Q&A: Consolidating multiple student loans

Dear Liz: I have four private student loans that I would love to consolidate so that I can have one medium-size monthly payment instead of four large ones. How do I go about finding a company that will consolidate them?

Answer: If you have good credit and sufficient income — or a willing co-signer — several lenders now offer private student loan consolidation. That’s a change from the recent past, when recession-scarred lenders largely abandoned this market.

Unless you’re able to get a substantially reduced interest rate, though, you shouldn’t expect your consolidated payment to be much lower than the sum of your current payments. Your payment could even go up if the consolidation loan has a shorter repayment period.

You can start your search at cuStudentLoans.org, which represents not-for-profit credit unions. RBS Citizens Financial Group, Wells Fargo, Charter One and other banks offer consolidation options as well. Some lenders offer fixed-rate options and “cosigner release,” which enables creditworthy borrowers to remove a cosigner after a certain number of on-time payments.

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  1. I would caution against consolidating student loans. Perhaps it is desired because it will “simplify” managing debt because one makes only a single payment instead of several. Since there are rarely opportunities to consolidate at a rate that provides a net lower total payment, keeping the loans separate may provide a means to manage cash flow more effectively. Pay the required amount on each loan every month, but tackle them individually by choosing the highest interest rate loan and putting excess into that loan. When that loan is done, take the money once paid against that loan, and starting tacking it onto the loan with the next highest interest rate.

    • Keep in mind that private student loans typically have variable rates. It can make sense to consolidate them into a fixed-rate loan, even at a higher rate, since you won’t face big future increases in payments.