Can I Consolidate My Private Student Loans?

Can I Consolidate My Private Student Loans?

We're going to be talking about consolidation student loans. How it works? Why you might want to do it or not want to do it? How it's different and sometimes considered the same as refinancing? This article is all about helping those, who are making that transition from college to career get on that path of financial savviness. And one huge thing that comes up a lot in student loans. You might have a lot of student loan payments from different loan balances that you have out there. 

And you're wondering if there a simpler way to make all of these payments. That is through consolidating them. If it's available to you and we'll be talking about that. If it's actually a good decision and choice for you financially or not. This article is all about that transition. But if you are in your late 20s early 30s or 40s and beyond and you're still trying to figure out student loans or any other pieces of just making sure your financial life is in order. Then this article is definitely great for you.

Can I Consolidate My Private Student Loans
Can I Consolidate My Private Student Loans

Consolidation Student Loan

Consolidating student loans basically, means that you're taking all of those loan balances and pulling them together. Putting together a new interest rate. Usually, it's a weighted average of the interest rates. You had on these other separated loans and putting together those loan payments. Instead of making several loan payments. If you do have several loans you're only making. This is a simpler way to pay off your student loans. But it's not necessarily the best option I'm going to tell you why?

First, it's important to understand the difference between consolidating federal student loan and consolidating private student loans

Consolidate Federal Student Loans

You can absolutely consolidate your federal student loans. Taking those balances, putting them together, getting a weighted average interest rate. Getting one loan payment, in this situation, it's not necessarily, going to be more expensive or save you any money. When you do consolidate your student loan. You're just combining it, you don't have to make several different loans. But the interest rate essentially stays the same. You're just combining them and getting an average. You can consolidate your federal student loans and get a direct consolidation loan.

Consolidate Private Student Loans

The confusion comes in when people talk about consolidating private student loans or even consolidating their private with their federal student loans. You can't technically, combine in a normal consolidation manner those private and those federal student loans.

The Refinance Process

If you have both and you want to pull them all together just to have one loan payment. You actually have to go through the refinance process. This means that you have to apply, they're going to look at your credit score. They're going to get you an entirely new interest rate and buy out all your old loans to give you a new loan at this new interest rate. Then you'll get that one payment that you have to make. This exact same process is applied if you only have private student loans. Technically, you can't consolidate private student loans you have to go through it that refinance process. 

That's A Good Idea for You or Not?

Federal student loans: Let's say that you have all federal student loans your rates are pretty good. You can choose whether you consolidate them or not. One side note, if you can't consolidate Parent PLUS loans. That's a bummer, but you can consolidate all other federal loans and you just kind of have to decide if that is right for you. If you're more motivated to pay down smaller chunks at a time and seeing one chunk being paid off. Then moving to the next, if that's motivating to you. Then I would not consolidate. But if you just feel like you want a simpler process for paying off your student loans then. It’s okay to consolidate those federal student loans.

Private student loans: What if you have only an all private student loan. You might be facing the opportunity of getting a lower interest rate. Because sometimes, private student loans can have higher interest rates. That might mean, it would be in your better interest to go through the loan application process. 

Refinancing Student Loans

What do you want to do? Make sure is that your credit score is up to snuff. Because they're going to be looking at your past credit history. Make sure that you are a good credit citizen before, they give you a new interest rate. And ideally, you would want that interest rate to be lower than the current interest rates. That you're paying on those student loans. If you get approved for interest rates, that's middle-of-the-road. Maybe you have some loans that are higher, some loans that are lower. Then that's where you really want to sit down and consider.

What Is The Cost Difference On All Of These Loans?

If I pay them separately versus, if I get new loans? And would I be just more motivated to pay off them in smaller chunks or do I not get demotivated by seeing a huge chunk of a loan? That’s I need to slowly pay off overtimes. 

When You Consolidate Refinance Your Private Student Loans?

You do run the risk of ending up having to pay more in interest. Because of that whole refinance process. Just pay attention makes sure you're not at risk of that. If you're looking at federal student loans and private student loans, it’s not always the wisest choice to consolidate them. First of all, you lose a lot of your federal benefits. Because if you consolidate private student loan with federal student loans. That is going to be a complete refinance process. You're going to apply for a new loan, with a new interest rate based off of your credit score. That loan will buy out all the loans you have outstanding. And it will all be rolled into one new loan. That you have to pay off. You'll only have one payment, but it's a new interest rate.

If that interest rate isn't as good as the federal rates, that you've been given which it very may well not be. Then you're better off keeping your federal loans separate. You also lose a lot of your federal benefits. such like student loan forgiveness, better student loan repayment plans, going on income-based repayment deferment, etc. Those are things that are nice to know that, You have as long as you keep your federal student loans around. But if you buy them out with a new private loan through the refinancing or what they'll call consolidation. 

Then you're going to lose those benefits. At the end of the day, you get to do what you decide but do know, that there are some costs involved. If you choose to completely refinance. Consolidate all of your private student loans and federal student loans together. And even just your private student loans. There's an entire mindset perspective of approaching your student loan repayment. When you approach it and you have the small chunks to pay off. You get to see that moment on versus you just have one big loan. That you have to make payments towards for quite a long time.

Consider all of these facts make the best decision for you. Good luck with this financial blow-up. That is all I have for you on the difference and the reasons. Why you may or may not want to consolidate? In some cases refinance your student loans.

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