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Know that you might need a higher credit score if you want the best rates without a co-signer.Federal consolidation loans come with borrower protections private lenders may not offer.“With (our student loan program), if the borrower makes 12 months of on-time principal and interest payments, they can request to release the co-signer,” he says.“That creates tremendous flexibility, especially for families applying for loans for multiple kids.” Students consolidating federal loans can do so through the Department of Education’s website at Loan gov, by phone at (800) 557-7392 or by downloading a paper application at Loan gov/borrower/and mailing it in. Consolidation provides grads with the ability to combine their student loans into one megaloan, but it comes with drawbacks. Along with gaining a new degree, many graduates will also leave campus with new student loan payments they’ll have to fit into their post-graduate budgets.
Most also have limits on how much you can consolidate.
But borrower protections and repayment options on private consolidation loans can vary wildly from lender to lender.
Betsy Mayotte, director of regulatory compliance for the student debt assistance group, American Student Assistance, makes sure to tell borrowers to stay away from consolidation loans that combine federal and private loans.
Regardless of how the market fluctuates, borrowers will never pay more than 8.25 percent on their consolidation loans.
Private loans can typically only be consolidated with other private loans.These include deferment — the ability to suspend payments under certain circumstances such as serving active military duty, attending further education or unemployment — and forebearance, which allows borrowers to postpone payments while still accruing interest, in cases of financial hardship.