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Student Loan Consolidation Made Easy

Learn more about consolidating Federal and Private Student Loans
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TWO TYPES OF STUDENT LOAN CONSOLIDATION

Student loan consolidations come in two basic forms, namely federal and private. People often confuse these two types; however, each is different. To find out the best student loan consolidation method, you first need to understand the difference between the two. Learning about the best student loan consolidation programs is a fantastic way of making a positive change to your financial future. It may be the vital first step into improving your finances and moving forward with other important things you want to focus on.

Federal Student Loan Consolidation

A federal student loan consolidation is a way to pay off student loans through the Department of Education, allowing you to consolidate the loans in order to qualify for certain federal loan repayment programs. However, a federal consolidation is a logistical move – it will not lower your loan’s interest rate or save you money.

Private Student Loan Consolidation

A private student loan consolidation is a way to pay off student loans via a private lender. It is a financial move, as you can get lower interest rates eventually saving you money. In order to qualify, you have to meet certain requirements, including having a good credit score. As such, it’s also sometimes called student loan refinancing.

Which one is better? The best methods and best companies for student loan consolidation depends per person and their situation. What works for you may not be the right fit for other people, and vice versa.

WHEN TO CONSOLIDATE LOANS

If you are asking yourself whether to consolidate loans, remember that the answer varies. It all depends on what your current circumstances are. As with any decision, there will always be pros and cons, so either option could be the best way to consolidate student loans for your situation. 

PROS

  • If you have loans with various servicers, consolidating your student loans is a great way to simplify things by allowing you to have a single loan to repay. You only have one monthly bill to think about, instead of several.
  • Depending on the amount of your consolidated loan, it’s a good way of lowering your monthly payment. On one hand, due to a lower amount, you can repay your loans without burdening your other monthly expenses. On the other hand, it’s a longer period of time to pay it all off (up to 30 years).
  • You can switch your variable rate loans into a fixed monthly interest rate.
  • If you consolidate loans other than Direct Loans (which are from the William D. Ford Federal Direct Loan Program), you may have the privilege of getting additional income-driven repayment plan options, and even Public Service Loan Forgiveness.
  • You’ll be able to switch any variable-rate loans you have to a fixed interest rate.

CONS

  • Consolidation often increases the period of time you’re allowed to repay your loans. As such, you will make more payments, and eventually pay more in interest than you would if you did not consolidate.
  • In some cases, consolidation will make you give up certain borrower benefits associated with your original loans. This may include interest rate discounts, loan cancellation benefits, principal rebates, and others.
  • If you are paying loans through an income-driven repayment plan, or if you have already made qualifying payments to your Public Service Loan Forgiveness, consolidating these loans will make you lose credit for any payment for these.

Remember that once you have combined your student loans into a direct consolidation loan, you may no longer remove them as the loans consolidated are already paid off by the government.

FEDERAL STUDENT LOAN CONSOLIDATION

Consolidating federal loans means the government pays off your loans, and then replaces this with a direct consolidation loan that you will pay instead. Rather than going to several lenders paying them off one by one, the student debt is combined by the Department of Education into just one. Generally, anybody is eligible for this once they graduate, leave school, or drop off below half-time enrollment. In addition, getting this service is free – do not let companies charge you fees to consolidate federal student loans for you.

In consolidating federal student loans, the combined amount has a new fixed interest rate which is the weighted average of your previous rates, and then rounded up to the next eighth of 1%. For example, if your loans’ averages is 6.15%, your new interest rate is 6.25%.

 

Federal Direct Consolidation Loan Repayment Terms

Once you consolidate, you will also get a new loan term. It can vary anytime between 10 to 30 years, and will often start within 60 days from when your federal student consolidation loan is first paid. It is based on your total federal student loan balance, as well as other factors.

 

Total Federal Loan BalanceDirect Consolidation Loan Repayment Term
Less than $7,50010 years
$7,500 to $9,99912 years
$10,000 to $19,99915 years
$20,000 to $39,99920 years
$40,000 to $59,99925 years
$60,000 or more30 years

HOW TO CONSOLIDATE FEDERAL STUDENT LOANS

According to the Federal Student Aid website, applying for consolidation usually takes about 30 minutes or less. All you need is to provide details of your current federal student loans, and then select a federal loan servicer and repayment plan.

It should be noted that you need to complete this form in a single application session. As such, research first so you will not lose your progress. Once you have everything prepared, you can then follow these five steps:

Visit the Federal Student Aid website


Visit the Federal Student Aid Website at www.studentloans.gov and log in using your Federal Student Aid ID.

Under the repayment and consolidation tab, click “Complete a Consolidation Loan Application and Promissory Note” link to start the application.

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Choose your federal loans


You can either consolidate all your federal loans, or only a few of them.

For parents with PLUS loans and still have other federal student loans, it’s ideal to consolidate the PLUS loans in a different consolidation loan. If not, your PLUS loan will deem it ineligible for all income-driven repayment plans (Except income-dependent repayment).

For people with Perkins loans, consolidating these with others means you will lose access to Perkins loan cancellation.

Select a student loan servicer


Federal loan servicers are private companies that help the Department of Education manage federal loans. There are four servicers:

  • FedLoan Servicing
  • Great Lakes Educational Loan Services, Inc.
  • Navient
  • Nelnet

If your loans are already with any of the above, you can either stay with them or select a new servicer.

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Pick a repayment plan


On standard repayment plans for direct consolidation loans, you give equal monthly payments for 10 to 30 years, the duration of which depends on your total federal loan balance. However, there are six alternative repayment plans you can choose from, four of which are income-driven plans.

To find out which plan works best for your situation, the repayment estimator on the Federal Student Aid website is a great tool that displays how much your potential monthly payment will be. It’s a practical way to find out what amount you will pay each month before you commit to a consolidation plan application.

When selecting an income-driven plan, you have to provide income information in the form of your IRS tax information. However, you may opt out – by submitting a copy of your most recent federal tax return to your loan servicer after the consolidation loan application has been completed.

Submit the Application


The final step is to fill in basic personal information, as well as entering names and contact details of two people who can serve as a reference. These reference persons should have known you for at least three years.

Once you have reviewed, signed, and submitted your application, you should still continue making payments on your existing federal loans until you are notified that your application has been processed. Should you have any questions or issues regarding this application process, reach out to the Federal Student Aid’s Loan Consolidation Information Call Center at 1-800-557-7392.

PRIVATE STUDENT LOAN CONSOLIDATION

Often referred to as refinancing, a private student loan consolidation is a way to replace multiple student loans with a new single private loan. It can be a combination of private or federal student loans. Is it best to consolidate student loans? Take a good look at your situation in comparison to what these companies offer. In addition, if your new loan has a lower interest rate, you will end up saving money.

This new interest rate is based on your financial history, which may include your income, credit score, job history, and educational background. When you want to refinance with the best company to consolidate student loans for you, you will need a credit score of around 650 (give or take) to qualify; interest rates will then range from around 2% to 9%.

When refinancing federal loans into a private loan, it’s important to know that you will lose protections specific to federal loans, including interest-free deferment on subsidized federal loans. In addition, you may also lose access to income-driven repayment plans, as well as federal loan forgiveness programs. What is the best student loan consolidation company around? We have taken the time to research and inquire to find the best banks to consolidate student loans.

    BEST STUDENT LOANS CONSOLIDATION COMPANIES

    A lot of people value education so much, that despite financial troubles they still pursue going to college. It can cause a person thousands of debt over their lifetime, unless paid off properly and on time. The best way to consolidate private student loans is to first do research to compare which one will benefit their particular situation.

    When applying, do not be afraid if you do not meet the requirements. When looking for the best student loan consolidation companies, 2017 is a great time. Remember that these days, a cosigner can increase your chances of approval so you can still get the best student loan consolidation program even if you don’t have a particularly great credit history.

    The best bank to consolidate student loans will differ from person to person, but here are some of the best companies out there which we have reviewed. It should be noted that for these reviews, the actual interest rate they give will always be based on your credit score, savings, income, and even your degree type, as well as the background of your co-signer (if you have one). To better your chances of approval from one of the best student loans consolidation programs and increase your chance of getting a low interest rate, it is recommended to have a co-signer.

    Here are 6 of the best banks for student loan consolidation that we have found. Some of these have the best student loan consolidation rates around, allowing you to save hundreds of dollars on your new monthly payments.

    Highlights:

    • SoFi can help you cut the cost of your student loan debt, with its members saving an average of $316 each month.
    • No origination fees or prepayment penalties.
    • SoFi helps refinance and consolidate both private and federal student loans, and is available for both undergraduate and graduate school student loans.
    • Potential members should have completed a qualified undergrad or graduate degree program.
    • Rates:
      • 79% APR to 6.72% APR (with autopay) variable rates, capped at 8.95% to 9.95% APR
      • 35% APR to 6.74% APR (with autopay) fixed rates
    • Repayment terms can be 5, 7, 10, 15, or 20 years.
    • They offer unemployment protection, meaning loan payments are paused and they help members find a new job.
    • They also offer career support via complimentary coaching for their members.
    • They offer an entrepreneur program, wherein qualified applicants can receive loan deferrals and mentorship.

    Highlights:

    • CommonBond allows you to see your rate in just two minutes.
    • Its members save an average of over $24,046.
    • Your fully funded degree loan helps fund the education of a child abroad in need, via Pencils of Promise.
    • No application, origination or disbursement fees.
    • CommonBond helps refinance and consolidate both private and federal student loans, and is available for undergraduate, graduate, and Parent PLUS student loans.
    • Rates:
      • 79% – 6.72% APR variable rate refinancing (with autopay)
      • 35% – 6.74% APR fixed rate refinancing (with autopay)
      • 81% – 6.25% APR hybrid rate refinancing (with autopay)
    • There is a 0.25% Interest Rate Reduction with automatic payments through ACH.
    • Repayment terms can be 5, 7, 10, 15, or 20 years.
    • They offer unemployment protection, meaning loan payments are paused and they help members find a new job, as well as hire them for short-term consulting projects.
    • Members are part of the CommonBond Community – everyone gets information about events in their cities as well as networking opportunities, and even lifestyle perks.

    Highlights:

    • LendKey’s loans are funded by community lenders.
    • You can check refinancing rates from the company’s network of over 300 lenders within just two minutes using one form, without risking negatively impacting your credit score.
    • Its members save an average of $15,270.
    • No application or origination fees, and no prepayment penalties.
    • LendKey gives you a higher chance of approval with their network of non-profit lenders.
    • They don’t do handoffs – their fully-trained customer care system takes care of you from application through final payment.
    • The company helps refinance and consolidate both private and federal student loans, and is available for undergraduate and graduate school student loans.
    • Rates:
      • Fixed rates from 3.25% ARP to 7.26% APR (with autopay)
      • Variable rates from 2.67% – 6.31% APR (with autopay)
    • There is a 0.25% Interest Rate Reduction, available to borrowers when they make automatic payments.
    • Repayment terms can be 5, 7, 10, 15, or 20 years.
    • They offer unemployment protection, meaning loan payments are paused for a maximum of 18 months while in-between jobs.
    • They offer cosigner release after at least 12 on-time payments.
    • Their minimum balance for refinancing is $7,500, and minimum income of $24,000 a year.
    • You can keep your payments low with interest-only repayment; this is available on the first four years of some 15-year term loans.

    Highlights:

    • Laurel Road helps refinance up to 100% of outstanding private and federal student loans at really low rates.
    • Its clients save an average of $20,200.
    • No origination fee or prepayment penalty.
    • Laurel Road applicants must be graduates of a bachelors or graduate degree program (such as Master’s Degree, Law, post-residency Medical/Dental, Physician’s Assistant, Advanced Degree Nursing, Pharmacist, Engineering, Ph.D., etc.), and must meet the underwriting criteria.
    • The company offers parents of Bachelor’s Degree holders the chance to refinance student loans they took out to help finance their child’s education, just as long as their child has already graduated and is already working. Qualified parents can refinance Parent PLUS loans either in their own name or their child’s name.
    • Rates:
      • 99% – 6.42% (with autopay) variable rates
      • 95% – 6.99% (with autopay) fixed rates
    • Repayment terms can be 5, 7, 10, 15, or 20 years.
    • There is a 9% cap or maximum variable rate at 9% for 5 to 10-year terms. For terms greater than 10 years, the rate cap is 10% APR.
    • There is a 0.25% Interest Rate Reduction with automatic payments through ACH.

    Highlights:

    • Earnest allows you to see your rate in just two minutes.
    • Its clients save an average of $21,810.
    • No origination fees, application fees, or prepayment fees.
    • Commitment-free rate check that takes only two minutes.
    • Earnest helps refinance and consolidate both private and federal student loans, and is available for both undergraduate and graduate school student loans.
    • Rates:
      • Starting at 2.65% APR variable (with autopay)
      • Starting at 3.20% APR fixed (with autopay)
    • Successful applicants can have great payment flexibility, with terms ranging between 5 to 20 years, thus allowing you to save more compared to standard rates and terms.
    • They have no set income requirements, as the company looks at thousands of data points that assess financial responsibility, allowing them to deliver to you the lowest possible rate.
    • They don’t do handoffs – their fully-trained customer service partner system takes care of you from application through final payment.
    • You are allowed to change your loan as your needs and your life situations change; you may refinance your loan for free, update and change your payment dates, and even skip a payment once per year that you can make up for at a later time.
    • They offer unemployment protection, meaning loan payments are paused while a member is in between jobs.
    • Qualifications:
      • Applicants must have completed their undergraduate or graduate degree, or their expected graduation date is within the next 6 months.
      • Applicants must be currently employed, or have an employment offer and their first working day is within the next 6 months.
      • Applicants must be a U.S. citizen or a permanent resident.

    Highlights:

    • Citizens Bank customers have an average savings of $132 per month, or an average total of $15,842.
    • No application, origination or disbursement fees.
    • Citizens Bank helps refinance and consolidate both private and federal student loans via the company’s Education Refinance Loan®
    • Rates:
      • Average of 3.74% APR to 8.24% APR (with autopay) for fixed rates
      • Average of 2.78% APR to 8.13%4 APR (with autopay) for variable rates, and will fluctuate over the term of your loan with changes in the LIBOR rate
    • Repayment terms can be 5, 10, 15, or 20 years.
    • Members are eligible for loyalty discounts, such as a 0.25% Interest Rate Reduction on a new Education Refinance Loan when you (or your co-signer, if applicable) has a qualifying account with Citizens Bank in existence at the time of application.
    • Co-signer Release: Your co-signer may be released from loan responsibility once you have made 36 consecutive and on-time principal and interest payments.
    • The minimum loan to refinance is $10,000.

    Looking for the best place to consolidate student loans is not easy, but it is worth all the time and effort once you understand the payoff. Whether you are looking for a great federal consolidation plan or the best private student loan consolidation around, the pointers above are a great way to start.