When to Consider Student Consolidation Loans

Before you begin to search out a consolidation company for your student loans, you must first answer the following questions: Are all of my student loans Federal loans? If not, are they all private loans or are they a mix of both? It is important to note that student consolidation loans for Federal loans do not consolidate in the same way that private student loans do.

Federal student loans, for instance, are guaranteed by the Federal government—and can be consolidated in two ways: they can be consolidated by the Department of Education or they can be consolidated by a private lender. If they are consolidated by the Department of Education, they are locked in at the annual student loan rate, which is based on 91-day Treasury Bill rate. If they are not consolidated by the Department of Education, they must be consolidated by a private lender. In such a case, they are subject to private lending rates; and can only be “reconsolidated once”--back to a fixed Department of Education rate.

If all of your loans are private, you cannot consolidate them at a new fixed student loan rate, but you do have a number of ways in which you can shuffle your debt around. If you find that your current lender has comparatively high rates, you can seek out a debt consolidation company. If you are weary of volatility, but have an excellent credit rating, you may want to look for a company that is willing to offer you student consolidation loans at a fixed rate. If your credit isn't so create, you will more than likely have to look for student consolidation loans at a variable rate, which can often be dangerous, especially if the Fed is increasing interest rates.