Federal and Private Student Loan Consolidation: Which to Choose?

Federal and private student loan consolidation options can provide many benefits. While it is true that the availability of new and consolidated loans has been reduced recently, it's still important to know the the upsides and downsides of federal and private student loan consolidation, including:

  • The ability to deal with one lender, reducing paperwork for you and saving time
  • Possible lower interest rates for a consolidated loan and therefore lower payments
Federal or Private?

Choosing between federal and private student loan consolidation programs requires a review of the advantages and disadvantages of each.

For private student loan consolidation:

  • The application process is typically shorter and easier
  • All borrowing requires documentation and paperwork, but many private lenders have fewer bureaucratic requirements
  • There can be more flexibility on interest rates resulting from your credit score and collateral
  • Currently, private lenders are more likely to have money for consolidation, however, private lenders cannot consolidate federal loans

For federal student loan consolidation:

  • Because of the current regulatory environment, many federal loan programs are not offering consolidation loans
  • When such loans are offered, federal loans typically offer more competitive interest rates, even when the loans are offered through a local lender and backed by a government organization
  • Federal student loan consolidation, when it is offered, cannot be combined with private student loans


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