Private student loans can have variable interest rates, some greater than 18%. A variable rate may substantially increase the total amount you repay.
Federal student loans include many benefits (such as fixed interest rates and income-driven repayment plans) not typically offered with private loans. In contrast, private loans are generally more expensive than federal student loans.
- You can earn interest rate discounts if you qualify
- You can refinance in the future with a private consolidation loan
- There are no prepayment penalties
- Interest may not be tax deductible
- You may need a cosigner
- Private student loans may not offer forbearance or deferment
A private student loan can cover up to your school’s full cost of attendance, less other aid you’ve received. Many private student loan lenders offer a cosigner release option that enables you to remove the cosigner from the loan if you meet the lender’s requirements.
Lowering your interest rate with a private student loan consolidation, can lessen your financial strain now. Plus, you are more likely to have funds available for your next big purchase such as buying a home or paying for a wedding. For instance, a loan consolidation could cut your monthly payments in half — someone with a student loan debt of $10,000 and a consolidated loan rate of 6% for 15 years, could bring $170 monthly payments down to $84.69.
Many students with little steady income and/or credit history must involve a cosigner to qualify for a loan. Consolidating to release your co-signer can have long-term benefits for that individuals’ credit score and financial stress while also, possibly, enhancing your relationship with the person who was kind enough to share your loan debt.
Loan consolidation can help borrowers struggling with large monthly payments or high interest rates avoid serious financial repercussions of going into default.
Is Private Student Loan Consolidation an option for you? Find out now.