A private school loan in general, cannot be consolidated with a federal student loan. The low interest rates on federal consolidation loans are not available to private educational student loans. Nevertheless, there are several options for refinancing private educational student loans.

Since most private student educational loans do not compete on price, a private student consolidation loan is merely replacing one or more private student educational loan with another. Therefore, the main benefit of such a consolidation is obtaining a single monthly payment. In addition, since the consolidation resets the term of the loan, this may reduce the monthly payment, of course at a cost of increasing the total interest paid over the lifetime of the loan.

However, since the interest rates on private school loans are based on your credit score, you may be able to get a lower interest rate through private student loan consolidation loan, that is, if your credit score has improved significantly since you first obtained the loan. For example, if you have graduated and now have a good job and have been building a good credit history, your credit score may have improved. If your credit score has increased by 50-100 points or more, you may be able to get a lower interest rate by consolidating your debt with another lender. You can also try talking to the current holder of your loans, to see if they will reduce the interest rate on your loans rather than lose your loans to another lender.

Private student education loans tend to have interest rates that are in the same ballpark as home equity loans. If your private student education loan has a variable interest rate, you might consider using a fixed rate home equity loan to pay off the private student education loan. This could effectively lock in the interest rate.

There are many student education lenders that will consolidate private student educational loans. These are private consolidation programs, so the interest rates are dictated by the lender, not the government. There may be additional fees charged for originating these loans.

You should not consolidate your federal student loans together with your private student educational loans. They should be consolidated separately, as the federal consolidation student loans offer superior benefits and lower interest rates for consolidating federal student loans.

When evaluating a private school loan consolidation, ask whether the interest rate is fixed or variable, whether there are any fees, and whether there are prepayment penalties.

All educational student loans, including federal and private student loans, allow for penalty-free prepayment. This means you can make extra payments to reduce the balance of the loan, or even pay off the entire balance early, without having to pay an extra fee.

When a lender receives payments on a student loan, the payment is applied first to late charges and collection costs, then to outstanding interest and then to outstanding principal. Any amount beyond the amount due is considered a prepayment

The right to a penalty-free prepayment of all or part of a federal educational student loan is established by the Higher Education Act of 1965. There is no statutory or regulatory requirement for private school loans to have penalty-free prepayments. However, most all current personal student loans provide for penalty-free prepayments for competitive reasons.

The benefits of prepayment can save you money by paying off your loan earlier and by reducing the total interest paid over the lifetime of the loan. Since the loan balance is reduced, more of your subsequent monthly payments will go toward further reducing the student loan balance and less toward interest.

When you have more than one student loan, you should apply prepayments toward the more expensive loans first. This strategy will save you the most money. Generally, this strategy will involve prepaying first credit cards, then private school loans, then the PLUS loan, then the Stafford loan and last the Perkins loan, since credit cards are the most expensive and Perkins loans are the least expensive.

Tags: college, finance

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