Consolidating college student loans
Your income provides the money you’ll use to make monthly payments, and lenders want to see plenty of income available each month.To determine whether or not you have the ability to repay a new loan, private lenders use a debt to income ratio.Unfortunately, your cosigner takes a big risk by helping you out — if you don’t make payments on the loan, the cosigner’s credit will suffer, and lenders can try to collect the debt from both you Refinancing can help you save money and simplify your life, but it can also cause problems.Higher costs are the biggest threat when refinancing private education loans.If you’ve taken out loans in the past and you always pay on time, your credit should be in good shape.
If cash flow is an issue right now, you can certainly get some breathing room by refinancing — just find out ahead of time if you’re going to pay more interest for that comfort. If you’ve got loans from five different lenders, things can slip through the cracks.
If you have significant student debt, private lenders with a focus on education loans will likely end up at the top of your list.
Because you’re not using a government program, these loans are basically just personal loans branded as education loans.
Help in hard times: federal student loans offer assistance when you’re unemployed or your income is low — you can stop paying temporarily without hefty fees or damage to your credit.
Private lenders aren’t as generous, but they might offer short periods of unemployment deferment and other benefits. Criteria to qualify: banks may decline your application, but try other lenders.
However, once you move federal loans out of Department of Education programs (and into a private program), you’ll give up the benefits that come with federal student loans — your loans will become those benefits, but you should at least know what’s at stake.