Private student loans are necessary for thousands of students to cover tuition as well as peripheral university costs, including textbooks, transportation, food, and any other unexpected expense which may arise. Student private loan consolidation—bundling loans into one, packaged loan—is a smart way to minimize monthly payments, simplify payment processes and ease debt.
Benefits of Student Private Loan Consolidation
According to the Student Loan Network, there are many benefits to pursuing student private loan consolidation, including reducing interest rates and extending payment terms. Below are some of the reasons to consider student loan private consolidation:
- Reduced payments – borrowers can often extend the overall time frame within which they must pay back the entirety of the loan, thus reducing monthly payments and lowering near-term debt burdens.
- Student loan interest rates consolidation – borrowers who choose to bundle their loans with improved credit from the time they originally applied for their private loans can benefit from lower interest rates.
- Overall rates reductions – in addition to student loan interest rates consolidation, borrowers have the potential to receive reduced APR loans either by applying individually with vastly improved credit or by using solid co-signers.
- Graduate Leverage Private Student Loan Consolidation Program – this program offers particular students—who engage in student loan consolidation–debt-deferment possibilities. Military personnel on active duty can 36 month deferments, and medical/dental residents have the potential to receive up to 48 month deferments.
- Generous Repayment Programs – student loan (private) consolidation—along with student loan interest rates consolidation—can make borrowers eligible to receive extended repayment options, sometimes up to 30 years. Such options, in conjunction with student loan rates consolidation, can offer minimal monthly payments while reducing the enormous interest burdens such long-term payment plans often create. (Note: student private loan consolidation payments over such extended periods still accumulate a hefty amount of interest, but can be ideal for those interested in making very low monthly payments.)
- Prepayments allowed – borrowers who are able to make payments in advance are not penalized for doing so, as such payments go directly toward paying down the principal.
Cautions for Those Seeking Student Private Loan Consolidation
Students must be wary of predatory lenders—those lenders who look to take advantage of borrowers backed into a financial corner by offering deals which look good upfront, but which have massive hidden fees and burdensome interest rates.
Any student thinking about pursuing student private loan consolidation should consult either their school's loan office or business center for advice on which reputable companies to consider.
Federal Loans and Private Loans
Private lenders have two options for offering student loans:
- Federal (FFEL) Loans – FFEL loans are student loans offered by private financial institutions, such as Citi, Chase, and Wells Fargo, but backed by the federal government.
- Private Loans – these are unsubsidized loans backed only by the financial institutions themselves.
While both options can be consolidated, FFEL loans must be consolidated with other federal loans, and cannot be consolidated with genuine private loans.
Student Loan Interest Rates Consolidation for Private Loans
According to the Student Loan Consolidation Center as of October, 2009, student loan private consolidation can offer students first-time interest rates which are lower initially.
Such first year introductory interest rates offered for those pursuing student loan interest rates consolidation can sometimes find "origination fees from 1% to 5% "depending upon [a borrower's] individual credit or the credit of a co-signer."
It should be noted that borrowers should always check to see the exact fees consolidated lenders are charging, making sure that they are in line with expectations and do not exceed a given state's maximum levels. In addition, borrowers should always check to make sure that introductory interest rates do not balloon after the first year.
David Harris-Gershon - David Harris-Gershon – a blogger for Tikkun magazine and a freelance writer on Israel, the Middle East and America’s role in ...
