There are two primary types of educational loans — private and federal. While both may be eligible for consolidation, it is important to think of these two types independent of each other when considering consolidation.
Private student loans are granted and managed by regular lending institutions – banks, college foundations, various state agencies – and typically charge a higher fixed or variable-interest rate than federally funded loan programs. Private student loans are credit-based, meaning student borrowers with better credit scores will pay lower interest rates than those with lower scores because banks assess the risk of each borrower. Federal student loans are the easiest and most beneficial to consolidate because they offer low interest rates, increased payback terms (which decreases the monthly cost) and because they reduce the number of lending institutions you have to pay every month. For example, instead of making multiple payments to multiple lenders at various times of the month, you simplify the equation by making a single monthly payment.