| If you've recently graduated from college, you've | | | | and talk to a loan officer about the reason for your |
| probably been bombarded with mailings and | | | | rejection. The officer may offer you advice on how to |
| advertisements urging you to refinance (or consolidate) | | | | qualify for their program at a later date. |
| your student loans right away. But wait, what is loan | | | | If you decide to refinance, be sure to consolidate |
| consolidation? And why should you do it? | | | | federal loans and private loans separately from each |
| If you've just graduated from college, you've probably | | | | other. When you consolidate your loans, you're typically |
| got a number of different student loans, all in different | | | | offered a rate that's 1-2% lower than the average rate |
| amounts from different lenders at different interest | | | | of your loans. Federal student loans often carry much |
| rates. Loan consolidators (which can be private banks, | | | | lower interest rates than private loans, so consolidating |
| lenders or government agencies) pay off all your | | | | them together can bring up the average interest rate |
| individual loans in exchange for a single loan in the | | | | of your loans and leave you with a higher fixed rate |
| same amount issued to you. So now instead of all | | | | locked in. If you only have one private loan, it may not |
| those different loans, you've got one loan that you | | | | make a difference, but it's important to assess your |
| repay to the consolidator. | | | | options before committing to refinance. |
| Refinancing your student loans reduces your monthly | | | | Is there anyone who shouldn't consolidate? Let's look |
| payments and locks in a fixed interest rate. In most | | | | at a scenario. Tracy has 2 loans for $5,000 each that |
| cases, student loans have variable interest rates set a | | | | are scheduled to be paid off within 5 years. She can |
| few points below prime. As interest rates go up, so will | | | | afford to make her monthly payments but wants to |
| the interest rate on your loans. When you refinance | | | | see if she can save a little extra cash each month by |
| your loans, you lock in an interest rate based on the | | | | consolidating. She finds out that she can refinance the |
| current market conditions that will be set for the life of | | | | loans into a $10,000 consolidation loan to lower her |
| your loan. Therefore, it's important to evaluate the | | | | monthly payments and she'll be eligible to extend her |
| market before making the decision to consolidate. | | | | payments over 8 years. But because she's extended |
| Right now, interest rates are low, but they're going up | | | | the life of her loans, she'll be paying interest over a |
| and most economists predict that they'll continue to go | | | | longer period of time and may wind up paying more |
| up for awhile. So for many people, this is a good time | | | | overall than if she had kept her loans as they were. |
| to refinance. | | | | It is tempting to pay less per month but if you can |
| Your credit history will also determine your eligibility for | | | | afford to pay off your loans in a shorter period of time, |
| loan consolidation programs. Loan consolidators can be | | | | then you'll likely save money on interest in the long run. |
| picky in who they accept for their programs, so the | | | | Obviously every situation is different and you won't |
| option to refinance is usually only available to individuals | | | | find all your answers in a short article like this. But if |
| who have established good credit by paying their loans | | | | you think loan consolidation might be right for you, |
| back on time. If you've missed payments or made | | | | check out the Student Loan Network's site at for |
| payments consistently late, you may not be offered | | | | more information or speak with a loan officer or |
| the best terms, if you're accepted at all. If your | | | | financial planner to see what your options are. |
| application is denied the first time, call the consolidator | | | | |