7 FAQs About Credit Union Student Loan Consolidation

After many years of schooling, it’s easy to accumulate student loan debt from multiple lenders or several loans from a single lender. Having multiple student loans can be confusing, difficult to manage, and stressful. However, there is a solution to this problem: student loan consolidation.

Consolidating and refinancing student loans can reduce the number of bills each month, provide a more attractive interest rate, save money, and give you better control over your finances. Student loan refinancing through private lenders like LendKey can help millions of graduates develop better financial health. There is a lot to know about the process of refinancing your student loans.

Here are some of the most common questions revolving around credit union student loan consolidation.

1. What Is Student Loan Refinancing?

Refinancing refers to taking a new loan to pay off existing debt. Because most borrowers have multiple student loans, a popular way to refinance student loans is to pursue a student consolidation loan. Consolidation is when you refinance multiple loans with one, bringing all of your debt into a more manageable form. Paying off multiple loans with one loan gives you a more condensed view of your total debt figure.

While seeing a larger monthly payment rather than multiple smaller ones might be stressful, it is often a lower total payment when all is considered. Consolidation can be very useful and beneficial to your financial health. Consolidation reduces your confusion and gives you one figure to focus on reducing to zero.

2. Should I Consolidate My Student Loans?

This question doesn’t have an easy catch-all answer. If you are struggling to pay off multiple loans and want lower monthly payments, consolidation might be the right fit. However, consolidation could also result in higher monthly payments depending on the terms of your new loan.

To help you make this decision, we offer a loan refinance savings calculator. This tool can help you weigh the pros and cons of your current payments vs. repayment terms of your potential refinanced loans. You should also consider your financial institution’s offerings—whether a bank or credit union. They might have unique offerings to members with an established credit history at their institution. This tactic can be beneficial if you have taken loans out via your credit union.

3. What Are the Benefits of Credit Union Student Loan Consolidation?

The most considerable borrower benefits of consolidation revolve around the single loan you receive in the end. When you have several loans from multiple lenders, you are likely dealing with many different interest rates and due dates. Navigating this complex financial situation can be overwhelming, especially if you don’t have a lot of experience with understanding different strategies for loan repayment. When you have multiple loans—including a mix of variable-rate loans and fixed-rate loans, with different minimum payments and balances—it can be difficult to determine the best approach to pay down your debt.

By refinancing your student loans into one consolidated student loan, it’s easier to keep track of how much you owe each month. Plus, whenever you have extra funds to put toward your student loan debt, there’s no confusion about which loan would benefit most from receiving your additional payment. This simplification of your student loan debt may help to keep you motivated and focused on your payoff goals.

4. Do I Need a Cosigner?

Depending on your debt and the condition of your credit report, you may be required to have a cosigner when you refinance student loans. Some credit union student loan consolidation programs, such as LendKey, even offer a cosigner release, but this is not guaranteed. A cosigner release program means if you initiate a loan alongside a cosigner, they may be able to be removed from the loan after a certain number of on-time payments.

Cosigner releases like this are an excellent opportunity to build up an attractive credit score as a young adult. When refinancing your student loans, you can take more control of college debt and have more confidence as you enter your professional life.

5. Does Student Debt Consolidation Improve My Credit?

While student loan refinancing can make your debt more manageable, taking out a consolidation loan will affect your credit. But this process can help you build a credit history and possibly improve your credit score through more regular and steady monthly payments. This aspect is very attractive to many borrowers when refinancing student loans.

It’s important to note that a credit check for loan consolidation is a ‘hard inquiry,’ which can impact your credit score. Multiple inquiries in a short period can have a negative effect on your credit score. Additionally, be sure that the minimum payment amount for your new loan is easily affordable within your monthly budget. As with any loan, missed payments can result in a decreased credit score and unfavorable credit terms in the future.

6. Can I Refinance Federal Student Loans?

Yes, you can consolidate your federal and private student loans into a single new loan through a private lender—however, this will result in losing access to benefits offered by federal student loans. If you have multiple federal student loans, you may want to consider the Direct Consolidation Loan Program, which can lower your monthly payments or possibly open your debt to new loan forgiveness programs the government may offer. This program also keeps benefits such as payment deferment available.

However, if you choose to refinance federal student loans via a private lender, you might see more benefits to your credit score, interest rate, and other loan terms. Federal student loans are commonly refinanced, but your options are worth weighing.

7. When Can I Start Consolidating My Loans?

Typically, refinancing student loans requires you to graduate, leave school, or drop below half-time enrollment. These are standard expectations for student loan refinancing, but individual lenders and programs may have additional eligibility requirements.

Being a Lanco Federal Credit Union member will give you access to LendKey’s student loan refinancing.

Take Control of Your Financial Life with Lanco FCU!

Despite advancing your education and career opportunities, you might still struggle due to the stress of debt. These difficulties are common, but there are ways to help manage them. If you have concerns about dealing with student loans, contact us at Lanco Federal Credit Union!

Credit unions are community institutions that help people find new financial opportunities and advance in their lives with confidence and comfort. Here in Lancaster County, PA, we have seen the difference a local credit union can make for those with student loans. Call us today and start your new financial journey!