Student loan consolidation rates vary from lender to lender. But there are some things you can do to make sure you get the best rate when you go to consolidate those student loans. It can help to know what these companies are required to offer you, and what they’re offering as a true benefit.
Getting Better Student Loan Consolidation Rates
Legally, they must offer you a rate that’s 0.6% less than your current rate. So if the lender you’re looking at advertises this heavily as a benefit, they’re probably doing so because they don’t really have much else to offer you. Since this is required by law, it’s not a real selling point—you will get this minimum amount of reduction anywhere you go. Student loan consolidation rates can vary widely below that, but they all must hit that minimum reduction. Anything beyond that is the true amount offered specifically by that company.
To get the best rates, try looking at non-profit lenders first. These will almost always have the best rates because they have lower operating costs and aren’t out for maximum profit. It’s rare that you’ll find a for-profit company that can offer better rates than a non-profit, though it doesn’t hurt to look just in case.
When you find a for-profit company that seems have better discounts than a non-profit, that doesn’t mean you’ll end up with better student loan consolidation rates if you go with that company. There are some catches you need to watch for.
With non-profit lenders, the discounts they offer are typically permanent. That means you receive that same discount for the entire length of the loan repayment, no matter what. A for profit company that advertises a better discount is probably cloaking the fact that the discount is a temporary one. Either it’s a time-limited offer that runs out after a certain period, or it’s dependent on you.
Discounts offered for on-time payments, for example, can look great on paper. Often after 2 years of payments that are all one time you get this discount. But even if the loan runs 10, 20 or 30 years, if you’re late with one single payment you lose that discount permanently.
It’s far better to get a loan with locked-in discounts that you can’t lose so easily. So for the best student loan consolidation rates, look to the non-profits that offer permanent discounts and rate reductions beyond what’s required by law.