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Consolidation loan for students

If a student has multiple loans, he/she can roll them into a federal consolidation loan. With a consolidation loan, one has to make just one payment each month. It's like refinancing a mortgage: The original loans are paid and the student gets a new loan for the combined balance with a new term and often at a different interest rate and conditions. Some lenders may consider the credit report of the individual before offering the consolidation loan. Sallie Mae's Smart Loan, which is used to consolidate federally guaranteed student loans, does not require a credit check.

Consolidation loans can be from the federal government or from a private lender through the Department of Education. If one wants to consolidate loans directly from the federal government, the authorities will check to see whether the borrower is in default on any student loans. If so, the student will have to do some explaining and make some promises before the government approves a consolidation loan.

If one applies through the Department of Education but the loan is from a private lender, that lender might or might not choose to look at the individual’s credit report. If the lender checks and denies a consolidation loan, the student still might qualify for a consolidation loan directly from the government. One should understand the consequences of not paying student loans. The federal government can hire a bill collector, withhold federal tax refunds, and even take away the individual’s wages. If one declares bankruptcy, education loan probably won't be forgiven. Discipline in spending is required to repay the consolidation loan.