College Life

Student Loan Consolidation 101

Student loan consolidation and refinancing has been all over the news over the last year. As more and more graduates leave school with student loan debt, many borrowers are now looking for ways to better manage their student loan debt after graduation. You may have heard of student loan consolidation in the news, on the radio, or even on television. Sorting out the facts behind student loan consolidation isn’t easy. Before you refinance or consolidate your student loan debt you should familiarize yourself with the facts.


Federal Student Loan Consolidation

The majority of students use federal student loans to help pay for college. Taking out a new federal student loan each semester is often the norm. When you graduate, you may be left with 5, 6, 7, or even 8 different federal student loans to your name. Keeping track of all these federal student loans is not easy task.

Luckily, the Department of Education created a program called the Direct Consolidation Loan. Direct Consolidation Loans allow you to consolidate multiple federal educational loans into one loan. Your new consolidated loan will have on monthly payment, one interest rate, and you will be free from multiple monthly payments.

There is no application fee to consolidate federal student loans through the Direct Consolidation Loan program. Only federal student loans are eligible for consolidation through this program. Most federal student loans are eligible including:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans
  • Direct PLUS Loans
  • PLUS loans from the Federal Family Education Loan (FFEL) Program
  • Supplemental Loans for Students (SLS)
  • Federal Perkins Loans

Federal student loan consolidation will not lower your interest rate or your total loan cost. The new interest rate you pay will be a weighted average of your consolidated federal student loans.


Refinancing & Consolidation

If you are looking to refinance both federal and private student loans you need to look elsewhere from the Direct Consolidation Loan program. Student loan refinancing and consolidation is only available through private student loan lenders including iHelp.

When you refinance your student loans, you consolidate your student loan debt into one new loan at a new rate. Refinancing could be a great option for borrowers stuck paying high interest on their old federal or private student loans. Student loan refinance rates can be significantly lower than new private student loan rates. iHelp is one of the top student loan refinance lenders on the market.

iHelp’s Consolidation Loan rates start at 6.00% for qualified borrowers who have a cosigner. Without a cosigner, iHelp’s Consolidation Loan rates start at 7.00%. iHelp offers only fixed rates on their consolidation loans. Fixed rates are great for borrowers looking to lock into low rates while interest rates are at historical lows. With fixed rate student loans, the rate you pay and your monthly payment will be constant throughout the life of the loan. iHelp charges a 2% supplemental fee at the time of disbursement. You can compare iHelp and other private student loan consolidation lenders at LendEDU.

Refinancing through a private lender is the only way to lower your interest rate and the total cost of your loan. LendEDU reports that their average user saves over $10,000 when refinancing their student loans. iHelp is a great place to start.

To be eligible for student loan consolidation with iHelp, you must have graduated from one of iHelp’s eligible schools. To view iHelp’s full eligible school list start here!


Avoiding Student Loan Consolidation Scams

You may have heard the radio ads promising to forgive your student loans or to lower your monthly payment through federal student loan consolidation. These ads are paid for by scammers looking to steal your money.

Do not ever pay for student loan consolidation or student loan refinance. In general, there are no application fees to consolidate or refinance student loan debt. These scammers are essentially paperwork handlers. For a fee, these scammers will submit paperwork in your name for federal student loan forgiveness and consolidation. Don’t believe their claim that you can get all of your student loan debt forgiven. Only a small fraction of outstanding student loans are eligible for forgiveness through the Public Service Loan Forgiveness Program (PSLF). Moreover, federal student loan consolidation will not save you money. You can only save money on your student loans by refinancing with a private lender like iHelp. You can submit the necessary paperwork for federal student loan forgiveness and consolidation for free with the Department of Education.