How to Find the Best Student Loan Consolidation Rates

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Student loan consolidation isn’t a one size fits all kind of deal. This, I discovered when I first started looking into the options out there (and trust me, you’ll see there are a lot of options). What I quickly learned was that as with any other type of loan, consolidation terms change depending on the company and if/how you match their financial criteria. While this broadens your set of options considerably it can also make the process pretty overwhelming.

There are a ton of different student loan consolidation companies (with more and more popping up as time goes by). This overload of info can be intimidating but it doesn’t have to deter your search. Break up the big task into smaller, more manageable pieces and you’ll be on your way to finding your best rate. Here are a few tips as you begin your search…

*Note: These tips pertain mostly to private student loans. Though you can consolidate your federal student loans via the federal government, the rates are calculated by taking the weighted average of your federal loan interest rates. Since these rates are federally regulated, this means less flexibility! Private student loan consolidation rates, on the other hand, are calculated based on a borrower’s credit score (in addition to other financial factors). This means more flexibility in rates!

Finding the Best Student Loan Consolidation Rates

List out the details of your current loans/lenders
Include interest rates, projected repayment timeline, monthly interest accrued, principal balance, etc. This will help to give you a clear look at the current financial breakdown of your student loan debt. This is particularly useful if you have multiple lenders and loans.

Check in with your credit score and credit report
In many cases, you’ll need to meet (or exceed) a certain set of criteria in order to obtain a consolidation loan. Before applying, take a look at the health of your credit and consider checking in with your credit report as well.  Since most lenders will ask for your credit score, having this information handy will help you avoid any surprises as you first begin the application process.

If you have low credit, you might consider taking some time to raise your credit before applying in order to qualify for even lower interest rates.

Choose a set of companies to compare
When you first start the process of choosing a student loan consolidation company, you’ll soon realize there are quite a few out there. To organize your approach, break it down. For instance, instead of applying back-to-back-to-back, choose three companies to start out with. This way, you’ll prevent yourself from being inundated by information (and keep your sanity in the process). Once you choose the companies you’d like to begin with, you can start the application process for each.

List out the terms and rates for each offer you receive
Once you complete the application process for your chosen companies you’ll be notified of your offers, usually via email. While not always instantaneous,  it generally only takes a few minutes to generate the information. As soon as you have your offers, use a piece of paper or a spreadsheet to compare the terms and rates side by side. You may receive more than one rate per company, depending on different repayment plans.

Consider the whole repayment timeline
This is the most crucial part of the comparison process… understanding what the interest rate means for your repayment. How will a particular rate and offer impact the life of your loan? Some offers may include a lower interest rate but a longer repayment plan. Still other offers give you more flexibility in your repayment or greater protections but without a lowered interest rate. These are all important things to consider as you navigate offers and make your final decisions.

Check out online marketplaces
Comparing interest rates can all be done on your own, but you can also enlist the help of online marketplaces created for the same purpose. Credible is a site that lists out the various offers available and helps you to compare the terms – all in one place. As with other refinancing sites, you’ll have to fill out an application with some of your basic information.

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Remember: There’s more to consolidation than the interest rate

The repayment timeline will impact just how much you end up saving (and in some cases, it might not end up being much). If you opt for a 20 year payment plan, you may pay less each month but accrue more interest in the long run. Make sure you weigh the pros and cons of each offer before choosing based on interest rate alone.

To start off your hunt, you can check out companies like SoFi or CommonBond to compare your rates, or head over to Credible to start comparing rates from a wider selection!

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  • Good point at the end. Its important to remember why you are consolidating. Generally, it should be to pay less interest on your loans (or pay the same interest but free up cash to earn more income elsewhere).

    Too many people consolidate debt (student loan or otherwise) to “put all their debt in one place”. This isn’t really helping anyone…

    • Claire Murdough

      Completely agree – it’s even more crucial to think about the “whys” in addition to the “hows”.

      Thanks for reading and commenting!

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