Student loan debt is one of the biggest burdens for students as well as parents. It is not always to make the ends meet and monthly installments on the loans can be quite a task. Many students spend almost one-third of their lives on the repayment of these debts. If not managed correctly, it can take a huge toll on the financial well-being of the person.
To ease this burden, many people look for student loan consolidation companies that can help in lowering the monthly payments or even get rid of the debt completely. But, with so many options available in the market, it can be difficult to decide which company is reputable and can be trusted.
In this article, we will be talking about what student loan consolidation is, how does it work, and some of the best and most reputable companies in the market. So if you are a student or parent looking for a student loan consolidation company, this article is definitely for you.
What is student loan consolidation?
First thing first, let’s take a look at what student loan consolidation is. In simple terms, student loan consolidation is the process of taking multiple student loans and combining them into a single loan with a lower interest rate. This way, you will only have to make one monthly payment instead of multiple payments. In simple words, student loan consolidation is a type of student loan refinancing.
It will be a lot easier for parents and students to keep track of the payments as they don’t have to manage multiple loans at once. In addition to interest rates, you might also get more suitable repayment terms and lower monthly payments.
How do student loan consolidation and student loan refinance work?
So now that we know what student loan consolidation is, let’s take a look at how it works. As we mentioned earlier, student loan consolidation is the process of taking multiple student loans and combining them into one. But, the term ‘consolidation’ can be a bit misleading as you are not consolidating or merging your loans, you just refinance student loans.
What happens is that you will take out a new loan to pay off your old student loans. This new loan will have a lower interest rate and more favorable terms than your original loans. In addition, the consolidation company might be able to get you a lower monthly payment than you are currently paying.
Student loan consolidation: Federal student loans vs Private student loans
When it comes to student loan consolidation you can either consolidate your federal student loans or your private student loans. Let’s take a look at the difference between the two:
If you want to consolidate or refinance federal loans, you will have to do it through the Department of Education’s Direct Loan Consolidation program. This program is only for federal student loans such as Stafford Loans, PLUS Loans, and Direct Loans.
The biggest benefit of consolidating your federal student loans through this program is that you will be eligible for certain repayment plans that are not available for private loans. In addition, you might also be able to get a lower interest rate on your consolidated loan.
Private student loans
If you want to consolidate your private student loans, you will have to do it through a private lender or a loan servicer. Many private lenders offer student loan consolidation services and you can shop around to find the best rates and terms.
The biggest benefit of consolidating your private student loans is that you might be able to get a lower interest rate than your current rate. In addition, you will also have the flexibility to choose your repayment terms.
Note: You can combine your federal loans and private student loans for consolidation. This means if you have both federal and private loans, you have to make two separate consolidation applications, one for your federal loans and one for your private loans.
What is a direct consolidation loan?
The direct consolidation loan is a federal student loan that combines two or more federal loans into one. Similar to other types of consolidation loans, a direct consolidation loan will have a low fixed interest rate and more flexible repayment terms.
When it comes to direct consolidation loans, only students with federal loans can apply. Students who have private loans are not eligible. They have to find a private lender to consolidate their loans.
What are the benefits of student loan consolidation?
There are many benefits of student loan consolidation. Let’s take a look at some of the most important ones:
1. Lower interest rates: The best part about consolidating your student loans is that you can get a lower interest rate, which means fewer loan payments. This will save you money in the long run and help you pay off your loan faster.
2. More flexible repayment terms: Consolidating your loans will give you more flexible repayment terms. This means that you can choose a repayment plan that fits your budget. But first, you have to qualify for a repayment plan.
3. You can focus on a single loan: When you have multiple student loans, it can be difficult to keep track of all of them. But when you consolidate your loans, you will only have one loan to focus on. This will make it easier for you to stay on top of your payments and avoid defaulting on your loan.
4. Peace of mind: Consolidating your loans can give you peace of mind. This is because you will know that all of your loans are in one place and you are only making one payment each month.
Disadvantages of student loan consolidation
While there are many benefits to student loan consolidation, there are also some disadvantages that you should be aware of:
1. You might lose your grace period: When you consolidate your loans, you might lose your grace period. This means that you will have to start making payments on your loan right away instead of after the grace period.
2. You might have to pay more in interest: If you consolidate your loans, you might have to pay more in interest over the life of the loan. This is because your grace period will be reset and you will have to start paying interest right away.
3. You might have to pay an upfront fee: Some lenders might charge an upfront fee for consolidation. This fee can be anywhere from 1% to 5% of the total loan amount. So make sure to shop around a find a suitable lender.
4. You might not qualify: Not everyone will qualify for a consolidation loan. This is because you have to meet certain eligibility requirements, such as having a good credit score. So check the eligibility criteria before applying.
How to find a suitable student loan consolidation company?
To get the best deals, it is very important to find a reputable and reliable student loan consolidation company. Here are some tips that can help you:
1. Shop around: The best way to find a good consolidation company is to shop around. There are many companies out there and each one has different terms and conditions. So it is important to compare the offers before you choose a company.
2. Read reviews: Another great way to find a good consolidation company is to read reviews. Many websites offer reviews of different lenders. So make sure to read the reviews before you make a decision.
3. Look for an upfront fee: As we mentioned earlier, some lenders might charge an upfront fee for consolidation. This fee can be anywhere from 1% to 5% of the loan amount. So it is important to find a company that doesn’t charge this fee or at least charges a lower fee.
4. Check the eligibility criteria: Make sure to check the eligibility criteria before applying for a consolidation loan. This will help you determine if you are eligible for the loan or not.
5. Check the interest rate: The most important thing to consider when consolidating your loans is the interest rate. Make sure to find a company that offers a lower interest rate. Lower interest means lower monthly payments and less money paid in the long run.
These are just some of the things to consider when consolidating your student loans. If you take the time to shop around and compare the offers, you will be able to find a good consolidation company that meets your needs. So make sure to do your research before making a decision.
Top student loan consolidation companies
Here are some of the top student loan refinancing lenders:
1. MPOWER: Refinance your U.S. or foreign student loan with MPOWER. Release your cosigner and collateral. Benefit from lower, more convenient payments, and build your U.S. credit history.
2. SoFi: SoFi is one of the most popular student loan refinance companies that offer low and fixed interest rates and a range of other benefits. They have a good reputation and are known for providing excellent customer service.
3. Credible: Credible is another popular student loan consolidation company. They offer a wide range of services and have a good reputation. For an overall good experience, Credible is a good choice.
4. LendKey: LendKey is a company that specializes in student loan consolidation. They offer low-interest rates and a wide variety of lenders to choose from. If you are looking for a specific lender, LendKey might be the best choice.
5. RISLA: RISLA is a student loan consolidation company that offers low-interest rates and flexible repayment options. You can have options like income-based repayment options and deferment options.
6. Discover: Discover is a well-known financial institution that offers student loan consolidation services. They offer low-interest rates and a wide variety of repayment options. Discover is a good choice for those who want flexibility in their repayment options.
These are just some of the top student loan consolidation companies. If you are looking for a consolidation company, these are some good choices. Each one has its own set of benefits and features. So make sure to compare the offers before you make a decision.
The bottom line
There are many student loan consolidation companies out there that can help you refinance your student loans. It is important to find a reputable and reliable company that offers low-interest rates and flexible repayment options. You can use the tips above to find a good consolidation company. So make sure to do your research before making a decision.