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    Repaying And Consolidating Private Student Loans

    Updated: May 18, 2015

    What You’ll Learn

    • Differences between private and federal student loans
    • How your interest rate and repayment options can vary
    • How you can consolidate private loans

    Private loans, sometimes called alternative or commercial loans, are student loans provided by financial institutions or other organizations—not the federal government. They are used to  bridge the gap between your financial aid and your cost of attendance, or if you do not qualify for other forms of financial aid.

    Some student loan servicers collect payments for both private loans and federal loans, so it can be very confusing to figure out what types of loans you have. Here are some tips to help. For starters, take a look at some of the main differences between federal and private loans.

     Federal Stafford LoansPrivate Student Loans
    Flexible Repayment OptionsYesSometimes
    Ability to Postpone PaymentsYesSometimes
    Fixed Interest RateYesSometimes
    Forgiveness/Cancellation OptionsYes, if you qualifyRarely
    6 Month Grace PeriodYesRarely

    Where Can I Get A Private Loan?

    Private loans are generally offered by schools, states, or financial institutions, including:

    • Banks/student loan lenders
    • Credit unions
    • Credit card companies
    • Directly from the school (institutional loans)

    While credit card companies sometimes offer student loans, these loans are not the same thing as a credit card.

    How Do I Know If I Should Get A Private Loan?

    You should always maximize the amount of federal student loans you borrow before taking out private loans. Private loans can be much tougher to manage and repay than federal student aid because they tend to offer fewer options for repayment and postponement (deferment/forbearance).

    Getting Private Loans: A Tricky Process

    Applying for a private loan is a lot like applying for other types of bank loans. The lender will have to check your (and your co-signer's) credit before approving you. Sometimes, you have to apply first and learn what repayment options and terms you qualified for afterward. These details can vary dramatically depending on who your lender is—but in general, the terms may be less flexible than federal loans, especially if you find yourself struggling to make your payments. Remember to do all of your homework before accepting any loans.

    Misleading Interest Rates

    Although many private lenders advertise low interest rates, these are typically difficult to qualify for without a co-signer and many students receive variable interest rates. So, your private loan's rate may start out higher than the advertised rate—and can then rise over time depending on changes to your credit score and to interest rates in general.

    Here's a worst-case scenario of how your private loan interest rate could change (risk varies by lender): 

    Private Loan Interest Rates

    Example is based on findings from a 2011 report by the Consumer Finance Protection Bureau.

    Co-signer Requirements

    Private lenders often require a co-signer to get a good interest rate, and some always require one. A co-signer agrees to repay the entire loan if you don't or can't pay as agreed.

    Some lenders offer a co-signer release after you make 1 or 2 years of on-time payments. Generally speaking, though, there are few ways to remove your co-signer once they've signed the form, so this person may always share the responsibility of repaying the loan with you.

    Can I Consolidate My Private Loans?

    Some private lenders will allow you to consolidate the private loans they service with other private loans you have borrowed. Check with your servicer to find out. 

    Note: If you consolidate private loans with federal loans, you lose all the benefits of your federal loans.

    You can also take a look at these private loan consolidation lenders that we have found. These programs change frequently, so always do your own research before choosing a lender. This list is just to give you some resources and should not be considered a recommendation. If you find a private loan consolidation program that isn't on this list, that doesn't mean it's a bad choice. It just means we missed it.

    Cedar Education Lending Private Student Loan Consolidation

    • Minimum: $7,500
    • Maximum: $125,000 undergraduate debt and $175,000 in graduate debt
    • Repayment term: Up to 15-year repayment term
    • Prepayment: Yes, with no penalties
    • Interest rate: Ranges from 3 month LIBOR + 3.74%
    • Origination fee: None
    • Interest-only repayment option: Up to 4 years for eligible borrowers
    • Cosigner release: Option after 12 months of on-time principal and interest payments
    • Income requirement: You must demonstrate 12 consecutive months of recent earnings history

    Citizens Bank Education Refinance Loan

    • Minimum: $10,000
    • Maximum: $90,000 for a bachelor’s degree, $130,000 for graduate and doctoral degrees including MBA, and $170,000 for professional degrees such as dental, medical, and law degrees
    • Repayment term: 5-, 10-, 15-, and 20-year repayment terms
    • Prepayment: Yes, with no penalties
    • Interest rate: Fixed interest rates range from 5.24% to 10.25%, and variable rates range from 2.81% to 8.41%
    • Origination fee: None
    • Interest-only repayment option: None
    • Cosigner release: After 36 consecutive months of on-time principal and interest payments, a cosigner may apply to be released from the loan.
    • Income requirement: You must demonstrate 12 consecutive months of recent earnings history unless you have a qualified cosigner.

    CommonBond

    • Minimum: None
    • Maximum: None
    • Repayment term: Up to 15 years
    • Prepayment: Yes, with no penalties
    • Interest rate: Fixed interest rates range from 3.89% to 7.24%, and variable rates range from 2.66% to 5.66%. Hybrid rates are also available, which are fixed for 5 years and switch to variable for the remaining 5 years. Hybrid rates start from 4.14% to 5.99% for the first 5 years and 3.40% to 5.28% for the last 5 years
    • Origination fee: None
    • Interest-only repayment option: None
    • Income requirement: None, but you must meet credit requirements
    • Other: You must be a graduate of an MBA, law, medical (post-residency), or engineering graduate degree program within the CommonBond Network

    CU Student Loans/Lend Key

    • Minimum: $7,500
    • Maximum: $125,000 undergraduate debt and $175,000 in graduate debt
    • Repayment term: Up to 15-year repayment term
    • Prepayment: Yes, with no penalties
    • Interest rate: Ranges from 3 month LIBOR + 3.74% – 7.24%
    • Origination fee: 1.00%
    • Interest-only repayment option: Up to 4 years for eligible borrowers followed by 11 years of principal plus interest payments
    • Cosigner release: Option after 12 months of consecutive, on-time principal and interest payments
    • Income requirement: Reliable, steady income of at least $2,000 per month (or a co-signer must meet this requirement); amount of loan must be less than what you earn in a year; co-signer's income counts toward these requirements
    • Other: You must have graduated from a cuGrad eligible school

    Darien Rowayton Bank Refinance/Consolidation Student Loan

    • Minimum: $5,000
    • Maximum: None
    • Repayment term: 5 to 20 years
    • Prepayment: Yes, with no penalties
    • Interest rate: Fixed interest rates range from 3.75% to 6.50%, and variable rates range from 2.88% to 4.23%. Variable rate loans have an interest rate cap of 9% for 5-, 10-, and 15-year terms or 18% for a 20-year term.
    • Origination fee: None
    • Interest-only repayment option: None
    • Income requirement: None, but must meet credit requirements
    • Other: No deferral options are offered on these refinance/consolidation loans, and forbearance is not generally approved

    DEAL Consolidation Loan

    • Minimum: None
    • Maximum: None
    • Repayment term: Up to 25 years
    • Prepayment: Yes, with no penalties
    • Interest rate: Fixed rates of FHLB 10 Year Advanced Rate + 3.25%, variable rates of 3 month LIBOR + 2.5%
    • Origination fee: 0% for North Dakota applicants and 3% for everyone else
    • Interest-only repayment option: No
    • Cosigner release: Option after 48 consecutive months of on-time principal and interest payments
    • Income requirement: None, but must meet credit requirements
    • Other: Must be a North Dakota resident or a non-North Dakota resident with at least one DEAL loan being consolidated

    Earnest Student Loan Refi

    • Minimum: $5,000
    • Maximum: None
    • Repayment term: 5 to 20 years.
    • Prepayment: Yes, with no penalties
    • Interest rate: Fixed from 3.50% to 7.25% and variable from 1.90% to 5.75%.
    • Origination fee: None
    • Income requirement: Typically need to be employed or have a job offer
    • Unemployment benefit: Offers unemployment protection if you lose your job

    Link Capital Refinance

    • Minimum: $15,000
    • Maximum: $450,000
    • Repayment term: 3 to 20 years.
    • Prepayment: Yes, with no penalties
    • Interest rate: Fixed from 4.00% to 7.00% and variable from the 3-month LIBOR rate plus 2.50% to plus 4.50% with a cap of 18.00%
    • Origination fee: None
    • Deferment: Offers deferment during residencies and fellowships, but interest will accrue. Deferments are also available for economic hardship, natural disasters, and other emergencies
    • Employment requirement: Refinancing is available for medical and health professionals who are currently a medical resident, in a fellowship program, or is employed by a healthcare system, hospital, or medical practice

    RISLA Refinancing Loan

    • Minimum: None
    • Maximum: None
    • Repayment term: 5 to 10 years.
    • Prepayment: Yes, with no penalties
    • Interest rate: Fixed rates from 4.49% to 6.64%
    • Origination fee: Yes

    SoFi Graduate Loan Refinancing

    • Minimum: $5,000
    • Maximum: $200,000
    • Repayment term: 5, 10, or 15 years
    • Prepayment: Yes, with no penalties.
    • Interest rate: Fixed interest rates range from 3.625% to 7.49%, and variable rates range from 2.67% to 5.045%
    • Origination fee: None
    • Interest-only repayment option: None
    • Cosigner release: None
    • Income requirement: No, but must be employed or have an offer of employment to start within 90 days and meet credit requirements
    • Other: 0.25% interest rate discount if you make payments with AutoPay. You must have gone to an eligible college. If you lose your job, you may temporarily pause your payments and SoFi will provide job placement assistance

    U-Fi Refinance Loan

    • Minimum: $5,000
    • Maximum: $125,000 for undergraduate loans only, $150,000 for graduate or doctorate degree, $175,000 for an MBA or law degree, or $225,000 with a graduate health professions degree
    • Repayment term: 5 to 25 years
    • Prepayment: Yes, with no penalties
    • Interest rate: Fixed from 4.15% to 8.64% or variable from 6.93%.
    • Origination fee: None
    • Cosigner release: Available after 24 on-time payments
    • Cash back: Cash back benefit of 1.5% after your initial 12 monthly principal and interest payments that are made on time and consecutively, with a $500 cap
    • Employment requirement: Have at least $24,000 of annual income or have a credit-worthy cosigner who can meet this requirement

    Wells Fargo Private Consolidation Loan

    • Minimum: $5,000
    • Maximum: $250,000 aggregate limit, including all other educational debt
    • Repayment term: Up to 15 years
    • Prepayment: Yes, with no penalties
    • Interest rate: Variable rates range from 3.75% to 8.75% and fixed rates range from 7.24% to 12.29%
    • Origination fee: None
    • Interest-only repayment option: None
    • Cosigner release: May be an option after the first 24 consecutive monthly payments are made on time
    • Income requirement: Must meet credit requirements
    • Other: Up to 0.25% interest rate reduction for auto-debit; up to 0.5% interest rate reduction with existing qualifying Wells Fargo account

    Remember, there may be other private consolidation options, so be sure to do your homework to find the right one for you.

    Private Health Professions Loans

    Some private lenders offer special student loans for students entering into healthcare fields. These may seem very similar to federal loans for health professionals, but keep in mind that these have the same drawbacks as any other private loan. Generally speaking, they offer fewer repayment and postponement options, and they rarely allow for student loan forgiveness.

    How Do I Know If My Loan Is A Private Loan?

    All of your federal Stafford, PLUS, and Perkins student loans are listed in the National Student Loan Data System (NSLDS); however, federal Title VII loans (including Health Professions Student Loans or Loans for Disadvantaged Students) are not. You can find these loans, as well as any private loans, on your credit report, which you can get for free once every 12 months at AnnualCreditReport.

    Watch out: Some servicers manage both federal loans and private loans. If you can't tell whether your loan is federal or private, contact your servicer directly.

    Can I Use Bankruptcy To Discharge My Private Student Loans?

    Even though private student loans may seem like other types of loans you can get from a financial institution, they are still considered an educational debt and are very difficult to discharge in bankruptcy. A qualified bankruptcy attorney can help you determine if you might be eligible for this kind of debt relief. 

    Who Can Help Me If I Have A Dispute Concerning My Private Loan?

    Many lenders now have ombudsman or enhanced customer care centers that handle escalated consumer issues. Making a phone call to one of those centers or sending a detailed, polite letter or email can be a good way to work out these kinds of disputes. 

    If you still aren’t satisfied, the Consumer Finance Protection Bureau (CFPB) helps students resolve private education loan issues with their loan holders. You can file a dispute on the CFPB website. The CFPB ombudsman—a neutral mediator—can then help you and your lender find a resolution.

    Actualizado: 18 mayo 2015

    Lo que aprenderás:

    • Diferencias entre los préstamos estudiantiles federales y privados
    • Cómo puede variar la tasa de interés y las opciones de devolución
    • Cómo usar tu informe de crédito para revisar tus préstamos privados
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