How to Consolidate Student Loans

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Paying back student loans is an overwhelming process. It usually takes many years for college graduates to become free of these debts. When student loans become too difficult to manage, it's time to consider consolidation.

Gather Loan Information

The first step is collecting all loan information. Since student loan companies often transfer accounts, this may be a tedious task. Find both federal and private loan documents. If the original Promissory Note isn't available, find a statement. Locate the contact phone number for each lender, then call and ask for a payoff amount. Keep in mind that some private lenders assign a fee for early payoffs. Not all loans are eligible for consolidation, so be sure to ask each of the lenders about this.

Research Student Loan Options

Although there are several companies that offer consolidation loans, it's imperative to first see what options are available from the government.

Graduates who have considerable student loan debt may not be able to obtain a consolidation loan for the entire amount owed. Before considering searching for a private loan, visit the Direct Consolidation Loans site. This consolidation option is offered to graduates who have federal loans. Rates for these loans should always be below 9%. Never accept a loan from a company that requires a fee to consolidate federal student loans.

Complete The Application Process

Visit a credit union and at least two banks. Apply for a private or consolidation loan. Be sure to specify that the funds are intended to pay off student loans. Before accepting any loan offers, compare the interest rates. Keep in mind that consolidation loans have the same approval criteria as regular loans. Applicants must have a decent credit history, good FICO scores and sufficient income to qualify for approval. Some individuals may only qualify for a rate that is higher than the current rate of their student loans. If this is the case, it's best to avoid a consolidation loan. Wait patiently to hear from the lenders, as their responses may take a week or more.

Choose A Lender

One lender must be chosen eventually. Be sure to compare all of the loan terms offered by prospective lenders. Avoid any debt relief companies that claim to eliminate student loan payments completely. Once a lender is selected, make an appointment to sign the documents.

Remember that it's impossible to consolidate loans while attending school. However, it's actually best to set up a consolidation loan during the six-month grace period after graduation. While this choice often forces students into early repayment, it ensures a lower permanent interest rate.

Be sure to compare all of the loan terms offered by prospective lenders