You typically need a credit score at least in the mid-600s to qualify, and rates range from around 2% to more than 9%. Consolidation provides grads with the ability to combine their student loans into one megaloan, but it comes with drawbacks.
There are major benefits and drawbacks of federal consolidation; it’s important to understand both because consolidation can’t be undone.
Private student loan consolidation, or refinancing, means replacing multiple student loans — private, federal or a combination of the two — with a single, new, private loan.
Along with gaining a new degree, many graduates will also leave campus with new student loan payments they’ll have to fit into their post-graduate budgets.
Here’s what you need to know before deciding to consolidate student loans.
You can opt out, but you’ll have to submit a copy of your most recent federal tax return directly to your loan servicer after you finish the consolidation application.
The remainder of the application involves filling in basic personal information and providing names of two references who have known you for at least three years.
You’ll save money if your new loan has a lower interest rate.
Your financial history — including your credit score, income, job history and educational background — will dictate your new interest rate when you refinance.
Federal loan servicers are private companies that manage federal loans for the Department of Education.
You can choose one of four servicers for your new direct consolidation loan: Fed Loan Servicing, Great Lakes Educational Loan Services Inc., Navient and Nelnet.
This can be attractive to borrowers because the consolidation frequently results in longer repayment periods and lower monthly payments.