You’ve decided you want to consolidate your student loans. No doubt, one monthly loan payment would be easier to manage than several.
Plus, consolidating your student loans with a private lender may allow you to refinance at a lower interest rate. Saving thousands of dollars is certainly nothing to complain about.
There's no shortage of lenders available to consolidate your student loans, the bigger issue is how to choose the right one for you. Here’s how to make the best choice.
Explore options
Choose your loan consolidator with as much care as you would a new bank or mortgage lender. Make a list of companies that you’re interested in, and note important information such as contact phone number, website, interest rate, payment, and loan length.
You can start your search here, with our selections for the best banks for student loan consolidation and refinancing.
Know what you’re getting
Understand consolidation doesn’t automatically mean you’ll get a lower interest rate. For example, if you’re consolidating federal loans through a Direct Consolidation Loan, your interest rate may actually go up slightly.
So you may get lower monthly payments through a federal consolidation, but realize you’ll also extend the number of years you’ll be paying on the loan.
You should also keep in mind that if you use private student loan consolidation for federal loans, you could lose certain benefits, such as eligibility for repayment plans or loan forgiveness. However, the lower interest rate may be worth the trade-off.
Evaluate customer service
Two companies could offer you the same interest rate, but one may seem to have more knowledgeable and friendly customer service representatives.
Reputation is also key. How well does the lender resolve problems? Have there been a lot of complaints about them
Check with the Consumer Protection Financial Bureau and the Better Business Bureau, among other resources like the folks at your school’s financial aid office.
Dig deep
There are all sorts of variations among lenders. For example, some have no origination fees or prepayment penalties. Some have more lenient forbearance rules than others. Others will release a co-signer after a certain number of on-time payments.
See what each lender says on their website, or, what better way to test drive their customer service than by calling them for answers to your questions?
Check out our picks for the best lenders for student loan consolidation.