Consolidating Private Student Loans - Should You Even Bother?

Consolidating private student loans is not as difficult as you may think, but it also may not be worth your time and effort.

First, a private student loan is an option for paying for your higher education when you do not have the finances to pay for yourself or if your FAFSA loan cannot cover the full cost of tuition. When you graduate and start working, you are expected to start paying back your loan. While you are worrying about finding a job that pays you enough, you have the added burden of the financial institution from which you borrowed money waiting for you to start paying it back.

Does that sound like you? It is not uncommon for newly graduated students to feel the pressures of school loan repayment and naturally start thinking about consolidating private student loans. Sometimes that is an option, and sometimes it isn’t depending on your credit. But is it really worth it in the end?

Strictly speaking, a private student loan is an agreement between you and the institution loaning you the money which is used to complete your higher education.  As the loan is unsecured, the interest rates can be rather high, but in a lot of cases the interest rates on student loans is reasonable.

Interest rates aside, there are other advantages to consolidating private student loans.  One of those is having your loan payment in one, central location.  Instead of paying multiple loans each month, you will simply have one to pay.  And you can possibly get the amount of the payment reduced slightly either by getting a lower interest rate, by extending the period of the loan, or by getting a fixed rate loan.  All of these will assist your budget planning every month. And, it is better to have a loan consolidation agreement on your credit history than a red flag because you missed a monthly payment.

But is consolidating private student loans the right choice for you?

The best thing to do is to find the correct company representative who can help you work out the most cost effective way to consolidate your student loan. They can show you the in's and out's of the process and help you decide if you want to further pursue the consolidation.  As stated before, the two main advantages are getting a lower interest rate and having all your loans on one bill. 

If you do decide that it's right for you, this process will involve filling out lots of tedious application forms, but the end result could be very worth your while. If you do work with an agency, make sure you know how much they are going to charge you for their service.  

Many graduates opt for consolidating private student loans simply due to the fact that they are overwhelmed with all the different bills coming in, and have a hard time organizing and knowing which ones were paid and which ones weren't.  There is nothing worse than having to pay back a number of private student loans to different financial institutions, with differing interest rates, on a different day every month. It causes endless stress and unnecessary worrying and that's why consolidating private student loans is a good option for some.

So in review, what are you actually looking for as the deciding factors for consolidating private student loans?

Lower Your Interest Rate

Combine All Loans Into One

Explore the Option Of Lowering Your Payment by Extending The Life of the Loan

Before you make any major decision, there is one last thing to do. Contact the companies with whom you already have the private student loans and see if they offer any consolidation products. If they want to keep you as a future income earning, potential home loan, credit card customer, they might just structure something with which you can work more comfortably. Another way to consolidate your private student loan is to approach a private company who lends money to private students. They will easily be able to consolidate your private student loans into one easy, manageable package.

You also need to get some kind of an idea on what third party lenders could offer you. Approach this online where it is a bit easier to ask for and to receive quotes from more than one company. The key here is to shop around!

And, you may not qualify for every single loan offered to you, if any, but pursue the ones who are prepared to offer you a smart start to your financial future. Before you ever sign any documentation, please remember to read all the fine print. If you cannot understand it, ask friends or a loan specialist from that institution to explain it to you. It is never too early to take charge of your financial future and this experience can only help you later on in life.

Remember, your ability to pay off your student loans now is an indicator of how you will be able to pay off a car note, mortgage on a home etc. This is when your credit score can be severely damaged if you are not making payments in a timely manner. Consolidating private student loans is not an option for everyone, but if the terms are right, it could end up saving you time and thousands of dollars over the life of your private student loans.