Consider rolling your private student debt into single loan

For college graduates, there have been few options for consolidating private student debt into a single loan. But that may be changing.

In January, Providence, R. I.- based Citizens Bank said itwould begin offering private consolidation loans. Only a handful of other banks, including SunTrust andWells Fargo, and crowd funding sites such as SoFi and CommonBond offer the loans.

A consolidation loan is a type of refinancing that gives borrowers the chance to bundle their student debt into a single loan and, in some cases, lock in a lower interest rate. Grads can consolidate their federal student loans through theU. S. Department of Education’s Direct Loan Program. But few banks have offered consolidation loans for private student debt, in part because of the high cost of marketing to potential borrowers and finding adequate financing to provide the loans, said a report last year by the Consumer Financial Protection Bureau.

But Citizens Bank’s decision could signal that change is afoot.

“If a borrower has been using their credit responsibly, this becomes apparent a few years after graduation,” saidMark Kantrowitz, senior vice president and publisher of Edvisors . com, which connects students to a network of college- relatedwebsites, blogs and forums.

In recent years, banks have been especially cautious when it comes to underwriting private student debt. At the end of September, just over 3 percent of private student loanswere 90 days or more past due, saidMeasureOne, which analyzes student loan data. For student loans overall— including federal student loans, which do not require a credit check— the figure was 11.8 percent, according to the Federal Reserve Bank ofNewYork.

Said Kantrowitz, “Consolidation loans are a winwin: The borrower gets a lower interest rate and the lender gets a good loan.”

Whoshould consider a consolidation loan?

If you’ve finished school, are gainfully employed and have been making on- time payments on your private student loans for at least a year or two, youmay be a good candidate for a private consolidation loan.

The real advantage of refinancing is the chance to get a lower interest rate on your debt and to simplify your monthly payments into a single bill.

At Citizens, the private consolidation loan offers a variable interest rate as low as 2.81 percent and a fixed rate of 5.24 percent and up. You can get a quarter- point rate cut if you sign up for automatic payments. An additional quarter- point discount is available if you have another qualifying account at the bank.

To get the lowest rate, you will need a strong credit rating. Kantrowitz notes that lenders are looking for a FICO score in the high 700s or 800s ( out of a possible 850). If your credit score falls short, you will have to apply with a creditworthy co- signer, such as a parent.

Borrowers who can lower the average interest rate on their loans by a few percentage points are generally the best candidates for consolidation.

You can get an idea of howmuch you’d potentially save each month by using an online calculator, such as the one provided by Citizens at

If most of your loans carry lowinterest rates, youmay be better off not consolidating and instead putting extra money toward the one or two loans with high rates. That way, youwon’t give up the lowrates on your other loans. And you could save money in the long run, because consolidation loans typically have repayment periods of 15 years and up, compared with the standard10- year repayment for student loans.

If you do consolidate, though, there typically are no penalties if you pay off the loan early. Need more help? Go to

or

for information about consolidation. Edvisors also will offer tips about consolidating when the site relaunches inMay.