Consolidate Private Student Loan

In our May 13 posting on Federal college loan we advised readers to move
fast for consolodating their Federal student loan so that the whole process
can be finished before June 30th and they can take advantage of the
prevailing lower rate.

But remember, if you have private student loans, consolidation (i.e.
combining multiple loans into one) would be a different type of game than
that for federal student loans. First of all, consolidation of a mix of federal
and private loans is not allowed. You must separately consolidate any
private loans through a private lender.

The first difficulty you may face is that some lenders may not consolidate
your loan unless the loan balance is at least $10,000. Also, unlike with
federal student loans, no grace period may be allowed.

Interest rates for private student loans are usually higher. Most lenders
use the formula of prime interest rate (currently 6%) plus an additional
percentage based on your credit score. Some change the rate monthly,
others annually. (to compare... the rate on federal Stafford loans for
current students and recent graduates is 2.875%. Rates for graduates past
their grace period are 3.375%).

On the other hand there are sevaral advantages with private loans. For
example, you are allowed to re-consolidate your private loans at any time
if you find a lower rate. Federal student loans can be consolidated only
once - and after that you are stuck with the rate. For information on
private lenders and their background, visit FinAid.org's Website.

Also remember that for both private and Federal student loans, you may
be eligible for a discounted rate if you make payments on time for a set
period, or sign up to make automatic payments each month.