Best Place To Consolidate Student Loans

7 min read

Consolidating student loans has become easier than ever before due to innovative programs offered by lenders. In fact, some companies make it their mission to help students get rid of their debt faster and cheaper. So what’s the best place to consolidate student loans? Read on below for our top recommendation!

Consolidation Is A Great Option If You’re Interested In Paying Off Your Debts Faster

The first thing you need to know about consolidating student loans is that even if it sounds appealing, it doesn’t always mean you’ll save money paying off your debts over time.

It’s true — consolidation is great because you only have one annual payment instead of several. But each month that goes by means less interest is being paid off, and you could end up spending more dollars over time rather than saving them. So keep reading to find out how much you’d actually save!

You Can Consolidate Credit Cards Too

If you already have credit card debt and want to use consolidation to pay off your bills, don’t worry — you can do both at once!

When you combine your cards together, you can qualify for more competitive rates, and you can enjoy additional savings on everything from balance transfers to cash back rewards too! Plus, you’ll be able to take advantage of any introductory offers they may provide if you do decide to transfer balances.

Plus, you won’t have to worry about the hassle of getting separate loan offers in the mail.

Which Lenders Offer the Best Student Loan Consolidation Rates?

Before we go any further, let’s start off by talking about what makes for a good lender and what makes for a bad one.

First, you should look for a company with a solid reputation and strong customer service. Also, you should avoid anything that seems shady or difficult to deal with. Then, you’ll want to compare rates side-by-side with different lenders in order to determine who gives you the best rate. Here are some things to consider when comparing student loan rates:

Payment Frequency – Do they offer monthly payments? Quarterly? Or annually?

Interest Rate – How many points does the interest rate vary based on? And what are the terms of those variations?

Best Place To Consolidate Student Loans

Income Based Repayment (IBR) Programs

Income-based repayment programs offer eligible borrowers monthly payments at lower interest rates while still repaying their loans over a longer period of time. Eligible borrowers may receive payments based on either 10%, 15% or 20% of discretionary income, and payments may be deferred until after repayment of the loan.

Pay As You Earn (PAYE) Plans

Pay as you earn plans allow borrowers to make smaller monthly payments each month and pay off their loans faster than under an IBR plan. Eligible borrowers should compare different repayment options carefully before choosing the program that best meets their financial situation.

Graduated Payment Plans

Graduated payment plans allow borrowers to spread out repayments over a set number of years instead of paying back the balance immediately. These plans provide borrowers a chance to stretch their loan’s term without sacrificing any principal. Borrowers who choose graduated repayment plans should weigh the pros and cons of various repayment terms to determine what works best for them.

Public Service Loan Forgiveness (PSLF) Program

Students enrolled in public service jobs (e.g., teaching, social work, nursing, firefighting, etc.) have the opportunity to have federal student debt forgiven after making 120 qualifying payments. Undergraduate students must complete 120 fulltime semesters of qualifying employment prior to beginning repayment. After this point, undergraduate borrowers are not subject to the PSLF program. Graduate students must complete 60 months of qualifying employment prior to starting repayment.

Best Place To Consolidate Student Loans

Federal Government

The federal government offers many loans and grants designed specifically for students. These programs assist in paying educational expenses at various levels including undergraduate, graduate, and professional degrees. There are over 100 student loan repayment programs offered by the government. Each program has its own requirements and limitations. Some programs even offer interest-free loan options. If you qualify for any of these, make sure to apply early. You may not find out if you qualify until after you’ve already applied.

Private Lenders

Private lenders offer similar programs as mentioned above. However, they differ from the federal government in several ways. They offer a variety of different loan types (usually only direct/private) and have much stricter qualification standards than the government does. Their rates tend to be higher as well. However, private lenders do allow some flexibility with regard to where you live. Since they’re more focused strictly on repayment, they often require borrowers to reside near their offices instead of nationwide. In addition, they generally don’t accept student loans from previous schools.

Specialty Banks

Specialty banks specialize in lending to certain groups — usually those who have had bad credit in the past. Many people turn to specialty banks before applying to the federal government or private lenders. Because they focus solely on borrower repayment, they normally charge lower interest rates and give more lenient qualification rules. However, their programs are highly specific to what type of loan you need. Make sure to read each bank’s requirements carefully before deciding whether or not to use them.

Credit Unions

Credit unions are cooperative financial institutions owned by members rather than shareholders. They provide a wide array of loan options for college financing. Most of them are local, meaning they operate in only one state or area. Even though they aren’t as widespread as other lenders, they still offer a good selection of programs. While their rates are comparable to those of other lenders, their flexible terms and unique features may appeal to some individuals.

Peer-to-Peer Lending

Peer-to-peer lending services connect individual investors with small businesses seeking capital. Instead of going to a bank for help, the business owner goes directly to the investor. By cutting out the middleman (the lender), the rate of interest is considerably lower. These companies are also less regulated and allow anyone to invest as long as they meet minimum qualifications. However, peer-to-peer lending is largely unregulated and unproven, thus many experts recommend avoiding them.

Best Place To Consolidate Student Loans

Mortgage rates have been historically low throughout the past few years, making home ownership accessible to many people who may not otherwise qualify for a mortgage loan. Despite the recent rise in interest rates, borrowers continue to find ways to lower their monthly payments, including refinancing student loans. By consolidating all of her federal student loans into a single loan, Morgan was able to save $100 per month and eliminate interest charges for the remaining duration of her repayment period.

However, it’s not always possible to consolidate student loans. If you don’t meet eligibility requirements, you could miss out on a lower rate. But if you do qualify, there are some things to consider before signing on the dotted line.

Interest Rate

The interest rate paid on your consolidation loan is based on several factors, including the type of loan and whether you have had any credit problems. The higher your FICO score, the less likely you are to be approved for a loan at a particular interest rate. Likewise, if your credit history is poor, you might be charged a higher interest rate than someone with excellent credit. Lenders look at a variety of factors to determine your risk level and set your interest rate accordingly. You can check your current rate online with sites like Credit.com or NerdWallet.

Loan Type

Each school of thought offers different advice regarding the best type of student loan for your situation. Private student loans generally offer the lowest APR — about 4 percent — while Federal Direct Loans have the highest APR — nearly 10 percent. However, depending on your circumstances, you might get a better deal with private debt or public debt.

If you need additional funds to cover tuition costs, you should opt for Federal Direct Loans. These loans allow you to borrow from the U.S. Department of Education under guaranteed terms. Your lender will use your school’s financial aid award letter to calculate your eligible amount, then send you a promissory note (called a DS-5585) outlining your payment schedule.

Private loans, on the other hand, are unsecured and do not require you to demonstrate proof of financial stability, unlike government-backed loans. Because they aren’t backed by the federal government, lenders charge higher interest rates. And although private loans tend to cost less upfront, they carry an adjustable interest rate, meaning your interest rate could skyrocket over time.

Down Payment

Your down payment determines how much money goes toward principal versus interest. A smaller down payment lowers your total interest owed and saves you money in the long run. On the flip side, a larger down payment means you pay off more of your loan right away, reducing the total amount of interest you owe.

To figure out what size down payment works best for you, look back at your income and expenses. If you’re carrying a high level of debt or facing tight cash flow, you’ll probably benefit from starting out with a bigger down payment, particularly if you expect to pay just one big bill each month.

You can calculate how much you’ll pay in interest with our free Debt Analysis Calculator. You enter your information and receive the results instantly!

Repayment Terms

When applying for a consolidation loan, lenders want to make sure your finances remain stable for the long term. That’s why they often ask you how long you plan to repay your loan. There are two types of repayment plans that lenders offer.

Best Place To Consolidate Student Loans

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