Frequently Asked Questions about Consolidation

Asking questions is the beginning of wisdom. Here are some of the most commonly asked questions when it comes to student loan debt consolidation:

I’m not really struggling with my loans, should I consolidate?

There are other benefits to consolidation, even for those who may not be struggling to make their payments. Convenience is one – having a single monthly payment rather than many, and it is even possible that a consolidation can bring you more favorable terms than your individual loans, saving you money in interest or fees.

Can I consolidate before I graduate?

Hold your horses. Unfortunately, active student loans cannot be consolidated until after you graduate from your current degree-level. What that means is that the loans you take out in order to graduate with a bachelors degree cannot be paid off until you graduate with that degree or leave school. Once you start pursuing your masters degree, you can consolidate those loans that helped you get your bachelors degree, and so on and so forth.

Can I consolidate both Federal and private loans together?

Not usually no. There are Federal loan consolidation programs for Federal student loans and there are private loan consolidation programs for private student loans, and the two do not generally mix at all. There are other ways of consolidating both debts together if that is your interest, however, such as self-consolidation through a home equity loan or home equity line of credit. Or perhaps you can take out a personal consolidation loan which gives you a lump sum payment to be used for many different bills and make the payoff amounts to your Federal student loans and private student loans on your own.

Will I need a co-signer in order to get a consolidation loan?

You might, depending on your credit score and who you are trying to get consolidation through. If you are consolidating Federal student loans through the government, you will not need to bother with a co-signer since those loans are not credit-based – (it doesn’t matter how much you earn or owe). On the other hand, if you are consolidating private student loans through a private company, and your credit has suffered some recent “damage”, the consolidation company may ask you to find a co-signer or refuse to offer you the loan.

Does consolidation affect my credit?

No. Debt consolidation is the elimination of several debts by making payments to them. While this would be a good thing on your credit report, you are simultaneously taking on a new debt that is the exact same size as all the debt that was paid off. Essentially this works out to be a “wash” on your credit rating since having several debts on your credit worth $50,000, for example, is the same as having one debt for $50,000.

I have a co-signer on a private student loan, will consolidation affect them?

Only in a way that will make them say “thank you!” That’s because debt consolidation is the process of actually paying off your old loans in place of a new single loan, so as far as the law is concerned and your co-signer’s obligation, that old debt will be paid in full and they will no longer have any responsibility to you.