College graduates usually enter the workforce with an astronomical amount of debt. Those graduating from a public university may hold $25,000-30,000 in federal student loans, while those attending private schools can harbor as much as $100,000 in private loans. This can make it difficult to make ends meet even if you land a good job once you have your degree in hand.

For many young people these days, the only way to control their student loan costs is to consolidate all of those individual loans into one larger one.  By pooling all of your educational debt together into one longer term, lower interest loan, some graduates can save hundreds in their monthly loan costs.

Consolidating Private Loans

While it is relatively easy to consolidate federal student loans, doing so with private lenders may be a bit more difficult.  Since these loans are not backed by the government; meaning that if you default, the lender does not recoup their losses through federal aid, borrowers must pass a strict lending criteria in order to qualify for the new loan.  This can be even more difficult if you hold private loans from several different lenders.

Much like consolidating other types of debt, pooling your student debt into a single loan means qualifying with your lender. Some of the factors they will consider are:

• Your Income. Of course any lender is going to look at how much you make in order to even consider giving you a loan.
• Your Work History. One of the things that may work against you is the fact that you probably do not have a longstanding work history. For larger loans, lenders usually require borrowers to have been at the same job for 1-3 years. New graduates simply do not have that sort of track record.
• Your Debt to Income Ratio. Try to keep your expenses as low as possible while trying to consolidate your student loans. That means living well within your means and stay away from accruing nay other debts like car loans; long term leases; etc.
• Your Credit Rating. Most lenders require at least a 750 FICO score for loans over $10,000.  be sure to check yours before applying.
• Your Career Path. Of course, lenders will also consider where your career is headed in the next few years when determining whether or not you are a good loan risk.  They understand that you are just starting out in your career and my look at the potential for income growth down the line.
• Your Credit History. If you are lucky enough to have a strong credit history, meaning that you paid your bills while in college on time and did not default on any payments and have shown fiscal responsibility thus far, they may consider your loan request despite you lack of experience and even income.

Why Consolidating Private Loans May be Easier Than You Think

Now that we have talked about the difficulties of consolidating large sums of private student loans, let’s discuss some of the reasons why it may be easier than you first thought.  For one, if you have been making your individual loan payments on time since graduating, you have shown real responsibility in handling those bills, and since a consolidation loan will likely be cheaper than separate ones, the lender will see your ability to pay.

In addition, the longer you wait after graduation to apply for a loan consolidation, the better.  Every moth that you work and pay your bills on time, your credit score goes up and that is good news for borrowers.

Lastly, lenders understand how difficult it is for young graduates to consolidate their debt and often offer special help for just this situation. The key to obtaining that loan is to show your lender real fiscal responsibility before applying.

When Private Loan Consolidation is Not a Good idea

There are times, however, when consolidating student loan debt is not a good idea. One may be if you hold both federal low interest loans and private loans. Since these two loan types can not be combined into a new low interest government backed loan, it may be better to simply keep each individual loan as is to avoid paying more interest in a combined private loan.

Another time when consolidating loans may work against you is if you have the ability – and plan – to pay off your entire educational debt in less than, say 5-7 years.  No matter how much easier one loan payment may be, paying off all of your dent as fast as possible really is the smartest move, so don’t extend your loan terms in a consolidation, if you can afford to do otherwise.

Private student loans may come with higher interest rates than government backed ones, but that doesn’t mean that a consolidation is always necessary. Be sure to carefully consider all of your options before heading to the bank and asking for a brand new loan.