Private Student Loan Consolidation

Many student borrowers who are graduating and thinking about student loan repayment have questions about “loan consolidation”.

What is loan consolidation?

Loan consolidation simply means borrowing a new loan to pay off one or more existing loans.

There are two types of student loan consolidation – Federal and Private.

It is important not to confuse the two types. Federal loan consolidation involves only federal loans (typically Stafford). The low, fixed interest rate available on federal consolidation loans is not available on private consolidation loans, however some lenders do offer a fixed rate option from time to time.

Private consolidation loans, in general, have variable interest rates and some have fees associated with borrowing. The interest rates, in most cases, are very similar to the interest rates of the existing private loans being consolidated. In essence, private consolidation loans replace one private loan with another.

Please note: Private loan consolidation is one method available to help student borrowers manage their educational loan debt. Private loan consolidation is not advantageous for every borrower. Make sure you are fully aware of the terms and any fees associated with a consolidation loan before you apply.

Why then would I choose to consolidate my private education loans?

Simplify: By consolidating, student borrowers who currently have more than one type of private education loan can combine their existing loans into one new loan. This eliminates the need to make multiple payments to multiple lenders.

Better Interest Rates: If your credit score has improved significantly since you borrowed your original private loan(s), you may qualify for a lower interest rate than what you currently have.

Lower Monthly Payments: Depending on the size of your consolidation loan you may be able to choose a longer repayment period. Increasing your repayment period will decrease the amount you pay each month. Of course, this also increases the total cost of your loan because you are paying interest over a longer period of time.

You may find additional loan consolidation resources and a list of lenders currently offering private education loan consolidation products at