College can be absurdly expensive. The majority of college students find themselves facing thousands upon thousands of dollars of debt after they graduate. Many are left to deal with multiple outstanding student loans, forcing them to juggle multiple payments every month. What's worse is having all of these accounts open can actually damage their credit scores.
Fortunately, for those who are dealing with more than one student loan, student loan consolidation is a possibility. It will allow you to combine all of your student loans into one, thus closing out your outstanding accounts and allowing you more manageable payments.
There are two types of student loans: private student loans and federal student loans. Consolidating private loans is different from consolidating federal loans. Federal loan consolidation typically has a lower, fixed interest rate, and you can defer the loan in case of a financial hardship. Private student loan consolidation, on the other hand, typically has a higher interest rate, and you cannot defer the loan.
If you're planning to consolidate your loans, you should be aware of your current credit rating, since it will play a big part in dictating your interest rate. Get a credit report from Equifax, TransUnion and Experian to get an idea of where your credit score is at. If it's gone up 50 points or more since the time you got your student loans, you may be able to get your current lenders to lower your interest rate if you are not comfortable with loan consolidation.
Lender don't compete on price, so you should expect that you will need to shop around for lenders who will give you the best interest rate (i.e. the lowest one). If your loans were for your undergraduate degree or you have bad credit, you're going to need a cosigner to consolidate your student loans. Keep in mind that they will have to pay for your loan in case you default.
You can consolidate your loans if your loan amounts combined are, at minimum, $5,000 or, at maximum, $300,000. These aren't fixed numbers, however; the minimum and maximum may vary from lender to lender.
Student loan consolidation is a big financial responsibility, so before you make any decisions, make sure you're financially prepared to take that step and that you fully understand all of the terms of your new loan.
Ruri Ranbe is an accountant and part-time freelance writer. She has experience in a variety of fields -- finance and computers in particular -- and enjoys writing about a number of topics of which she is knowledgeable. She has written related articles on debt & debt consolidation, including: How to Consolidate Student Loans & Consolidating Private Student Loans
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