Student Loan Consolidation

Student Loan Consolidation

Education loans come in three major categories: student loans (e.g., Stafford and Perkins loans), parent loans (e.g., PLUS loans) and private student loans (also called alternative student loans). A fourth type of education loan, the consolidation loan, allows the borrower to lump all of their loans into one loan for simplified payment.

Federal law sets the maximum interest rates and fees that lenders may charge for federally-guaranteed loans. Nothing prevents a lender from charging lower fees. Many lenders offer a variety of student loan discounts to attract borrowers.

Few students can afford to pay for college without some form of education financing. Two-thirds (65.7%) of 4-year undergraduate students graduate with some debt, and the average student loan debt among graduating seniors is $19,237 (excluding PLUS Loans but including Stafford and Perkins), according to the 2003-2004 National Postsecondary Student Aid Study (NPSAS). (The median is $17,120. One quarter of undergraduate students borrow $24,936 or more, and one tenth borrow $35,213 or more.) For federal student loan debt (excluding PLUS Loans), the figures are 62.2% and $17,036. Average cumulative debt increases by about 3% or approximately $550 a year. When one includes PLUS loans in the total, the average cumulative debt incurred is $21,899. (Approximately one in ten (10.8%) parents borrow PLUS loans for their children's college education, with a cumulative PLUS loan debt of $16,317.)


Collegiate Funding Services (CFS)


$7,500 minimum. $125,000 maximum. Up to 30-year term. No prepayment penalty. Variable rate loan. Best variable rate is Prime + 1%. Guarantee fee of 1% to 3% (added to principal).

EduCap Inc. Loan to Learn Private Consolidation Loan

$10,000 minimum. $250,000 maximum. 20-year term for loans less than $40,000. Up to 25-year loan term for higher amounts. Variable rate loan. Interest rates range from Prime + 0.0% to Prime + 4%, but may be higher based on changes in the Margin Adjustment Index. Fees of 0% to 4%.

Education Finance Partners

$7,500 minimum. Up to 30-year term. No prepayment penalty. 0.25% interest rate reduction for making monthly payments via EFT. Choice of variable or fixed interest rate. Best variable rate is 3-month LIBOR + 1.80%. Fixed rate is 2.01% higher. No fees.

Key Education Consolidation Loan

$7,500 mimimum. $75,000 maximum for non-Key debt; no maximum for Key education debt. Choice of 10, 15 or 30 year repayment term. Variable rate loan, with rates pegged to repayment term: 3-month LIBOR + 3.75% (10 years), 3-month LIBOR + 4.25% (15 years), and 3-month LIBOR + 5.00% (30 years). No prepayment penalty. No fees.

Nelnet Private Consolidation Loan

$5,000 minimum. $100,000 maximum for non-Nelnet debt; no maximum for Nelnet education debt. Variable interest rate. Best variable rate of Prime + 4.75%. 0.5% interest rate reduction after making 48 initial on-time monthly payments. Co-signer release option after 48 initial on-time monthly payments.

NextStudent Private Consolidation Loan

$5,000 minimum. $275,000 maximum. Up to 30-year term. No prepayment penalties. Variable rate loan. Interest rates vary from Prime + 0.0% to Prime + 6.0%, depending on credit history. Origination fee of 2% to 5%. Co-signer release after 24 on-time payments.

Student Loan Network

$10,000 minimum. $250,000 maximum. 20-year term for loans less than $40,000. Up to 25-year loan term for higher amounts. Variable rate loan. Interest rates range from Prime + 0.0% to Prime + 9.90%, but may be higher based on changes in the Margin Adjustment Index. Origination fee of 0% to 10% (added to principal).

SunTrust eCon Loan

$5,000 minimum. $100,000 maximum. No prepayment penalties. Variable rate loan. Interest rates range from Prime + 0.25% to Prime + 7.0%. No origination fees. 0.25% interest rate reduction for making monthly payments via EFT. 0.5% interest rate reduction after making 48 initial on-time monthly payments. Co-signer release option after 24 initial on-time monthly payments.

Wells Fargo Private Consolidation Loan

$5,000 minimum. $100,000 maximum. Up to 15-year term. Variable rate loan. Interest ranges from Prime + 0.0% to Prime + 6.75%. No origination fees. Up to 0.50% interest rate reduction for making monthly payments by EFT. 0.5% interest rate reduction after making 48 initial on-time monthly payments. Co-signer release option after 24 initial on-time monthly payments.

Graduate and professional students borrow even more, with the additional debt for a graduate degree ranging from $27,000 to $114,000. The following table shows the percentage borrowing and average amount of cumulative debt among graduating students according to degree program. It provides the amounts borrowed for just the graduate education and also the combined totals for undergraduate and graduate education.