Tips for Student Loan Consolidation

For many, student loan debt feels like it deserves an education all unto itself. Juggling multiple monthly payments, shopping for the best rates, monitoring your credit score, tracking your logins — all of it takes time. All of it takes effort. And all of it could benefit from some simplification.

Weigh the risks and rewards of consolidation

On one hand, a single payment can be easier to manage and it’s that much easier to make payments on time, and raise your credit score in the process. Plus, you might be able to negotiate lower monthly payments and/or lower interest rates. ¹

On the other hand, consolidating loans could result in extending the loan period. Even if your monthly payments are lower, you might end up paying more over the years. And remember: You can consolidate your student loans once and only once. That means that your monthly fees and interest rates are permanently set afterwards.²

Convenience vs. speed. Simple vs. frugal. Today vs. tomorrow. Consolidation is all about what you value.

Speak with private lenders and the federal government

Both Uncle Sam and private financiers offer consolidation options.

Private lenders’ consolidation programs typically offer:

• Variable low interest rates
• Rigorous credit checks
• Simple comparison shopping

Most lenders will take a long, hard look at your repayment history, sizing up things like job history and credit score to determine your eligibility for a loan.³

Federally consolidated loans typically offer:

• Fixed interest rates
• Low- and no-credit financing
• Limited flexibility

A Direct Consolidation Loan has a fixed interest rate for the life of the loan. The fixed rate is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent. There is no cap on the interest rate of a Direct Consolidation Loan.²

On raising your credit score

Nobody likes the idea of swallowing a higher interest rate from the government. Especially when they’ve been paying as low as 2% in the years leading up to it. Generally, in order to get the best interest rates when consolidating loans, you’ll need a credit score in the high 600s.³

If you register your account with Synchrony, you can check your VantageScore for free once a year through Synchrony’s free credit score report. VantageScores are a new alternative to traditional FICO scores, requiring just one month of credit history.⁴ They’re ideal for recent graduates and young professionals who are still building a credit record—plus, it’s easy to enroll.

If you want to improve your VantageScore, there are plenty of tried-and-true ways to raise your credit:

• Make regular suggested payments on all existing loans
• Pay off your credit cards in full each month
• Pay utilities and other necessities on time, every time⁵

Speaking of your credit card: Your credit utilization ratio can also have a potential effect on your credit score.

“Credit utilization” refers to how much of your available credit you’re putting to use. Avoid maxing it out, and see if you can get to a healthy ratio before applying for student loan consolidation.⁵

Applying for consolidation

If you go the private route, many local banks and credit unions will let you apply online and make comparisons between them from the comfort of your home.

If you’re interested in federal loan consolidation, go to studentaid.gov and apply through their online form for loan consolidation. There are no fees, but be warned: You may start receiving calls from companies offering to help with the application process for a fee. Be cautious, as many overpromise on what they can actually offer. ⁶

Making your ultimate decision

Efficient? Yes. Straightforward? Yes. The way to go? With debt consolidation, it all depends.

Bringing your student loans together could be the best route for graduates who are struggling to keep pace with their payments, but could end up leaving a bigger tab than necessary for those with the means to make their monthly payments in full. Consider which camp you fall in.

If you are looking for an option to help manage your medical bills, consider financing through the CareCredit credit card. The CareCredit credit card is an easy way to pay for health and wellness care, and offers promotional financing options.* To apply, go to carecredit.com/apply.