The average college graduate carries more than $20,000 in debt. According to Student Loan Consolidation Blog that is about a 6% increase every year.
One of the most demanded refinancing loans are student consolidation loans. These loans offer some important benefits that are available in private student consolidations and even more benefits in federal consolidations.
Federal education loans usually offer flexible payment terms, loan forgiveness and cancellation provisions. On the other hand, private student loan consolidation will decrease your monthly repayments but increase your effective interest rate. Therefore it is highly recommended to find a federal consolidation loan first before considering a private consolidation.
However, due to two main reasons, private lenders recently refuse to consolidate student loans:
1.) Because of the global financial and credit crisis
2.) Because of the reduced subsidies for providing education loans
The recent credit collapse has forced private lenders to increase requirements for potential borrowers applying for a student loan consolidation. They have increased the minimum credit score and income for applicants to be approved.
Generally, private student loan consolidation now requires the applicants to have a FICO credit score of 700, which is 50 points higher than a few years ago; whereas, with federal student loan consolidation, your credit score and income level will not be checked.
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