How do student loan consolidation companies make money?

By now most borrowers have heard of lenders such as SoFi, Citizens, and LendKey… companies offering student loan refinancing and consolidation at interest rates well below 3%. Interest rates this low give borrowers concern that these companies fall into the too good to be true category. read more

Companies that consolidate your loans for a fee make money by charging you an initial amount — which could be $600 or more — and occasionally a monthly fee after that. Instead, you might be referring to student loan refinancing, when a private company pays off your student loans and replaces them with a new loan at a lower interest rate. read more

Financial professionals define loan consolidation as the purchase of several different loans by one company to create one larger single loan. This idea behind this is the company buying the loans purchases them from the other companies at an agreed price, say 80 cents on the dollar. read more