Consolidating Private Alternative Loans

Private education loan consolidation is now available for those borrowers with one or more private alternative loans. Be aware that private loan consolidation varies greatly from federal loan consolidation; for example, they may not offer any payment postponement or repayment plan options.

WARNING: Do not consolidate federal student loans with private student loans. Federal loans have better interest rates, better repayment terms, and they have deferment and forbearance options. If you need to consolidate your private loans, keep them separate from your federal student loans. If you consolidate your federal loans with private loans, you will lose the federal loan benefits.

The benefits of a private consolidation loan may include making one lower monthly payment through an extended repayment period. Also, if you have more than one private loan lender, consolidating these loans may make managing your loans easier and more convenient.

The drawbacks of a private consolidation loan may include processing fees, credit check, no grace period, no deferment and forbearance options, and, if the interest rate is variable, higher margins over the index, so be careful in assessing how you may benefit from consolidating your private loans.

If you are considering refinancing your private education loans, we suggest that you first use the grace period and any other forbearance options you may have on your current private loans before consolidating. Most private consolidation loans do not have grace or forbearance options, so do not consolidate any loans until you have used all of these features on your current loans.

There are a limited number of private consolidation loan lenders. To identify private lenders, conduct a Web search for "private consolidation loans."

Review the information in the Tips to borrowing an alternative loan section for assistance determining which loan would be good for you.

If you need assistance with private loan consolidation, please feel free to contact our loan counselor.