Here's what you need to know before deciding to consolidate student loans.
Like federal loans, private student loans cannot be discharged in bankruptcy.
Thus, there is little incentive for private lenders to offer lower rates as they retain a strong claim over the debt even if the borrower declares bankruptcy.
Consolidation provides grads with the ability to combine their student loans into one megaloan, but it comes with drawbacks.
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.
Instead of making multiple payments to multiple lenders, the borrower only has to pay off the new consolidation loan, says Michelle Pezzulli, vice president of operations for Credit Union Student Choice, a student lending service provider in Washington, D.
C."That new loan will have its own interest rate; it will have its own repayment terms; it will have its own terms and conditions," she says.
After consolidating his or her loans, a student borrower will have just one monthly payment and just one loan balance to maintain.
The decision whether or not to consolidate can be tricky.
When considering options to consolidate private loans, remember that you qualify for lower rates if you have graduated, taken a job and made steps toward improving your credit score.