Private loan consolidation is not like federal

Many people share the misconception that their outstanding federal student loans can be consolidated with their outstanding private student loans. Unfortunately, this is not the case, so if you had dreams of getting the low interest rates that are available on federal loans by consolidating your private loans with the federal ones it is time to wake up. You can, however, consolidate your federal loans with private education loans, but then you'd be giving up the benefits of the low interest rate; thus you'd be better off consolidating your federal loans separately from your private education loans.

Private loan consolidation benefits

While consolidation of private education loans is not as beneficial as consolidating federal education loans, there is still the benefit of only having to make one monthly payment per month instead of multiple ones. How it works is you take out a completely new loan to payoff all of your outstanding private education loans. This may or may not provide you with a lower interest rate, it will depend on what the prime rate is; however, the new loan resets the terms of the original education loans which generally results in longer repayment terms, and thus, lower monthly payments, which in many cases makes the interest rate a negligible feature of consolidation.

Don’t settle for any consolidation lender

Don't just settle for any lender when consolidating your private education loans. Consider a handful of different lenders. Find out if the interest rate is fixed or variable, as well as if there are any origination fees. The key is to find a lender who is offering a fixed interest rate, as well as a low loan origination fee. If you can find this than you're getting a good deal, but try to get the lowest interest rate possible. This will be difficult because many lenders don't compete much in the area of loan consolidation because they do a heavy enough business in other lending areas.

Any savings is helpful

Consolidation of your private education loans can be beneficial. It may not be as beneficial as consolidating your federal education loans, but when you're young and starting out in your career every bit of help you can get makes a difference.