No, private loans typically cannot be consolidated as with federal loans. Here's some advice: If you're staring at federal education loans from many lenders, with varying balances, interest rates, and due dates, consider a federal consolidation loan. (You can't use one to consolidate private education loans.) This pays off existing debts and bundles them into a new loan with a minimum of paperwork. And to make monthly installments more affordable, for federal consolidation loans the payback term can be up to 30 years. There is a downside to consolidatingonce you consolidate, you can't undo the consolidation, and in most cases, you can't reconsolidate.
Federal consolidation loans are available through Sallie Mae, banks, and other lenders. There are some tricky rules that govern consolidation, though. The "single holder" rule requires that if a borrower's loans are all through the same lender, then the borrower has to go to that lender for a consolidation loan unless that lender doesn't offer consolidation loans or that lender doesn't offer an income sensitive repayment schedule. However, if you have loans with different lenders, you can go to either lender for consolidation or to any federal loan consolidation program.
The formula for the interest rate is federally mandated and thus the same from lender to lender. It's based on a weighted average of the loans being bundled, and rounded up to the next highest one-eighth of 1 percent. This rate won't be above 8.25 percent, and it's fixed for the life of the loan. Last year, the rate on Stafford loans, the most common type of student loan, dropped to 3.37 percent, the lowest point in more than 30 years.
Those who consolidate student loans before July 1, 2005 can lock in a consolidation interest rate based on this low rate. The rate is likely to rise in July, so it's worthwhile for those who haven't yet consolidated to do so. Be careful if you're consolidating Health Education Assistance Loans (HEALs) with other types of loans, however. In some types of consolidations, HEAL rates aren't figured into the weighted average calculation. Ask your loan officer how HEALs would be treated in the consolidation loan you're considering.
Federal consolidation loans will pay off if you're holding loans with interest rates higher than the current formula based on the federally mandated rate, and if you pay off the consolidation loan in the original time frame. If you consolidate but extend the repayment period, you could end up shelling out more interest.
Taken from:
http://www.memag.com/memag/article/articleDetail.jsp?id=154641
