There are two types of student loans: federal and private.
Federal loans are subject to oversight and regulation by the federal government and include Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans. You can get information about federal programs here.
Private loans (also called Alternative Loans), are made by private lenders and don't have benefits and protections that come with federal loans.
Whichever loan you choose, and you may choose more than one, you should compare all the costs. Private loans typically have higher fees and interest rates than federal loans. Private loans also have no cancellation or forgiveness options. So make sure to exhaust any federal loan options (and grants and scholarships) before considering private loans.
Always know who you are dealing with when getting a private loan. Some lenders and marketers use names, seals, logos or other representations similar to government agencies to create a false or misleading impression that they have some government affiliation. The federal government does not solicit or advertise.
Promotions, incentives and 'free gifts' are a clever marketing ploy to divert you from looking at the key terms of the loan. Don't fall for them.
Never give personal information over the phone, through mail, or online unless you know exactly with whom you are dealing. You may be giving your information to a scam artist.
Check out the track record of the lender with the North Carolina Attorney General's Office and the Federal Trade Commission (FTC).
Avoid lenders with high-pressure tactics. If they say interest rates will go up if you don't consolidate immediately, walk away. Whether and when interest rates for consolidating your loans will change depends on what type of loans you have. Look at your loan documents to determine whether the interest rates are fixed or variable. If all of your loans have fixed interest rates, there may be no deadline to consolidate. If some or all of your loans have variable interest rates, when you consolidate into a fixed loan it may affect the interest rate of your loan.
Some lenders lower the interest rate on your consolidated loan, but only if you opt for automated payments from your checking account.
Other lenders discount the interest rate on your consolidated loan, but only if your loan has at least a specified minimum loan balance.
Still others agree to lower the interest rate on your consolidated loan, but only if you remain current on your payments for the life of the loan. You may want to consider loans with more immediate discounts, a shorter on-time payment period for interest rate discounts, or an additional discount for signing up for automatic payments.
Some lenders sell consolidated loans to other companies. Because benefits of consolidated loans — like promised discounts — may not transfer, you may lose benefits if the lender sells your loan. Ask the lender whether the terms of your loan will change if it is sold.
Be cautious about consolidating federal loans and private loans into one private loan. The result of consolidating all loans into one non-federal private loan means that you lose all the benefits and protections provided in the federal loan programs.
Consolidating a Perkins loan may not be in your best interest. You may lose unique deferment and cancellation rights available to Perkins loan borrowers.
Frequent consolidation after borrowing may impact timelines you need to meet to qualify for any benefits.