State of Wisconsin Department of Financial Institutions

Private Lending for Higher Education

What is Loan Consolidation?

If you're having trouble keeping track of—or affording—multiple student loan payments, you may want to consider whether consolidation makes sense for you.

In order to get a private consolidation loan, you must pass a credit check, and you could be required to have a cosigner who shares responsibility for repayment.

Possible benefits of consolidation include: refinancing variable rate loans at a lower fixed rate; reducing the number of payments you make each month; and making your monthly payment more affordable to fit your budget.

Consolidation may offer a longer repayment term with lower payment amounts; however, the total amount you pay over time may be more than if you didn't consolidate, and you may lose borrower benefits with some types of consolidation loans.

Consider What You May Be Giving Up

Evaluate the new loan's hardship protections and repayment terms, as well as the interest rate, to make sure you're not giving up protections you currently have. If you consolidate before your grace period is over, you may forfeit that time of making no payments.

It's rare (and nearly always unwise) to consolidate private and federal loans together in a new private consolidation loan, since you may lose benefits from your federal loans when you do so. In addition, many consolidation loans extend your repayment term, which means you will likely pay more interest over time than if you did not consolidate.

When considering private loan consolidation, ask whether the interest rate is fixed or variable (and what the maximum interest rate is); whether there are any origination fees (and how much they are!); and whether there are prepayment penalties (some private loans will have them). You'll want to consider these factors in your decision.

Private loan consolidation lenders should not require you to do anything with your federal loans.

Evaluate What You May Gain

If you are facing a rate hike in your variable rate private loan, it may make sense to include that loan in a consolidation loan at a fixed rate to prevent hefty payment increases or to reduce the amount of interest you pay. If you decide to consolidate to avoid interest rate increases, plan ahead so that you can consolidate before the original loan rate makes your payment amounts too high. If you opt for a longer term loan, you may end up paying more interest, but you may have more manageable payments.


Many private consolidation loans are variable rate loans, so if you have a good credit history, and are shopping when rates are low, you may be able to save. Just make sure you know what the maximum interest rate may be down the road.

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If juggling multiple payments with different servicers or lenders causes you to have late or missed payments, you may save your credit score—not to mention time, hassle, and fees—by consolidating your private loans with one lender.

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Consolidation loans offer an opportunity to change repayment terms and options from what you set up originally, as your situation has changed.

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Understand the Process and Timeline for Consolidating

You must pass a credit check in order to consolidate private loans. Your credit history and credit score impact the consolidation and refinancing loan options that are available to you, and the interest rate and terms you qualify for.

Often, a cosigner is required, at least initially. Most lenders will allow you to request removal of your cosigner from the loan after a certain number of on-time payments. Ask about this.

You should research lenders before applying for private loan consolidation.

Factors to consider: fixed or variable interest rate; if variable, the maximum interest rate; origination fees; prepayment penalties; and how long a cosigner must remain on the loan.

It can take 60-90 days to complete the consolidation process.

Credit Check Required?

Can I get a private consolidation loan without a credit check?

Please answer the question above before continuing.

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