Student loan debt is a common problem among graduates. According to the NCES, 13% of students in the repayment phase of their loans defaulted in 2013. Finding the best student loan consolidation provider means taking many factors into consideration.
However, the end goal is the same: getting the needed extra funding without being financially burdened for years to come. After looking at many of the top providers, I found that the following are the best student loan consolidation options.
In This Guide
The Best Student Loan Consolidation Companies
With college costs increasing, there is no shortage of student loan consolidation lenders available. As a response to high student loan debt in this country, many online companies have popped up with the goal to offer better options.
I've taken a look at the industry to uncover what makes certain companies stand out. My review of the leading student loan companies lead us to our top choices, all of which offer a variety of consolidation and refinance options. Read through more information on student loan consolidation and refinancing.
Here's an introduction to a few of our favorite online lenders:
- Interest Rates: 3.37-6.74%
- Loan Amounts: $5,000-500,000
- Consolidation for federal and private loans
- Choice of 5, 10, 15 or 20 year repayment terms
- Consolidates graduate and undergraduate loans
- Allows credit scores that are medium and above
- Loan payments are paused when you are unemployed
- You must complete a degree to qualify
SoFi is a leading lender in the online market, serving over professionals with over $5 billion loans issued. The company aims to revolutionize lending with a "nontraditional underwriting" process that takes more factors than a simple credit score. Though SoFi takes job history, education and other merits into account, they are known for their discerning qualification process. SoFi prefers to lend to those that they consider "early stage professionals." This causes them to be very selective in their loan qualifications, preferring those who have degrees, a job and a high credit score. If you do qualify, you gain access to several excellent features like competitive fixed rates, unemployment protection, live customer support and career building support.
- Interest Rates: 3.25-7.26%
- Loan Amounts: $7,500-175,000
LendKey Student Loans
- Average saving of over $15,000
- Offers refinancing for private and federal loans
- Initial interest-only option to keep payments low
- The consigner is released after 12 consecutive payments
- Not-for-profit lender network has lower minimums for approval
LendKey is another online lender but they don't offer direct consolidation loans. Instead, they connect consumers to a network of over 13,000 local banks and credit unions. Because of this, you have access to a huge network of lenders all on one website under one account. LendKey offers reasonable rates, the ability to consolidate federal and private loans together and you have the option to release your co-signer after 24 full, consecutive payments. The company is also known for excellent customer support with high levels of customer satisfaction. Lendkey also offers the ability to return your loan without fees for 30 days after accepting.
- Interest Rates: 3.38-6.74%
- Loan Amounts: $5,000-1,000,000
- Flexible repayment terms
- Competitive rates
- Sophisticated data analysis
- Autopay discounts
- Handles your loan on sight
- Not BBB accredited
- Only available in 29 states (and D.C.)
Earnest aims to streamline the lending process for "financially responsible" people by cutting out unnecessary costs and offering low rates. Earnest's fixed rates are on the low end, starting as low as [DATA:279]. They also offer merit-based loans, which means they take things like employment status, income, payment history and bank account balances into consideration during the approval process, rather than a simple credit score. This is ideal for recently graduated students who may not have established much credit history. Because of this, applicants should be prepared for a thorough application process. However, if you feel that your credit score doesn't accurately report your ability to pay, it may be worth the extra effort.
Student Loan Consolidation: Key Considerations
The Best Student Loan Consolidation
Refinancing student loans with the right company is important. Student loan consolidators each come with their own programs and benefits. As a result, you shouldn't accept the first loan you qualify for. Choosing the right lender depends on a few factors. After doing my research, I found a few important things you should consider:
Reasons to Start Searching for the Best Student Loan Provider
The cost of tuition and other college-related expenses often cause students to have to take out several student loans. This is made even more expensive if a student decides to go to law, medical or any other graduate school.
At the end of your educational career, you may be left paying off multiple loans and the monthly payments may be quite high. Finding the best student loan refinance options is often a good way to deal with debt. Below we list a selection of companies with the best student loan consolidation rates.
Many graduates who have a lot of payments to deal with each month choose to consolidate their loans into one simple monthly payment. This makes it easier to organize your finances and it means that you will be able to pay interest on one loan instead of many. You can also extend the length of the loan, giving you more time to repay it. This means your monthly payments will be lowered and more manageable.
...13% of students in the repayment phase of their loans defaulted in 2013.
On the other hand, it may take longer to pay back your debt which will mean more interest paid over time. However, if you are struggling to make monthly payments or if missed deadlines are causing you to have to pay fees, then seeking a reputable student loan consolidation company may be a good option.
|Company||Interest Rates||Loan Amounts|
|LendKey Student Loans||3.25-7.26%||$7,500-175,000|
Another consideration you should make before choosing to consolidate student loans is your interest rates. The interest rates of a refinanced student loan depend on the average interest rate of all the separate loans that go into it. If your loans all have fairly similar interest rates, then the interest rate of the combined loan will be close to watch you are paying on the individual loans currently.
The interest rates of a refinanced student loan depend on the average interest rate of all the separate loans that go into it.
However, combining small interest loans with large interest loans may cause you to pay more. If you have several low-interest loans and one high-interest loan, it may be better to consolidate the smaller ones and leave the higher ones out.
Before You Apply
There are several things you need to do before you apply and in many ways, preparation is the most important step:
- Look at all of your loans and how much you owe. Decide which loans you want to consolidate. Remember, rates are largely determined by the average of the rates you are consolidating. If you just combine loans with large interest rates with smaller ones, your overall rate will increase.
- If you can use a co-signer with an established credit history to help you get better interest rates and qualify for the loan that works best for you.
- Make a financial plan to pay off the loan. You are more likely to successfully pay off your loan if you make a clear budget and stick to it.
- Find a loan that works for you.
How do I Apply?
Application processes vary from lender to lender but there is some basic information that you will need. Collect all of the necessary school information (the school's name, your majors and minors, etc.), your social security number, your current address, your gross income, your residential status (do you rent or own a home), and the requested loan amount.
Once you have all of the necessary information, you can start the application. Most banks have an online application and you might even be able to electronically sign documents. However, if you have questions or if you are confused it may be better to meet with a live representative who can walk you through the process.
Look for Extra Perks
When you consolidate loans, the old loans are paid off by the new consolidation loan. That means any perks or discounts you had with your old lenders are gone. Consolidating multiple loans may mean that you lose the perks that come with the some of your specific lenders, especially if you have a federal loan.
Student Loan Income-Based Repayment
Paying off loans after you graduate can be tough, especially if you are in lower paying jobs to get your foot in the door. Some consolidation loans come with income-based repayment plans. This means that your monthly payments are dependent on your income.
If you are in a low paying job, your payments will be manageable and when your make more money you can contribute more to paying off your loan.
Three Resources to Help Find the Best Student Loan Refinancing
For some additional informatonfore choosing a student loan consolidation lender, take a look at the following resources:
1. Student Debt Study
Student debt is a prominent issue in the US. We've taken a deep look at the numbers to find which states are the best and the worst in terms of the monetary burden its students carry.
2. Compare Student Loan Consolidation Rates
After review the top student loan refinancing companies, compare student loan refinance rates side by side with this tool. Move the sliders to positions that reflect your loan or the loan you hope to find and see the rates that are offered by the top lenders.
3. Student Loan Calculator
To calculate your student loan monthly payments and your total repayment, take a look at this student loan calculator. This can give you an idea of what loan amount you can afford to pay back and the loan term you should look for. It can also help you see how different rates can affect the overall cost of the loan.
Important Questions to Ask
Can you Refinance Federal Student Loan from a Federal Source?
Do you have private or federal loans? Federal loans may allow you to qualify for a federal consolidation program. These are excellent options to cut down on your monthly payments by giving you longer to repay the loan. You may also have the option to choose from a variety of repayment plans that you wouldn't have before consolidation.
A direct federal loan also gives you the option to switch to a fixed interest rate instead of a variable rate, allowing you to plan your repayment more accurately. Federal student loan consolidation lenders loans limit fees, simplify payments and lower monthly payments. It may also lengthen the term or your loan, causing you to pay more in overall interest.
Private Student Loan Consolidation
Private loans can be consolidated through a number of private lenders with the same goal as a federal loan: to simplify and lower payments each month. It is difficult to consolidate federal and private loans together and doing so may cause you to miss out on benefits from federal lenders like limited fees.
How to Refinance Student Loans
Finding the best way to consolidate student loans can be a tricky process. You need to collect a lot of information, decide which loans you want to combine and determine the best time to consolidate. However, your first question should be whether or not you should consolidate. After you decide to move forward, you can begin to find answers to those other questions.
When is the Best Time to Consolidate?
When you are trying to choose the best time to consolidate, the first thing you should know is that consolidation lenders will probably not help you before you graduate. Consolidation for both federal and private loans is for graduates almost exclusively. Plus, before graduation you may have to take out new loans to complete your degree. Since you can typically only consolidate student loans one time, you should wait until you are finished taking out loans before you consolidate.
However, if you drop out or decide not to complete schooling you can consolidate as well. As soon as you drop out, you can begin the consolidation process but it will be more difficult to find a good loan with reasonable rates.
You will most likely have a grace period after graduation when you do not have to make payments and you may not accrue interest. Some suggest consolidating during this time because lenders will give you better rates. Make sure you are prepared to begin making payments, though. As soon as you consolidate, the grace period is over.
Student Loan Consolidation Advice
Before you begin shopping for student loan refinancing, visit our advice section to learn more about what you should be looking for.
- What can you do if you can't find a job and it's time to start paying back your student loans? Finding a job after graduating can be difficult for some students and, with the deadline to start making payments is approaching, you may start to feel overwhelmed. You have a few options if your loan payments are going to be too much to handle. Consolidation can lower your monthly payments and combine them all into one simple loan. Some lenders have safeguards for unemployment and programs to help you find a job. Before you panic, talk to your lender and ask them about your options. If you can't avoid making payments before finding work, take a look at some of these helpful tips.
- For federal loans, you have some pretty good refinancing options. A Direct Consolidation Loan can combine multiple federal loans, with fairly helpful plans based on your income. However, you may not have that option if you have a loan from a private lender. However, the online lenders discussed above are an excellent option if you are stuck with multiple private loans. Some lenders will even finance private and federal loans together. However, this should be done carefully. By consolidating a private loan with a federal loan you may give up attractive benefits available from the government.
- The choice to consolidate student loans ultimately comes down to the choice between lower monthly payments or a shorter loan term. In some cases, you can actually save money in interest if you combine the right loans and find a lender that offers favorable interest rates. However, it's likely that consolidation will lengthen your loan term and ultimately cause you to pay more in overall interest. On the other hand, if you don't think you'll be able to make your monthly payments, consolidation can be a big help. Be sure to do the math to find out if consolidation is a good option and take a look at these other tips.
- Student loan consolidation isn't just for students who have recently graduated. Parents often take out student loans for their kids. The government even offers a special PLUS loan for parents with dependent children. Some lenders offer special programs for parents who are looking to consolidate. For instance, SoFi offers no-fee parent PLUS refinancing options that can help you lower your payments and, in some cases, pay less.
- Many students fresh out of college haven't yet had a chance to build credit. The state of your credit report is an important thing to consider, especially if you plan to make big purchases in the future. If you decide to consolidate your loans, it's important to know how your credit will be affected. Right after consolidation, the multiple closed loans may negatively impact your credit. However, this may just be temporary. Too many lines of credit may have been hurting your credit already, and closing some can help. Ultimately, making consistent payments on a consolidation can help you slowly build it back up.
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