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Consolidate Private Student Loans

Private student loans can be a great asset to students while they are in school.  They can prove quite beneficial to helping the student get through the courses and expenses of earning a higher level education.  However, after graduation, these loans can start to cause trouble.  Too many monthly payments can be difficult to budget or keep track of.  Plus having too many outstanding loans can have a negative affect on their credit rating.  For some students, choosing to consolidate private student loans may be the answer.

There are certain things that you can do and should know about when you choose to consolidate private student loans.  First, it is important to consolidate your federal loans separately.  This is because federal consolidation combines all loans into one and reflects a positive payment history which will improve your credit score.  Improving your credit score will give you a better rate for the private loan consolidation, which is credit-based.  That way you will get the best deal and lowest monthly payments for both loans.

There are several benefits to deciding to consolidate private student loans.  Doing so combines all of your private loan debt into one loan, which can reduce your monthly payment.  This consolidation can also improve your credit score, and you can sometimes get interest rate reductions for on-time and automatic payments.  Private student loan consolidation is for anyone with non-federal education-related expenses who is also a U.S. citizen or permanent resident.  Loans will usually be available for $5,000-$275,000 – though sometimes more can be borrowed with a cosigner - and can have a repayment period of 20-25 years, sometimes longer, depending on the amount.  Parents can consolidate loans for more than one student, and spouses can consolidate their loans together.

If you are still confused by the whole private student loan consolidation process, you should take some time to understand the process.

For instance, you can look up and see if having a co-signer will help you get a better interest rate and waived disbursement fee on the loan.  It also discusses the type of loans that can be consolidated, why you should consolidate federal student loans separately, and the ineligibility of 1098-E eligible loans for consolidation.

Depending on the lender, you generally have to wait until after graduation to consolidate your student loans.  However, some lenders will allow you to consolidate one month prior to graduation.  If your private loans have grace periods before you have to start repaying them, you can apply for loan consolidation during this period.

There are a few disadvantages that should be considered before thinking to consolidate private student loans.  Depending on when you decide to consolidate, you may give up any grace periods on the loans, since payments on the consolidation loan usually start a month after approval.  Also, if there are any repayment benefits, such as interest rate reductions for on-time payments, that have not been received, they will be lost.  Plus, by extending the repayment term and making smaller monthly payments you will end up paying more over the life of the loan.  All of these things should be considered before you make the decision to consolidate.

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