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Private Student Loan Consolidation

After graduation, students head out into the world with a degree and a dream of landing their perfect job – and often a lot of student loan debt.  Since this debt can affect their credit rating and their ability to get loans in the future, it is essential to get it paid off in a timely fashion.  Private student loan consolidation is one way to do this.

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 consolidating private 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.

Some research online can help you if you are still confused by the whole private student loan consolidation process. There are websites that can help you understand the process.  There they allow you to compare different types of federal and private consolidation loans and apply online.  They even offer a frequently asked questions page that gives you all the details of private student loan consolidation programs quickly and easily.

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 private student loan consolidation.  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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