New students participate in orientation at Hastings College in Nebraska where students pay up to $40,000 per year to attend with at least 5% expected to default on their loans after graduation.
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College Students Step Into Two Types of Debt Consolidation

Some people are fortunate enough to have a successful kin pay off their student loan debt, like NFL cornerback Logan Ryan taking care of his brother’s $82,000 bill from engineering school. But most recent graduates aren’t so lucky and are burdened by debt. In these cases, consolidation has become an important part of getting student loan debt under control.

Bonnie Carleton, who went to the University of Maine at Farmington and has seven school loans, said that consolidating or refinancing could prevent missed payments and result in a lower interest rate. Graduates have the option of federal or private loan consolidation. What’s the difference?

For free, the Department of Education will consolidate separate loans into one to simplify bills. It doesn’t reduce the interest rate but can give a new repayment term and offer eligibility for certain repayment or forgiveness programs. A downside is that this type of consolidation can lead to higher interest payments in the long run.

Alternatively, private consolidation pays off the original lender and initiates a new loan in its place. The new loan might provide a reduced interest rate but it depends on each person’s financial history. This choice removes federal protections but might result in saving on interest and turn multiple loans into one. By refinancing his student loans, graduate Andrew Post of Los Angeles reduced his interest by $10,000 per year.

Each graduate needs to consider his personal finances and which type of consolidation would be best.

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