Private Student Loan Consolidation

Private student loan consolidation enables you to combine all of your non-federal student loans into one loan. It is also a mechanism by which you can refinance your existing private loans. There are a number of lenders such as cuStudentLoans (eStudentLoan affiliate) that offer this service. You should compare your options before you choose to consolidate your private loans. As with any loan, you have to pay close attention to the terms of your existing loans as well as those of the consolidation loan product you are considering. In every case, you want to be sure you are optimizing your outcome to ensure you don’t end up worse off than where you started.

Things to consider when comparing private student loan consolidation loans include:

  • Interest Rate
    Interest rates can be fixed or variable. A fixed interest rate will never change during the course of repayment. Variable rates are usually tied to a popular base rate such as the Prime Lending Rate and will change as the base rate goes up or down. You'll want to know what base rate is used and how much the lender will add to that amount (margin). You will also want to know if that rate is capped which means that the base rate plus the margin will not go higher than an amount set by the lender.
  • Fees
    Look for origination fees that are added to the amount you will borrow. Some loans have fees and others do not.
  • Repayment Term
    Repayment terms can vary based on limitations of the lender or be based on the amount you borrow. If you are consolidating a large amount of debt, you may want to look closely at how long you will have to repay your loan. A longer repayment term will make your monthly loan payments lower, but the longer you take to repay, the more the loan will cost you overall.
  • Total Cost of Borrowing
    The total cost of borrowing includes the interest charged on your loan while you carry a balance and represents the total of all of your payments. Paying any amount greater than your minimum monthly payment will reduce your total cost of borrowing provided that you make sure the additional amount you pay reduces your principal. If you choose to make overpayment, check with your loan provider to ensure they are applied toward prinicipal.
  • Credit
    Private student loan consolidation is much like any other unsecured consumer debt. If you do not have a satisfactory credit history, adequate income or have high debt in proportion to your income, you may need to obtain a creditworthy co-signer in order to be approved for your loan.