Private student loans are credit-based, meaning student borrowers with high credit scores will pay lower interest rates than those with low scores because banks assess the risk of each borrower.Learn more about federal student loans All students are eligible for federal loans, regardless of financial need.If you’re using private lenders for student loan consolidation, there is a chance you could get a better interest rate and possibly lower monthly payments. These are private loans where credit score and other conditions are weighed in. Here are some things to consider when evaluating the prospect of student loan consolidation.If you have a tremendous job that pays really well and no dings on your credit report when you graduate, you could find a lender willing to give you a break on interest to get your business. There are two primary types of educational loans — private and federal.Your options are determined by the amount of debt you carry and the difficulty you have meeting monthly payment obligations.Consolidating student loans into one payment could free up additional cash or help to structure payback of your loans on more favorable terms.You can’t consolidate private loans in the federal Direct Consolidation Loan program, but some private lenders allow you to consolidate federal and private loans together.The Direct Consolidation Loan program is the right choice if your goal is to simplify the process and keep your options open for the many repayment plans available for federal loans. Your rate is determined by the weighted average of the interest on the loans being consolidated rounded up to the nearest one-eighth of 1%.
However, if you try to refinance a federal loan through a private lender, you will lose eligibility for things like forgiveness programs, deferment, forbearance, as well as the income-based repayment programs.Ideally, you would qualify for debt consolidation after graduation.However, you also could qualify when you leave school or are enrolled less than half-time.Both federal and private lenders recognize that lower monthly payments help may be the best option, if you don’t get the job you want immediately after graduating from colleges.Find out more about the choices debt consolidation offers.