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However, if you have a high credit score and you consolidate to a federal loan, you may lose out on getting a lower interest rate that could save you thousands of dollars over the life of your loan.
Both federal consolidation and private refinancing allow you the opportunity to: However, if you refinance federal student loans with a private company, you lose access to federal income-based repayment plans and loan forgiveness programs.
We’re here to help with answers to your most pressing questions about consolidating your student loans.
When you consolidate your student loans, you combine all your separate student loans and pay them off as a single new loan.
For instance, consolidating your student loans through a federal Direct Consolidation Loan could lower your monthly payments in the short-term if you extend your repayment term, but you may end up paying more over the life of the loan than you’re paying under your current plan.
Here’s why: when you consolidate federal loans, the U. Department of Education sets your consolidated interest rate as a weighted average of the interest rates of all your old loans, rounded up the nearest one-eighth percent.
Knowing the pros and cons of consolidation can help you make a decision.
Consolidation through a federal Direct Consolidation Loan helps streamline your monthly student loan payments while allowing you to: See also: Should You Refinance or Consolidate Your Student Loans?
See also: Student Loan Forgiveness: What You Need to Know. You can also consolidate your federal student loans by refinancing with a private lender. Before you apply, we recommend comparing terms and repayment options of at least three different companies so you can be sure you’re getting a loan that works best for you.You may be able to reduce that monthly chaos by consolidating your student loans into a single monthly bill.But if you’re considering consolidation, you’ll want to understand your options and the potential impacts before you take any big steps.Private student loans are not eligible for consolidation through a federal Direct Consolidation Loan, but you can consolidate your private student loans by refinancing with a private lender.With numerous banks offering student loan refinancing, choosing a lender can be overwhelming.