October 28, 2008

Student Loan Consolidation – nowhere left to turn?

Posted in Consolidation at 7:05 AM by Joe From Boston

Just a few years ago, consolidating your student loans was almost a right of passage.  Six months after graduating your grace period ends, and students scrambeled to consolidate the Federal student loans at the last minue while retaining that lower grace=period interest rate.

That’s just not happening any more.  Private companies aren’t offering consolidations for federal loans any more.  Only the Department of Education is left.

The Chicago Tribune has a great article chronicling why this is and how you can get yourself consolidated.  Here’s an excerpt:

“This time of year, millions of college graduates face a reality of life after academia: With the six-month grace period on student loan repayment coming to an end, it’s time for them to start making good on their debt.

But this year, one popular option–student loan consolidation–is harder to come by.

Consolidation loans are a type of refinancing for student debt. Graduates can lump all their college loans together, merging multiple bills into one and potentially lowering the interest rate.

Lenders used to eagerly consolidate student debt.

Not anymore.

The credit crunch has made it expensive for many lenders to raise the funds they need to create new loans. In addition, a law passed last year by Congress reduced the subsidies on federal loans that lenders receive from the government.

Virtually no private lender will consolidate federal student loans anymore. But there is another option: You can consolidate your loans through the U.S. Department of Education’s Federal Direct Loan Program.

The government has become, in a sense, the lender of last resort, but the consolidation loans are the same as those offered from private lenders. You even receive a 0.25 percentage point discount on your interest rate if you pay your monthly bill with automatic debit.”


  1. kenneth said,

    Student loan consolidation is simply a combination of the various loans students or their parents take out during the educational years and creating one loan from a single lender. A balance is then created so that all the other lenders can be paid off in a manner that eases the burden off the debtor.

  2. Mark C Brown said,

    Student consolidation loans can make loan repayment very simple and easy. All of your loans can be combined into a single large loan with a low interest rate.

  3. […] Having Trouble Consolidating Debt The blog Student Loan Info for Parents has an interesting discussion of a recent Chicago Tribune article on how the credit crunch is affecting student loan […]

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