You have decided that consolidating your student loans is the right decision for you. You have many years left on your loan, so lower monthly payments would be beneficial. A fixed interest rate makes sense, and simplifying your finances is an added benefit. One question remains: Who can consolidate your student loans? Do you have to go to a bank, go through your college financial aid office, or use a specific company?
There are hundreds of companies and lenders who will consolidate your loans. You can choose from companies whose only specialty is consolidating federal or private student loans. Banks also offer consolidating services for private loans. However, your college financial aid office does not have the ability to consolidate. They only administer the money, but may be able to provide you with a list of their preferred providers.
You may think that consolidating student loans is pretty cut and dry. True, the basic services each of these organizations offer are similar. However, each borrower has their own unique set of financial circumstances. This is one of the reasons why there are so many companies to choose from. Lenders distinguish themselves by the variety of services and added benefits they offer. Do not get hung up on using a big-name lender to consolidate your loans; investigate a variety of companies and banks.
Student Loan Consolidation Companies
A student loan consolidation company focuses specifically on consolidating student loans. They are not concerned with refinancing home loans or reviewing applications for auto loans. They only handle student loans, so these companies know the student loan market inside and out.
If you are looking to consolidate your federal student loans, you will need to use one of these companies.
Many have signed contracts with the United States Department of Education to service federal student loans. The government does dictate the maximum amount of interest that can be charged, and decides which fees and penalties do not apply. This does not mean that each company offers the exact same services. They can get a little creative by offering special incentives to distinguish themselves from their competition. Shop around to see what the different companies are willing to offer.
These companies will also consolidate your private student loans. This is where the biggest chance for negotiation is. There are no maximum-interest caps on private loans. Companies can look at your credit history to see if they can find you a little interest-rate relief. They may offer deferment options for active-duty military personnel or doctors. Some will match a competitor’s offer. A few will even give interest-rate reductions if you pay electronically or on time.
Consolidating services is not the only benefit for using these companies. You will also receive valuable financial resources to help you get out of debt. Workshops, debt counseling, and even credit forums may be available free of charge.
Many of the nation’s largest banks will consolidate private student loans. Their process is nearly identical to the one a student loan consolidation company uses. Banks will perform credit checks to make sure that you can meet the monthly payment schedule. Your new interest rate can be fixed or variable, and will most likely be determined by interest market factors.
When you consolidate, you will likely lose the incentives tied to your original loans. However, banks do have the option to offer an entirely new set of incentives to consolidated loans. If you or your co-signer is a long-time customer, you may be eligible for rebates or even rate reductions. Similar to consolidation companies, you may also be eligible for rate breaks if you pay on time or electronically.
A bank is not superior to a student loan consolidation company and vice versa. You have one opportunity to consolidate. Shop around to see which lender offers the best rates, benefits, and incentives.