Dear Steve,
I'm looking to consolidate private/government student loans.
I have a few several outstanding loans with both public and private entities from graduate school (Navient, Nelnet, Discover student loans). is there a way to consolidate these all into one single debt/monthly payment?
Peter
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Dear Peter,
If it was just about government student loans then the answer would be an easy, 'Yes.' There is no charge to consolidate most government student loans into a Direct Consolidation Loan which is then eligible for a monthly payment based on your income. These payments can be as low as $0 per month if your income is low. It is easy-peasy no-brainer.
But when it comes to private student loans, people are always getting confused and think they are like government student loans. They are truly apples and flashlights.
A private student loan is a closer cousin to your car loan than your government student loan. Except for some protections from bankruptcy in a few situations, the loan is just a vanilla closed-end consumer loan. But let's not forget, some private student loans are dischargeable in bankruptcy even today.
Private student loan holders are neither required to allow you to consolidate them or make it easy for you to do so.
If you don't have a lot of private student loan debt, you can wrap them up in an unsecured debt consolidation loan like those from LendingClub.com
The only issue with the unsecured lenders is the limit of the loans is typically around $35,000 or so. That's often not enough to consolidate all of your loans. The good news about these types of loans is that once the student loan is moved into an unsecured loan, it may be fully dischargeable in a future bankruptcy.
There are some other resources out there like SoFi.com. However there are limitations on the loans they make. Generally you must have graduated from the program the loans were incurred for and the school must be a Title IV accredited university.
If any of these loans were used for graduate studies, not all schools are eligible. According to the SoFi website, only graduate expenses from the following schools are eligible.
Carnegie Mellon University
Columbia University
Cornell University
Dartmouth College
Duke University
Emory University
Georgetown University
Georgia Institute of Technology
Harvard University
Massachusetts Institute of Technology
New York University
Northwestern University
Stanford University
University of California, Berkeley
University of California, Los Angeles
University of Chicago
University of Michigan, Ann Arbor
University of North Carolina - Chapel Hill
University of Pennsylvania
University of Southern California
University of Texas at Austin
University of Virginia
Vanderbilt University
Yale University - Source
There are similar outfits like CUStudentLoans.org but they have limitations as well. Then there are the private student loan lenders like Wells Fargo that would love to consolidate your loans into yet another private student loan.
With all these lenders the ultimate rate you will pay will be based on your credit history and credit score. If you have crappy credit then the current rates you are paying on your current loans might be better.
And let's not forget that consolidating your private student loans does not mean you'll have a lower payment or pay less. It is quite possible your monthly payment after consolidation may be the same or higher than what you are currently paying. Private student loans just don't have the same payment adjustments based on income like a government loan does.
As far as I'm concerned, students should be talked out of taking out private student loans and schools should not make them available. In my book they are among the worst possible types of debt to have. They are not much better than a noose around your neck and for many, their dream careers are scuppered the moment the debt is incurred because they have to find any job and not the kind of job they studied for, just to make the loan payments.
Please post your responses and follow-up messages to me on this in the comments section below.
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