Do you have bad credit? You Can Still Consolidate Some Of Your Student Loans – Here’s How
If you have student loans with many loan servicers, consolidation is an option to simplify loan repayment while potentially reducing your monthly amount owed. Student loan consolidation combines multiple student loans with different interest rates and terms in one loan.
Since the US Department of Education does not perform credit checks as part of the application process, borrowers with bad credit can still consolidate their student loans, says Tate Law. However, private lenders have strict lending guidelines for consolidating and refinancing private student loans.
How to Consolidate Federal Student Loans
With federal student loans, the Department of Education reviews your account to make sure you have qualifying loans and don’t have any wage garnishment or judgment for a defaulted federal student loan, explains Tate Law.
Most federal student loans can be consolidated, with the exception of:
A single federal loan, unless it is an FFEL consolidation loan.
A joint consolidation loan.
A loan with an active wage garnishment or judgment.
You can consolidate your federal student loans through studentaid.gov. Log in to your account and select “Manage my loans”, then “Consolidate my loans”. You will be guided through the application process and you can choose the loans you want to consolidate.
Choose a repayment plan and a loan manager for your consolidation loan. If you are unsure which repayment plan to choose, you can explore different plans through the department’s loan simulator.
Once you submit your application, the ministry says it takes approximately six weeks for applications to be processed. You can also contact your loan officer to check the status of your application. Two weeks before your new consolidation loan is disbursed, you will receive a loan summary from your loan manager.
How to Consolidate Private Student Loans
Private student lenders prefer borrowers with excellent credit, a long credit history, stable income, and a low debt-to-income ratio. If your credit score is below 680, Tate Law says you may need to explore other options, such as:
Consolidate with a co-signer with excellent credit.
Find a credit union that offers members with poor credit personal loans to pay off their debts.
Find a lender who will work with student borrowers with bad credit.
Although it is possible to consolidate private student loans with bad credit, you probably won’t qualify for a lower interest rate. Waiting to consolidate your private student loans until your credit score improves may be a better option.
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This article originally appeared on GOBankingRates.com: Do you have bad credit? You Can Still Consolidate Some Of Your Student Loans – Here’s How