Consolidating federal student loan rates
Here’s what you need to know before deciding to consolidate student loans.
Loan consolidation is when a borrower takes out a new loan to pay off several smaller student loans.
Instead of making multiple payments to multiple lenders, the borrower only has to pay off the new consolidation loan, says Michelle Pezzulli, vice president of operations for Credit Union Student Choice, a student lending service provider in Washington, D. “That new loan will have its own interest rate; it will have its own repayment terms; it will have its own terms and conditions,” she says.
This can be attractive to borrowers because the consolidation frequently results in longer repayment periods and lower monthly payments.
“With (our student loan program), if the borrower makes 12 months of on-time principal and interest payments, they can request to release the co-signer,” he says.
“That creates tremendous flexibility, especially for families applying for loans for multiple kids.” Students consolidating federal loans can do so through the Department of Education’s website at Loan gov, by phone at (800) 557-7392 or by downloading a paper application at Loan gov/borrower/and mailing it in.
That means if your score isn’t superhigh, you could wind up paying more if you consolidate.Know that you might need a higher credit score if you want the best rates without a co-signer.