Private student loan consolidation, or refinancing, means replacing multiple student loans — private, federal or a combination of the two — with a single, new, private loan. You’ll save money if your new loan has a lower interest rate.
Your financial history — including your credit score, income, job history and educational background — will dictate your new interest rate when you refinance. You typically need a credit score at least in the high 600s to qualify, and rates range from around 2% to more than 9%.
How to Consolidate Private Student Loans – Refinancing
First of all, you will have to use a Loan calculator to check if there is any need to consolidate your loans. Since this is private student loans consolidation, it is more strict compared to that of federal. Some private loan companies don’t offer this option in their loan agreement at all. For more on private student loans companies and what they offer international students, please read the article below.
Requirements for Refinancing
- you must have made at least a few on-time student loan payments after leaving school.
- Good or excellent credit, generally defined as credit scores of 690 or higher.
- Have a stable job.
- Access to a co-signer with those characteristics, if that doesn’t sound like you.
Note; Refinancing federal student loans into a private loan means losing consumer protections specific to federal loans. Those include the option to tie payments to income and opportunities for loan forgiveness.
Like the federal government, private companies offer the option to consolidate multiple student loans into one. But unlike the federal government, they can consolidate both federal and private loans.
The goal with this process is not only to get the ease of a single payment, but to receive a lower interest rate based on your financial history.
Use a consolidation calculator to compare monthly payments under three different scenarios: federal student loan consolidation, private student loan refinancing and income-driven repayment plans.