Consolidating student loan rates

06-May-2017 00:29

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.When even the basic term "consolidation" means different things for different lenders, the process can understandably seem daunting.But if you're looking to save thousands on student loan interest payments -- as well as time and headaches from managing multiple monthly payments -- then understanding the consolidation process is critical.Check out the official government site for all the details on eligibility.If you're consolidating with a private lender, consolidating your loans means combining and refinancing your loans into one new private loan.

When it comes to consolidation, the types of loans you have matters, but most federal loans, including Stafford, Perkins, Direct Plus and Supplemental loans, can be consolidated with other federal student loans."The interest rate on (federal) consolidation loans is an average of the interest rates on the (federal) loans you're consolidating," says Ken O'Connor, director of student advocacy for Fynanz, a New York City firm providing technology for the private student loan market.

Here's the rundown you need to determine whether student loan refinancing and consolidation is right for you.

First, what does consolidating student loans really mean?

You can only consolidate federal, not private, student loans through this program.

(Note: You cannot consolidate federal and private student loans together through the federal government, either.) You can consolidate an existing Direct Consolidation Loan so long as you have a new eligible loan with which it can be consolidated.

When it comes to consolidation, the types of loans you have matters, but most federal loans, including Stafford, Perkins, Direct Plus and Supplemental loans, can be consolidated with other federal student loans."The interest rate on (federal) consolidation loans is an average of the interest rates on the (federal) loans you're consolidating," says Ken O'Connor, director of student advocacy for Fynanz, a New York City firm providing technology for the private student loan market.

Here's the rundown you need to determine whether student loan refinancing and consolidation is right for you.

First, what does consolidating student loans really mean?

You can only consolidate federal, not private, student loans through this program.

(Note: You cannot consolidate federal and private student loans together through the federal government, either.) You can consolidate an existing Direct Consolidation Loan so long as you have a new eligible loan with which it can be consolidated.

Even if your rates seem high, t he Department of Education puts a cap on consolidation loan rates at 8.25 percent.