Will Banks Take a Chance and Consolidate Your Student Loans?

With the cost of college and university study quickly eclipsing even upper class payability, families from all walks of life are finding the secondary loan market (or non-government program) a viable alternative. With between sixteen and eighteen million Americans attending college or post-secondary studies, the need for government loan money to be freed up for incoming freshmen has prompted the current surge in student loan consolidation. Graduating from college, however, does not automatically mean that all your student loans will be consolidated. Some institutions which may be operating in less affluent areas or those institutions which cater to students pursuing technical degrees may not qualify for student loan consolidation from some banks or lenders. In some instances, a student may carry a high personal credit score, but will still be turned down for loan consolidation due to what is called the "default rate." This is the average of how many of the students in the program or college has defaulted on their loan. Although this is certainly an understandable qualification in the loan process, it does present a burden to those students and their families whom these forms of financial assistance were initially created for.

There are few, if any ways to avoid this situation, particularly if a student is interested in a community or technical school. At best, the student's government loans are guaranteed, and so consolidation of these loans is practically guaranteed. Unsecured loans, however, through private banks or credit unions, should always be shopped around as though the student were shopping for the best rate on a credit card. Assume that you won't be able to consolidate these loans until you have a solid payment history behind you, which could mean one or more years of paying the higher interest rate until a consolidation company will consider your loan a risk worth taking.

As many private loan programs will allow a grace period of six months to a year after graduation to begin repayment of the loan, the student's best option is to make the payments they can during this grace period, if for nothing else than to establish that they are serious about the commitment they made to repay the loan. It is possible that with careful budgeting and unfailing monthly payments, your student loans could be consolidated into a much easier to manage loan package, potentially saving you thousands of dollars over the life of your student loans.