Why should I consolidate my federal and private student loans separately?
As I have mentioned in my past posts on student loan consolidation, combining your private and federal student loans in a private student loan consolidation is a BAD idea. They should be consolidated separately in all cases. Here are some reasons why consolidating your federal student loans with your private student loans will cost you:
-You are not able to defer payments on a private loan consolidation if you want to return to school. However, you can with federal student loan consolidation.
-With private student loan consolidation, you cannot forbear payments if you come under any economic hardship.
-On a private student loan consolidation, you are unable to claim interest as a tax deduction.
-You can’t apply for forgiveness with a private student loan consolidation. However, with federal student loans and federal consolidation, certain types of work (i.e. federal volunteer programs, military service, etc.) can qualify you to have some or all of your federal loans forgiven by the government.
-If you pass away, federal loans are forgiven, but private loans are passed on to your children.
-Private student consolidation loans have variable interest rates, meaning you cannot guarantee yourself any particular rate. Furthermore, those rates may be tied to volatile indexes (such as the Prime Rate) that can jump up very high.
While you cannot combine your private loans into a federal student loan consolidation, for some reason you are able to combine your federal loans into a private student loan consolidation. You should never do this as you will sacrifice many benefits that come with federal student loan consolidation, as you can see above.
You should always consolidate your federal student loans first, because you will reduce the number of open lines of credit (loans) that you have. Doing this will boost your credit score, which will allow you to then receive better offers for private student loan consolidation. Therefore, federal consolidation comes first!
