Home mortgage, auto loans, insurance rates, and even employment interviews all depend on your credit score.Interest Rates for many of these are greatly impacted on your credit score as well. We’ve got you covered with our Student Loan Smarts blog series.
As financial expert Dave Ramsey once wrote, “You can only do it once.”Applying for any line of credit requires serious consideration and weighing of risks and rewards.
When it comes to student loans, the stakes are even higher — without them, some students could never attend school.
Because student debt is so prominent in our society, questions frequently arise when young adults begin to understand the gravity of credit and make steps toward gaining control over their financial portrait.
However, simply because private and federal loans can be consolidated, does not mean that they should be in all situations.
Federal loans almost always have better rates and terms than private loans, and once a federal loan is consolidated with a private loan, the benefits of the federal loan essentially disappear.
Therefore, the first step to address student debt is to look at the types of loans held and the consequences of consolidating them.
As a student loan lender, we get a lot of great questions about how student loans affect credit score. The answer depends on whether you’re talking about federal or private student loans.
Federal loans don’t take credit scores into account, which is why every borrower gets the same interest rate regardless of financial profile.
However, federal PLUS loans do require that borrowers not have an adverse credit history, which is defined by Fin Aid as “being more than 90 days late on any debt, or having any Title IV debt within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or write-off.” For private lenders, your credit score is usually a key factor in determining not only student loan approval, but also the attached interest rate.