How to Consolidate your Student Loan

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How to Consolidate your Student Loan

How to Refinance Your Student Loan

How to Refinance and Consolidate Your Student Loans
Federal and private student debt consolidation are the two forms of student loan consolidation. Federal student loans are the only ones that fall under this category.

It’s good to know.

Federal and private student debt consolidation are the two forms of student loan consolidation. Refinancing is a term used to describe private consolidation. These processes are often misunderstood, yet they are vastly distinct. Here’s how to do it:

Through the Department of Education, federal student debt consolidation merges numerous federal loans into a single federal loan. Consolidation may be required to be eligible for certain federal debt repayment programs, but it will not decrease your interest rate. By extending your payments, you may be able to decrease your monthly costs.

Private student debt consolidation, also known as student loan refinancing, is a financial maneuver made via a private lender. You may save money by receiving a cheaper interest rate if you qualify.

Consolidating private student loans is a great way to save money.
Consolidating or refinancing private student debts entails replacing several student loans — private, federal, or a mix of the two — with a single, new private loan. If your new loan has a cheaper interest rate, you’ll save money.

When you refinance, your new interest rate will be determined by your financial history, which includes your credit score, income, work experience, and educational background. To qualify, you’ll normally need a credit score in the upper 600s, with interest rates ranging from 2% to more than 9%.

If you have any of the following private student loans, consider consolidating them.

Private student debts that have already been taken out.

Credit scores of 690 or above are typically considered good or outstanding.

A employment that is secure.

If it doesn’t sound like you, you may be able to find a co-signer who shares those attributes.

When you refinance federal student loans into a private consolidation loan, you lose the consumer protections that come with them. These include the ability to connect payments to income and debt forgiveness options.

Consolidation of federal student loans
There is no credit criterion for federal loan consolidation, and it provides the advantage of a single loan statement and possibly reduced payments. However, it is solely applicable to federal loans and would not lower your interest rate. If you’re looking for a way to save money, consider federal consolidation.

To be eligible for income-driven repayment or public service loan forgiveness, you must combine your debts. If you have Federal Family Education, Perkins, or parent PLUS loans, this is the situation.

Want to make a single federal loan payment, but not one that is much cheaper.

Are you in default on your student loans and want to get back on track?

› LEARN MORE: Calculate the interest rate on your federal student loan consolidation

The government pays off your federal debts and replaces them with a straight consolidation loan when you combine them. When you graduate, quit school, or drop below half-time attendance, you are normally eligible. Consolidating your federal loans via the Department of Education is free; firms who demand fees to combine them for you should be avoided.

When you combine federal loans, your new fixed interest rate will be the weighted average of your prior rates, rounded up to the nearest one-eighth of one percent. For example, if the average interest rate is 6.15 percent, your new interest rate will be 6.25 percent.

What is the best way to combine federal loans?
Click “Complete Consolidation Loan Application and Promissory Note” on studentloans.gov. You must complete the application in one sitting, so collect the papers given in the “What do I need?” section and set aside around 30 minutes to complete it.

1. Select which debts you want to combine – and which you don’t.

Decide on a payback strategy. You may choose a repayment schedule that is based on your loan amount or one that is based on your income. You’ll need to fill out an Income-Driven Repayment Plan Request form if you choose an income-driven plan.

Before submitting the form online, read the conditions. Continue to make regular payments on your student loans until your servicer certifies that consolidation is complete.

If you have defaulted on your debts, consolidation is one of the few options for getting them back on track. You must make three full, on-time monthly payments on the defaulted loan and agree to participate in an income-driven repayment plan to combine defaulted debts.

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