Alternative Student Loan Consolidation

Alternative student loans cannot, in general, be consolidated with federal student loans. The low interest rates on federal consolidation loans are not available to alternative student loans. Nevertheless, there are several options for refinancing alternative student loans.

An alternative student loan consolidation simply replaces one alternative loan for another. The main benefit is the potential of being able to obtain a lower monthly payment and possibly a lower interest rate. Unlike a federal loan consolidation, the alternative loan consolidation will not average out the interest rates on your alternative loans. The lender will review your credit and offer you an entirely new loan. For example, if you graduated and have a good job and have been building a good credit history, your credit score may have improved from when you first obtained the alternative loans. You can also negotiate with your present loan holder to see if they would reduce your interest rate rather than see your loans go to a different lender.

Home Equity Loans
Another possibility is a home equity loan. A home equity loan is a secured loan and the interest is deductible to you. However, you are using the equity in your loan so that would not be available to you if you would have need of it. Also the home equity loan payments may or may not be less than the school loan. The home equity loan would not have the economic hardship provisions or qualify for any of the other federal programs to assist you should you lose your employment or have other hardships.

Education Lenders
There are many lenders who offer alternative student loan consolidations. These are alternative loan 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 with your alternative student loans. They should be consolidated separately as the federal consolidation loans offer superior benefits and lower interest rates.

Here are some questions to ask when evaluating an alternative student consolidation loan:

1. Whether the interest rate is fixed or variable;
2. If variable, whether the interest rate is capped;
3. Whether there are any fees for this loan;
4. Whether there are prepayment penalties;
5. What your monthly payment will be and for what length of time;
6. If you do not prepay, what will the total of payments and interest be if payments made for the entire loan period? Compare that to what the total would be if you keep the original loan.

Many of the lenders on our lender list for alternative student loans do private loan consolidations, though you are not limited to that list. More information about alternative loans...