Student loan consolidation companies and the services they provide

Pick from the top 6 student loan consolidation companies and decide whether loan consolidation is the right option for you.

Updated by Jason Joy Manoj on 19th July 2019

Student loan consolidation companies aim at providing students with alternative payment options for the multiple loans they have taken for their tuition. Why do we need to consolidate these loans? Are there any advantages of consolidating multiple loans? 

Let’s find out.

Student loan debts could affect you in many ways, saving for retirement, qualifying for other loans such as personal loans and mortgage.

Having a strategy (such as consolidation) for debt management could help in your debt elimination.

Consolidation could be a bold step that may plummet you out of debt. However, it must only be undertaken when you have a broad idea of how it works.


List of contents


Basics of student loan consolidation

Student loan consolidation is a process that involves taking out a new big loan to pay off several small loans to get a reduced interest rate and a single pending loan with a better repayment plan, which saves you a lot of money.

Consolidation is one of the debt management options available to us along with refinancing which is also quite popular among students struggling with debt.

Consolidation is often confused with refinancing. They are quite different because consolidation can only be done for federal student loans while refinancing can be done for both federal student loans and private student loans.

Consolidation may not always provide the desired result, but if done properly and weighing out the pros and cons we can tske the decision on whether it is a good idea or not.


Why consolidate?

When you’re stuck with multiple loans, each having its repayment plan and interest, it becomes difficult to keep track of these loans or make multiple payments for them.

You get issued a new loan from the federal government for the combined amount of your old loans.

Consolidating your federal student loans may give you access to multiple repayment plans which has the potential of reducing your monthly payments and interests.

While you consolidate we should also consider the kind of loan we are consolidating, although it is common to consolidate federal loans it is not advised to consolidate a federal loan with a private loan. Although there are private lenders who offer the services to consolidate private loans with federal loans we must evaluate what we are getting into and what features and programs we can potentially lose as discussed further in the blog.


Is it a good idea?

Whether or not student loan consolidation is a good idea, depends on either your current financial condition or the type of debt you wish to consolidate.

The most common reason for consolidating is to get a new loan issued with a lower interest rate and reduced monthly payments but it should be noted that may not always be the case.

There have been cases where the consolidated loan has a higher interest rate as the new interest rate is calculated based on the old rates you were paying, as a weighted average.

The type of schedule you plan on following always plays a key factor in whether consolidating your loan is a good idea. If you plan on continuing a normal payment schedule it won’t affect the overall payment as much. But if you plan on finishing the payments ahead of time to save on making interest payments in the future it would be advisable to first clear the high-interest loans.


Top 6 Student loan consolidation companies

  • Discover

  • Earnest

  • Laurel Road

  • SoFi

  • Education Loan Finance

  • Splash Financial

Discover

Discover is a lender whose services are online-based. They are regarded as one of the best lenders with the lowest interest rates.

They function just like any other traditional bank would and provides many services as other banks do such as credit card issuing and account checking.

Discover consolidates many federal loans and can refinance a wide range of private student loan types such as undergraduate, MBA, health professions, graduate, etc

Highlights

  • The rates offered are both fixed and variable rates

  • Loan term spans from 15 to 20 years and no application, origination or late fees are imposed on borrowers

  • Deferment and forbearance are also offered by Discover Finances

Reviews

Discover has received a lot of positive feedback from its customers, most of which are strongly related to their great customer services.

  • Some card members have reported that their queries have been quickly been attended to and resolved.

  • The mobile app is equipped with many features such as live chat with customer support.

  • The grand reward program gives a 1% cashback on every purchase and a 5% cashback on other categories.


Earnest

Earnest is a financing company, founded in the year 2013.

It is a technology-enabled fintech lender and was acquired by Navient back in 2017.

It has funded over $4.5 billion just on student loans for over 50,000 borrowers.

Highlights

  • The rates offered are both fixed and variable  and the loan term spans between 5 to 15 years

  • The loan amount offered is  $5000 for the school-certified cost of attendance

  • Earnest does not charge  any application fee but charges an undisclosed origination fee

  • They provide autopay discounts and options for deferment and forbearance.

Reviews

Earnest has more positive reviews than any other servicer

  • Customer Satisfaction for Earnest is based on the speed and flexibility of its operation

  • They provide better rates than other competitors

  • Highly professional and wonderful to do business with

  • Excellent support and friendly staff who are truly helpful


Laurel Road

Laurel Road is an online-based lender which is a division of KeyBank.

It was formed in the year 2013 and has been refinancing and consolidating student loans ever since.

Borrowers can complete the entire application for loan consolidation online with Laurel Road on their website.

Highlights

  • The type of loan that can be consolidated are the graduate, resident, fellows, and Parent Loans

  • They offer both fixed and variable rates for a duration ranging from 5 to 20 years

  • Loan amount starts from $5,000

  • There is no application fee but they charge an undisclosed amount as an origination fee

  • Up to 12 months forbearance options are provided in cases of hardship

Reviews

Just like Earnest, Laurel Road has also received an appraisal from thousands of customers, most of which are linked to their customer support and interaction with their customers.

  • Customers have claimed that the whole experience completely exceeded their expectations

  • The easy nature of the application process has also received much appraisal

  • User-friendly website with great chat support


SoFi

Since the establishment of SoFi in 2011, it has consolidated and refinanced student loans for over 250,000 students in the united states, resulting in about $18 billion.

It is one of the few services offering student loan consolidation to borrowers with as low as 650 credit score.

Highlights

  • The rate types offered are both fixed and flexible

  • Loan amount starts from $5,000

  • No application fee is charged but origination fees are undisclosed

  • Autopay and other additional SoFi loan discounts are offered

  • Deferment and forbearance options are made available to borrowers

Reviews

Some of the reviews on the services of SoFi from its thousands of customers are:

  • Amazing experience with the staff

  • The application process was quick and simple

  • Quick debt relief after consolidating

  • High approval rate


Education Loan Finance

The Education loan finance, popularly known as Elvi among its borrowers, was established back in the year 2015 by the Tennessee based SouthEast Bank to assist borrowers on consolidating and refinancing education loans into a single loan to lower their cost of education.

Highlights

  • They provide both fixed and variable loan terms

  • Loan amount starts from $15,000 or higher

  • They do not charge for any application or origination fees

  • Options are available for deferment and forbearance

Reviews

  • Working with ELF to consolidate my student loans was surprisingly easy

  • They were very friendly and supportive

  • The process was quick and easy

  • Great service and rates

  • Amazing website user interface


Splash Financial

Splash Financial is a BBB A+ accredited student loan consolidation and refinance lender who operates in all 50 states in the United States.

They can consolidate the federal loans such as parent PLUS loans and refinance all private loans for undergraduate, graduate, MBA and medical.

A special refinance program is even made available for doctors who are yet to complete their residency or fellowship

Highlights

  • Rate types offered are both fixed and variable

  • Loan term starts from 5 to 15 years

  • Loan amount ranges from $75,000 to $300,000

  • No application or origination fee is required

  • No discount is provided

  • Cosigner release is made available after 12-months of on-time payments

Reviews

  • Enables faster repayment

  • Limits costs to save money on loan

  • Offers payment flexibility

  • Great customer support


Pro’s and Con’s of consolidating student loans 

As mentioned earlier consolidating your loans can be beneficial but it should be considered that consolidation might do more harm than good let us discuss the pros and cons in detail.

Pro’s

  • It helps to keep track of the monthly payments easily.

  • Consolidation usually leads to a lower interest rate or a longer repayment period both of which result in a lower monthly payment model.

  • If you have a good credit score then the lender can offer the new loan to you at a lower interest rate 

  • Suppose you have previously defaulted on a federal loan you don’t have to worry as the defaulted federal loans can be consolidated into a new direct consolidation loan.

Con’s

  • Once consolidated you can lose the benefits offered by certain programs like loan forgiveness programs.

  • There are chances where you might end up with a higher interest after consolidating the loans.

  • By consolidating you can lower your monthly payment amounts but you will be given a longer payment period so the burden of loan might be extended.

  • Beware of variable rates as they might be low currently but have chances to skyrocket in the future.


Table of comparison 

Here is a table which compares the rates and repayment term provided by the various consolidation companies to give you a better comparative understanding

Companies Fixed ARP Variable ARP Repayment Term (in years)
Discover 5.74 - 8.49 % 4.62 - 7.62 % 10 - 20
Earnest 3.36 - 7.82% 2.41 - 7.99 % 5 - 20
Laurel Road 3.50 - 7.02 % 3.23 - 6.65 % 5 - 20
SoFi 3.49 - 8.07 % 2.43 - 6.65 % 5 - 20
Education Loan Finance 3.29 - 6.69 % 2.80 - 6.01 % 5 - 20
Splash Financial 3.75 - 7.03 % 3.05 - 7.79 % 5 - 15

Can you consolidate a private loan and federal loan together?

Although you can’t consolidate a federal loan with a private loan there have been private lenders who allow you to consolidate them. For example, Discover student loans offer several repayment options to help borrowers repay their loans.

It would be advisable not to consolidate your private loan with your federal loan due to the following reasons

  • You lose the chance to enroll for an income-based repayment option.

  • You lose the chance to enroll for a loan forgiveness program.

There are various other programs available that can help you tackle the burden of debt after college. Loan forgiveness programs are a very interesting option as they forgive a loan in exchange for a service in an organization funded by the state, most of these programs are targeted towards the wellness of the state.

Income-based repayment options are those which are income-based repayment plans that are set on an amount to be paid monthly which takes your income into consideration so that the monthly payments may be affordable. The various income-based repayment options are Revised Pay As You Earn Repayment Plan (REPAYE Plan) Pay As You Earn Repayment Plan (PAYE Plan) Income-Based Repayment Plan (IBR Plan).one must conduct his own thorough research before applying to consolidate.


 

Conclusion

When you consolidate your student loans, you combine multiple loans into one. The type of loan being consolidated and the type of loan we get after the consolidation is to be considered if it actually benefits us.

Student loans often come from either the federal government or private lenders such as credit union and banks. Be sure to choose the best option for your student loan consolidation. And watch out for the guidelines given out during the loan consolidation, as mentioned earlier consolidating federal and private loans are not advisable but at the same time is not impossible with various private lenders offering services to provide the same.

Consider the pros and cons of consolidating as discussed early in the blog. This may vary based on the nature of the loans you have.

It is also important to consider the time frame of repayment you wish to follow while deciding to consolidate. As this plays a crucial role in deciding the amount to be paid each month.

Finally, be sure to choose the perfect lender from our list of lenders mentioned earlier you should get a fair idea for whom to contact and go ahead with.