Looking to Save Money on Your Student Loans? Consider Private Loan Consolidation

With over $1.4 trillion in combined student loan debt, Americans often need help to pay off their student loans. Refinancing is one common option, and private student loan consolidation is another.

If you are looking to save money on your student loans, hoping to make only one payment each month, or needing to lower your monthly payment, student consolidation loans might just be for you.

This is your guide to the best private student loan consolidation information available to you. We will give you the following info:

  • A definition of private student loan consolidation
  • The difference between private and direct student loan consolidation
  • Factors that influence consolidation of student loans
  • Pros and cons of student consolidation loans
  • A list of some of the best private student loan consolidation options from top private student loan lenders

By the end of this guide, you will be able to understand private loan consolidation and know whether or not it is the right choice for you and your finances.

See Also: Student Loan Repayment & Forgiveness | Guide | What You Need to Know About Paying Off Student Loans

What Is Private Student Loan Consolidation?

Private loan consolidation combines all your other loans into one new, bigger loan from a single lender.

Essentially, this new lender pays off all your existing student loans. Then, you simply need to pay that lender back for all of those payments.

private student loan consolidation

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The interest rate of these student consolidation loans will be the “weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent,” according to FinAid.

Only loans belonging to one borrower can turn into student consolidation loans. You cannot combine the loans you took out and the loans your parent took out.

The consolidation of student loans is final. You cannot reconsolidate. The only exception is if you add in more student loans that were not originally part of the initial private student loan consolidation.

Private Student Loan Consolidation vs. Direct Student Loan Consolidation

A direct student loan consolidation is just like private loan consolidation with one main difference:

Direct student loan consolidation is for federal student loans. These come from the government. Private student loans are from private lenders.

Instead of going to private student loan lenders, you can go straight to the Department of Education’s Student Aid website to fill out a direct student loan consolidation application.

For the purposes of this guide, we are going to focus primarily on private student loan consolidation, not direct student loan consolidation.

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Can Your Consolidate Federal and Private Student Loans?

Before we dive right into all the details of private loan consolidation, let’s answer an important question first: can your private student loan consolidation include federal loans, too?

The short answer is: yes.

But it doesn’t work the other way. You cannot add private loans into a federal direct student loan consolidation.

Just because you can join your federal loans in does not always mean it is the best private student loan consolidation method.

Many times, federal student loans come with great perks like student loan forgiveness. The second you join them with your private loan consolidation, you lose those perks entirely.

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Factors That Affect Private Loan Consolidation

Private student loan consolidation is not for everybody. There are a few factors that will not only affect whether or not you can benefit from private loan consolidation, but also what your interest rate is:

  • Good Credit: To get the best private student loan consolidation rates from top private student loan lenders, you will need to have a good credit score.
  • Minimum Income: Private student loan lenders may have different minimum requirements when it comes to household income, but if you do not meet those requirements, you will not be eligible for private loan consolidation.
  • Minimum/maximum loan amount: Even the best private student loan consolidation won’t be of service if you do not have much left on your loan.This is one of the reasons private student loan lenders will often have a minimum loan amount as well as a maximum loan amount.
  • The country’s economy: This last factor is out of your control, but it affects you just the same.When the economy is strong, you will probably have better rate options.When the economy is poor, even the best private student loan consolidation may not save you money.

Reasons to Utilize Private Student Loan Consolidation

So now you know how student consolidation loans work, let’s look at how the best private student loan consolidation can benefit you.

Here are some of the top reasons people choose private student loan consolidation:

  • Convenient single payment: Not only can this be a time-saving measure, consolidation of student loans can help people who easily forget due dates, which thereby hurts their credit.
  • Alternate repayment plans: Depending upon your needs, private loan consolidation can extend your repayment plan or move you to an income-based repayment plan to save money on monthly payments.
  • Switch from variable to fixed: If your current student loans are under a variable interest rate, you may be concerned that the rate could jump up. Private student loan consolidation allows you to move to a fixed interest rate for peace of mind.
  • Improved rates: If you have considerably better credit than when you first took out your student loans, the best private student loan consolidation may give you a much better interest rate.In fact, a credit score increased by only 50 to 100 points may get you a much better interest rate.

Related: Best Private Student Loan Providers – Best Place for Student Loans

Reasons Not to Utilize Private Student Loan Consolidation

While there are many reasons why choosing the best private student loan consolidation can help you, there are a few times when it won’t work as well.

Here are some reasons to avoid private loan consolidation:

  • Potential money loss: Without private loan consolidation, you can pay off the higher interest rate loans first, and then you are left with low interest rate loans.Instead, you are left with paying a moderate interest rate the entire life of the loan.
  • Origination fees: Though not all private student loan lenders will charge a fee for private loan consolidation, some will.The best private student loan consolidation options, however, won’t charge these.
  • Benefit loss: If you had any borrower benefits from your original student loan (like loan forgiveness or deferment), you can lose them with student consolidation loans.
  • Extended time period: The same reason many people want to choose private student loan consolidation (extended time period = cheaper monthly costs) is also a con.When you pay interest rates for a longer period, you can end up paying more in the long run.
  • Variable rates: Many people choose the best private student loan consolidation to go from variable rates to stable, fixed rates.If you use private student loan consolidation for the opposite reason, you can save money now.But the rate may go up in the next year or two.

Best Private Student Loan Consolidation Options

Of course, you want to get the best private student loan consolidation, so it is important to look into the options of many different private student loan lenders.

Here is a list of some of the top private student loan lenders offering private student loan consolidation.

There are many other private student loan lenders, but these are considered to be some of the best private student loan consolidation choices:

Citizens Bank

  • Interest Rate: 3.68% +
  • 5, 10, 15, 20 year repayment plan options
  • A minimum of $10,000
  • A maximum of $90,000 (undergraduates), $130,000 (graduates/doctoral degrees), and $170,000 (dental, law, or medical degrees)

College Ave

  • Fixed rates range from 4.75% to 7.35% APR.
  • Variable rates range from 2.88% to 6.13% APR.
  • 5 to 15 years for repayment plan options


  • Interest Rate: 2.56% – 6.48%
  • 5, 7, 10, 15, 20 year repayment plan options


  • Fixed interest rate: 4.20% – 7.20%
  • Variable interest rate: 3.64% – 6.29%
  • 5, 7, 10, 15, 20 year repayment plan options


  • Interest rate: 2.75% +
  • 5, 7, 10, 15, 20 year repayment plan options


  • Fixed interest rate: 3.49% – 7.64%
  • 5, 10, 15 year repayment plan options


  • Fixed interest rate: 3.375% – 6.740%
  • Variable interest rate: 2.565% – 6.490%
  • 5, 7, 10, 15, 20 year repayment plan options

Read the Fine Print Before Consolidating

When you deal with direct student loan consolidation, you are dealing with the government. They have many systems in place so you never get scammed.

private loan consolidation

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But when you are dealing with private student loan consolidation, there may be companies out there who will try to take advantage of your situation.

Be sure to choose the best private student loan consolidation option by:

  • Opting for one of the top, trusted private student loan lenders
  • Realizing that if it sounds too good to be true, it probably is
  • Reading the fine print carefully
  • Asking questions about anything you do not understand fully
  • Checking with your financial advisor first

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Conclusion – Private Student Loan Consolidation

Now that you have all the information on private loan consolidation, it is important to figure out if the consolidation of student loans is right for you. For some it is a fabulous idea; for others it is not ideal.

You may want to look into student consolidation loans if you:

  • Have a stronger credit score than when you took out the loan
  • Feel overwhelmed with keeping track of your various private student loans
  • Are concerned about a variable interest rate and hope to move to a fixed rate

If you follow these tips on the best private student loan consolidation and take the time to research top private student loan lenders, you should be good to go in combining your student debt into one, easy payment each month.

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