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How to Consolidate Student Loans, how to consolidate student loans.#How #to #consolidate #student #loans

How to Consolidate Student Loans

Consolidating student loans can make educational debt easier to manage. Instead of having to handle payments for a series of student loans, you ll have one single monthly payment that covers everything. Only federal student loans are eligible for consolidation. The interest rate is fixed for the life of the loan and based on the weighted average of the interest rates of each loan being consolidated.

Determine Eligibility

You generally can consolidate student loans after you graduate, leave school or drop below the half-time level. At least one Federal Direct Loan or Federal Family Education Loan has to be in either the grace period or repayment process. If you want to consolidate a loan that s in default, you have to either make satisfactory repayment arrangements with your lender or agree to repay it under one of the Department of Education s payment plans that tie payments to your income level.

Get Application and PIN

Apply for a consolidated student loan at You ll need your Federal Student Aid personal identification number, or PIN, in addition to your personal information. If you don t already have a PIN, request one online at Once you re signed in, you can complete the Federal Direct Consolidation Loan Application and sign the promissory note. Or you can print out a paper application and mail the forms in if you choose. You ll generally mail the paperwork to whichever loan servicer you select. Addresses for each can be found at

Select Your Servicer

When filling out the application, you ll choose the loans you want to consolidate. In addition, if you have loans you don t want to consolidate, you ll list those separately. They won t be included in the consolidation, but the amounts can then be considered when determining the maximum repayment period. You ll then pick the loan servicer you want to handle the consolidation from among the options provided by the Department of Education. As of publication, the Department of Education has four consolidation servicers: FedLoan Servicing, Navient, Nelnet and Great Lakes Educational Loan Services Inc.

Pick a Payment Option

Select your payment plan; these generally offer the opportunity to pay off the loans in terms ranging from 10 to 30 years. Read the terms and conditions, then confirm the borrower and reference information. Once that s done, review and sign the documents. There are no application fees for a direct consolidation loan and no prepayment penalty.

Complete the Process

Once you finish your application, the loan servicer will complete the process. In the meantime, keep making your current loan payments until you receive confirmation that the consolidation has taken effect. As far as student loans go, what has been consolidated cannot then be torn asunder. Loans are paid off and replaced by the consolidated loan, so they no longer exist. While private lenders may be happy to take on your federal loans, this is rarely is a good idea for you, as you ll lose the rights and benefits you have with the individual loans before the process and with the consolidated loan afterward.

Student Loan Consolidation vs Refinancing, SoFi, how to consolidate student loans.#How #to #consolidate #student #loans

Student Loan Consolidation

Student Loan Refinancing

Refinancing your student loans sounds great. But it’s not for everyone.

Consolidating student loans via refinancing is best for people whose financial position – in terms of employment, cash flow, and credit – has improved since they graduated from school. People who are working in the public sector or taking advantage of federal debt relief programs such as income-based repayment or public service forgiveness may not want to refinance, as these programs do not transfer to private refinance loans.

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Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (

To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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Know When it Makes Sense to Consolidate Student Loans – US News #pay #day #loans

#consolidated loans

Know When it Makes Sense to Consolidate Student Loans

Consider the type of loan you have and your repayment history before seeking consolidation.

Gone are the days when it was generally a good idea for most federal student loan borrowers to consolidate their loans. The student loan world has changed significantly, eliminating two of the biggest benefits of consolidation.

First, most federal loans previously featured variable interest rates. These rates changed annually, so consolidation allowed borrowers to lock in historically low numbers. In July 2006, interest rates on new loans became fixed. Because consolidation interest rates take a weighted average of the underlying loan rates, borrowers no longer automatically get a lower rate by consolidating.

Second, in the past, it was common to have your federal loans held by multiple servicers. By consolidating, borrowers could pay one servicer instead of many. Now, most borrowers pay all their loans under one bill from the start, thanks mostly to efforts on behalf of the Department of Education.

With these benefits removed, borrowers may be wondering if consolidation is even worthwhile. For many, the answer is, not really. However, it can still be a useful tool for some. Here are some situations where it can make sense to consolidate student loans.

1. To o btain access to forgiveness or repayment benefits: Student loan regulations and laws are complicated, but sometimes that can work to the borrower’s benefit. This is true when it comes to consolidation, Parent PLUS loans and Public Service Loan Forgiveness.

While Parent PLUS loans are technically eligible for PSLF. it’s hard for borrowers to take advantage of this benefit. A borrower must make 120 payments under either a standard 10-year, income-based, income-contingent or Pay As You Earn payment plan to qualify for PSLF.

The catch is that Parent PLUS loans are not eligible for the three income-related payment plans. and a borrower paying under a standard repayment plan will have nothing left to forgive after 120 payments.

If you consolidate a Parent PLUS loan under the Direct Loan program, however, it becomes eligible for income-contingent repayment and therefore has the potential to be eligible for PSLF. If the borrower wouldn’t otherwise be eligible for PSLF, having access to this option could make payments much more manageable, especially if the borrower still owes money when he or she retires.

On a related note, as only Direct Loans are eligible for PSLF, borrowers with older Federal Family Education Loan Program loans can use consolidation to transfer those loans ​into the Direct Loan program to gain access to PSLF.

Consolidation can work the other way too, especially when it comes to Perkins loans. Many unique forgiveness opportunities available to Perkins loans are lost when they are consolidated, so make sure you do your research before taking this step.

2. To obtain a lower payment : While income-related payment plans provide much needed relief for many, those lower payment amounts may still be too high to manage. For those borrowers, especially those with lower loan balances, extending the term of the loan through consolidation may actually yield a lower payment than some other repayment options.

This calculator can help weigh all of those options at once. Just remember that the longer you take to pay the loan, the more you will pay in interest.

3. To manage private student loans: The benefits of student loan consolidation have increased when it comes to private student loans. While it is generally not advisable to consolidate federal loans ​with private loans since you’ll lose the federal benefits, consolidating your individual private loans may make sense.

There’s been a significant increase in lenders offering a private loan consolidation product. increasing the competitiveness of these products. Borrowers can often find a lower interest rate and more favorable terms, especially if they have a good payment history on their existing private loans to date.

At the very least, private loan consolidations can extend the term of your loans, lowering the payment. As we’ve discussed in the past. private loans have very few lower payment options. so consolidating to a longer term with a lower payment can sometimes be the only option available.

If you have good credit and payment history on the loans you want to consolidate, this can also be a way to release the co-signer​ from responsibility of those underlying loans. The co-signer will not automatically transfer to the new loan product, so if you do still require one to consolidate, you’ll need to find a new one, or ask your existing co-signer​ to re-up his or her commitment.

4.To get out of default: If you’ve defaulted on your federal student loans, consolidation is the fastest way to get the loan out of default. Consolidation is not as beneficial as loan rehabilitation, as consolidation doesn’t remove the default from your credit history. However, if you’re not eligible for rehabilitation or can’t take the time to complete that process, consolidation can get your loan back in good standing.

A good place to start to determine the pros and cons of consolidation will be your student loan holder, which will have a good understanding of how consolidation will benefit – or not benefit – your particular situation.

How to Consolidate Payday Loans #omni #loans

#payday loan consolidation

How to Consolidate Payday Loans

Taking out a payday loan may help you take care of an urgent situation. However, if you take out multiple loans at the same, it could become unmanageable. The good news is that you may be able to consolidate your payday loans into one monthly payment.

Other People Are Reading

Consider a secured debt consolidation loan if you own a home. This is actually a home equity loan with a low interest rate. Consumers who owe thousands of dollars in payday loans may be able to take advantage of this option.

Use a credit card with no annual fees and a 0 percent introductory rate to pay off the loans. You would have one monthly payment and pay less in interest charges and fees. Take advantage of sites like to find the best credit card offers (see Resources).

Explore the possibility of using services like to find private lenders who are willing to lend money to private borrowers.

Take out a personal unsecured debt loan from a lending institution. This may be your best option since you don’t need collateral. A good credit history is essential to obtain this type of loan.

Ask a friend or family member for a personal loan. Offer to put everything in writing and to pay good interest rates. Paying a reasonable interest rate is better than continuing to incur fees from the payday loan companies.

How to Consolidate Credit Cards #home #loans #rates

#credit card consolidation

Other People Are Reading

Transfer Balances

Open a new credit card account to use specifically for transferring the outstanding balances on your open credit card accounts. You ll need the name, account number and outstanding balance of each open card you want to include. According to NerdWallet, a personal finance website, most credit card companies require a credit score of at least 690 to qualify. Identify cards that offer an interest-free introductory period. Next, review and compare their add-on fees such as annual fees and balance transfer fees — usually 3 to 4 percent of the amount of the transferred balance. Finally, compare the interest rates for each card once the interest-free period expires

Take Out a Debt Consolidation Loan

Apply for a debt consolidation loan through your bank or credit union. If you qualify, most lenders will pay each credit card company directly. If you don t qualify and you have sufficient equity or collateral, apply for a home equity or secured personal loan and pay credit card balances yourself. The Consumer Financial Protection Bureau recommends that you make sure a debt consolidation loan is a good choice before committing. You don’t want to spend more on fees or interest for the consolidation loan than you do on your individual credit cards. Use an online loan consolidation calculator or add up the monthly payments, including fees and interest, and compare these with the consolidation loan.

Work With a Credit Counselor

A credit counseling service is a way to consolidate credit card debt without opening a new card or taking out a loan. With this option, a representative from the service negotiates with credit card companies on your behalf to reduce interest rates and lower monthly payments. Each month, you send in a single payment that covers all your credit cards and the company pays your creditors. Using a credit counseling service will not affect your credit score as long as you pay all of the amounts in full. However, it is vital to choose a reputable company. To assist you, the U.S. Department of Justice website has a list of approved counseling services and the Consumer Financial Protection Bureau has a list of questions to ask each service before you decide.

Consolidation Considerations

It takes self-discipline and clear goals to make sure credit card consolidation is the best long-term choice. While the goal is to decrease the total percentage of your credit card balances to your available credit card limits, you can easily find yourself in more financial trouble if you consolidate and then continue using newly cleared cards. Cancelling cleared credit cards immediately after consolidating is another common mistake. According to MyFICO, owing the same total balance but having fewer open accounts can lower your credit score. Keep your other accounts open but resist the urge to make purchases with them.

Consolidate Your Credit – Top 10 Options #federal #school #loans

#consolidate debt

Consolidate Credit

10 Ways to Consolidate Credit Card Debt

Readers often ask Bill, the advice columnist, how to consolidate their credit card debt. Here is a summary of Bill s top 10 suggestions for you to consolidate credit card debt.

1. Apply for a Home Equity Loan

A home equity loan is money you borrow that is secured by your ownership stake in your home. Home equity loans are similar, in some ways, to standard primary mortgage loans. Both have fixed principal amounts disbursed when the loan closes, pre-set payment schedules, and either adjustable or fixed interest rates. Home equity loans also share similarities with Home Equity Lines of Credit (HELOCs).

2. Consider a Cash-Out Refinance

In a cash-out mortgage refinance, the home s value is estimated by an appraiser. The house s value is compared to the balance on the home loan. Any equity available can be borrowed against by the homeowner. If the homeowner refinances for amount larger than the balance of the mortgage, this is called a cash-out refinance.

3. Open a Line of Credit

A line of credit is a form of revolving credit where the borrower is approved for a specific amount of credit. Banks and credit unions typically offer consumers lines of credit secured by a home. They may also offer an unsecured line of credit to high net-worth customers with perfect credit history.

4. Transfer to a Card with 0% Interest Balance Transfer

0% balance transfer offers are available only on certain credit cards, and only well-qualified people are offered these cards. However, if you qualify, the 0% rate is for a limited period of time. If you do not pay off the debt you transferred onto the new card within the promotional period, the creditor will begin charging interest on the remaining balance.

5. Apply for a Personal Loan

Personal loans have fixed monthly payments and must be paid-off in-full within a set amount of time (typically over 36 or 60 months). You can find personal loans at your local bank, credit union, Prosper or Lending Club .

6. Get a 401(k) Loan

A 401(k) loan, if allowed by the rules of your 401(k) plan, is a withdrawal from your account that you repay with a modest interest rate. The interest paid goes to your account. You pay yourself the interest. There is no tax consequence for a 401(k) loan that is repaid. The risk of a 401(K) loan is the costs involved if something prevents you person from repaying the loan as agreed.

7. Borrow From a Rich Family Member

It probably will save interest charges, but personal loans create the potential for damaged personal relationships, the expectation that you ll return the favor years down the road, and even legal action by someone who was previously a good friend or close family member. If you are asked to lend money to a relative, consider instead gifting the person the money.

8. Consult With a Credit Counselor

Consumer Credit Counseling Service (CCCS) companies help people with financial counseling, budget planning, and Debt Management Plans (DMPs). In a DMP, the CCCS arranges a new payment amount with each of your creditors that is based on a lower interest rate. You then make a monthly payment to the CCCS, which distributes the funds to creditors. CCCS has negatives, though. First, depending on your creditors, the CCCS may not be able to reduce monthly payments enough to improve your financial situation. Second, it may have a negative impact on your ability to obtain a loan, so you may not wish to enter into a DMP if you anticipate any large purchases, such as home or an auto, soon. Third, the average DMP takes 5 years to complete, so you must be able to commit to a long-term repayment plan.

9. Hire a Debt Settlement Company

Debt settlement companies also offer credit consolidation services. Rather than making monthly payments to your creditors, these programs negotiate lump-sum settlements with creditors, often reducing debts substantially. Debt settlement programs usually take 3 to 4 years to complete, so this is a good option for many people to rid themselves of debt in a speedy manner. In many cases, they set up a low monthly program payment. However you make special savings deposits in lieu of minimum monthly payments. You are not making payments to creditors, which has negative consequences. First, debt settlement programs, will significantly damage your credit score while in the program. You will also be exposed to your creditor s collection efforts, including letters calls and possible lawsuits. However, if you are unable to afford to pay your creditors, the hit to your credit and the negatives may be worth the benefit of ridding yourself of credit card debt.

10. Create a Budget and Change Your Spending Habits

One of the first steps toward financial freedom is to understand how much money comes in and goes out of your household every month, what is called your cash flow. Your cash flow is a factor of how much comes in as income and how much goes out as expenses. Hopefully, you have much more coming in than is going out and if you don t you may need to make some quick changes. Start by creating a budget that breaks down your income and expenses by financial categories, providing you with a snapshot of your entire cash flow picture.


As you can see, you have many options to consolidate your credit card debt. Which you choose depends on your goals, circumstances, and the amount of your debt.

Consolidate loans #citifinancial #loans

#consolidate loans


Consolidation Loans combine several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. They also provide an opportunity for alternative repayment plans, making monthly payments more manageable.

Consolidation loans (add hyperlink) are available for most federal loans, including Stafford, PLUS and SLS, FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer private consolidation loans for private education loans as well.


Interest Rates

The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent. That interest rate is fixed for life.

For example, suppose a student has just unsubsidized Stafford Loans originated on or after July 1, 2006. These loans have a fixed interest rate of 6.8%. When they are consolidated by themselves, the consolidation loan will have an interest rate of 6 and 7/8ths of a percent, or 6.875%. So the interest rate increases only slightly.

If the borrower has a mix of loans with different interest rates, the weighted average will be somewhere in between. For example, if the borrower has $5,000 of Perkins Loans (at 5.0%) and $10,000 of unsubsidized Stafford Loans (at 3.86%), the weighted average is

This weighted average, 4.2%, is then rounded up to the nearest 1/8th of a percent, yielding a consolidation loan interest rate of 4.25%.

If you are consolidating loans with different interest rates, the weighted average interest rate will always be in between. Don’t be fooled if someone tries to suggest that this will save you money by getting you a lower interest rate. The interest rate may be lower than the highest of your interest rates, but it is also higher than the lowest of your interest rates. More importantly, the amount of interest you pay over the lifetime of the loan will be about the same.

No Cost to Consolidate

Aside from a slight increase in the interest rate on the consolidation loan, there is no cost to consolidate your loans. There are no fees to consolidate.

Under no circumstances pay a fee in advance to get a federal education loan or consolidate your federal education loans. There are no fees to consolidate your loans. While other federal education loans, such as the Stafford and PLUS loans, may charge some fees, the fees are always deducted from the disbursement check. There is never an upfront fee. If someone wants you to pay an upfront fee, chances are that it is an example of an advance fee loan scam.

Who Can Consolidate

Both student and parent borrowers can consolidate their education loans. Students and parents cannot combine their loans through consolidation, since only loans from the same borrower can be consolidated. But they can consolidate their loans separately.

Students can consolidate their education loans only during the grace period or after the loans enter repayment. Loans that are in default but with satisfactory repayment arrangements may also be consolidated. Students can no longer consolidate while they are still in school. Parents, however, can consolidate PLUS loans at any time.

Which Loans Can be Consolidated?

Any federal education loan can be consolidated. You can even consolidate a single loan. There are, however, a few restrictions on consolidating a consolidation loan.

You can consolidate a consolidation loan only once. In order to reconsolidate an existing consolidation loan, you must add loans that were not previously consolidated to the consolidation loan. You can also consolidate two consolidation loans together. But you cannot consolidate a single consolidation loan by itself.

Note that when you reconsolidate a consolidation loan, it does not relock the rates on the consolidation loan. The consolidation loan is treated as a fixed rate loan within the weighted average interest rate formula used to calculate the interest rate on the new consolidation loan.

Repayment Plans

Consolidation loans provide access to several alternate repayment plans besides standard ten-year repayment. These include extended repayment, graduated repayment, income contingent repayment (Direct Loans only) and income sensitive repayment (FFEL only). If you do not specify the repayment terms, you will receive standard ten-year repayment.

Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid over the lifetime of the loan is increased.

You do not need to pick an alternate repayment plan. We recommend sticking with standard ten-year repayment, because it will save you money. The alternate repayment plans may have lower monthly payments, but this increases the term of the loan and the total interest paid over the lifetime of the loan.

Repayment on a consolidation loan will begin within 60 days of disbursement of the loan, unless the borrower qualifies for a deferment or forbearance.

The Federal Loan Programs to Consolidate Your Debt #loan #forgiveness

#federal student loan consolidation

Information on Federal Consolidation Choices

How Direct Consolidation Loans Can Help

The federal government is the nation s primary provider of both student loans and the consolidation loans used to combine existing student loans into one large loan. Since it lacks any profit motive, both original loans and consolidation loans from the government usually have lower interest rates and easier payment terms than loans found in the private market. Rather, its goal is to put as many students through school as affordably as possible, and that includes recommending consolidation loans when appropriate.

Do You Need A Direct Consolidation Loan?

The U. S. Department of Education (USDOE) provides clear, straightforward information on its consolidation loan features, suggesting that anyone considering consolidation first make a thorough review of existing federal loans. If you re not sure which bank services your loans, you can check an online database called the National Student Loan Data System and find all the information about your loans that s been forwarded to the USDOE by your school and whatever companies guarantee and service your loans.

Your first step will be to determine the amount of all your monthly federal loan payments added together. Then multiply that by the number of months until your payoff date to find the total cost of your loans. Do not include private loans, because they cannot be included in federal consolidation.

What Loans Can Be Included In A Direct Consolidation Loan?

Here s a list of eligible loans:

  • Direct Subsidized and Unsubsidized Loans
  • Direct PLUS Loans
  • Perkins Loans
  • Federal Nursing Loans,

and here are the older types of loans that are also included:

  • Stafford Loans, both Subsidized and Unsubsidized
  • Federal Family Education Loan (FFEL) Program PLUS Loans
  • Supplemental Loans for Students (in this case, the proper name of a specific type of federal loan), and
  • Health Education Assistance Loans.

Even some existing consolidation loans can be consolidated again. Note: A student s consolidation cannot include a PLUS loan taken out by a parent to pay for that student s education.

Your second step is to estimate what your monthly payment and total loan cost would be if you consolidated those loans, then compare it to the current amounts. The USDOE has set up an online calculator for this purpose. To confirm the results of your calculation, you can contact the USDOE directly to compare your numbers to the consolidation loan terms the Direct Loan Consolidation Center would offer you.

Am I Eligible For A Direct Consolidation Loan?

Determining your eligibility is step three, and there are four primary requirements for taking out a Direct Consolidation Loan:

  • You must have at least one existing loan through the Direct or FFEL programs.
  • One of your eligible loans must be in either grace or repayment status.
  • If you want to include a defaulted loan, you must make acceptable arrangements to repay it with the company currently servicing the loan. Alternately, you must agree to one of these two repayment plans for your Direct Consolidation Loan: Income-Contingent or Income-Based, about which you can find details here .
  • Rules for including an existing consolidation loan in a new consolidation are probably the most complex aspect of consolidation. Some FFEL Consolidation Loans may be reconsolidated on their own, but usually you must include a new Direct or FFEL loan in the group to be consolidated.

Direct Consolidation Loan Costs

There is no fee to apply, and no prepayment charge for a Direct Consolidation Loan. The loan will have a fixed interest rate, calculated in an interesting way: take the weighted average of the rates on your existing loans and round that number up to the nearest eighth of a percent. In this case, the weight is assigned to each existing loan s interest rate in the same proportion as the amount of the existing loan to your total existing debt.

For example, if you have a $5,000 loan at 5% and a $15,000 loan at 6%, your total indebtedness is $20,000. The weight of the first loan s 5% is 25% compared to 75% for the second loan s 6%, and the weighted average of those two rates is 5.75%. The rate of the new Direct Consolidation Loan is capped at 8.25%.

Repaying Your Direct Consolidation Loan

Your loan servicer will tell you when to start repaying your Direct Consolidation Loan, and repayment must begin within sixty days. Possible lifespans for such a loan vary between ten and thirty years, depending on three factors: the amount of your other debts, the amount of your consolidation loan, and your repayment plan.

There are three possible repayment plans for a Direct Consolidation Loan:

  • The Income-Based Repayment (IBR) plan applies to consolidation loans that do not include Direct or FFEL PLUS loans made to parents.
  • The Pay As You Earn plan, which started in December 2012, is offered for the same loans as the IBR plan, but usually brings a lower monthly payment amount.
  • The Income-Contingent plan can be used for any Direct Consolidation Loan.

Can I Consolidate Federal – Private Student Loans Together? #short #term #loans #bad #credit

#consolidate student loans

Can I Consolidate Federal Private Student Loans Together?

If you have student loans, chances are you’re dealing with multiple interest rates, multiple loan servicers and multiple monthly payments – a surefire recipe for multiple headaches. The idea of consolidating all your loans together sounds like a great way to simplify, but is that even possible when you have both private and federal loans? More importantly, is it advisable?

The short answer to the first question is yes, it is possible. But in order to decide whether it makes sense for your situation, there are some considerations to take into account. Here’s what you need to know:

The Term “Consolidation” Can Have Different Meanings

Consolidating student loans simply means combining them together, but there’s a difference between consolidating through the government’s Direct Loan Consolidation Program and consolidating through a bank or alternative lender.

When you consolidate student loans through the Direct Loan Consolidation Program:

  • Most (but not all) federal loans are eligible, and private loans are not allowed.
  • The resulting interest rate is a weighted average of the original loans’ interest rates, which means no money is saved.
  • You may be able to select a new, longer term, which can reduce your monthly payments ; however, a longer term can also end up costing you more money in total interest.

When you consolidate student loans through a private lender:

  • In most cases, only private loans are eligible (although a handful of lenders accept both private and federal student loans).
  • You’re offered a new interest rate based on your current financial situation, including your credit score (which means those loans are being refinanced as well as being consolidated).
  • If you qualify for a lower interest rate, you may be able to reduce your monthly payments or shorten payment term, and you can save a significant amount of money on total interest.

Okay, so we’ve established that certain lenders will allow you to consolidate your private and federal loans together. Now let’s talk about whether that option is right for you.

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When Refinancing Federal Loans Is a No-Brainer

The interest rates on federal loans are all one-size-fits-all numbers determined by Congress, so everyone gets the same rate for the same type of loan regardless of their unique financial situations. This can be advantageous for some borrowers – for example, undergrads who have little-to-no credit history and income. But borrowers whose finances and credit improve after graduation may find they’re eligible for lower rates through a private lender. This is particularly the case for mature borrowers who take out higher-rate federal unsubsidized or PLUS loans for graduate, MBA or professional degree programs. (You can see how your credit standing affects your cost of debt over time using this calculator .)

Unfortunately, many borrowers who would qualify to refinance don’t even realize the option exists for federal loans – mostly because it only became available in the past few years. But as awareness grows, so does the number of borrowers who take advantage of refinancing. In fact, the majority of SoFi’s $1 billion in funded loans is made up of refinanced federal student loan debt. (Full disclosure: I work for SoFi.)

Before refinancing federal loans, it’s important to note that some of these loans have features that don’t transfer to private lenders through the refinancing process. There are three main examples:

  • Deferment/forbearance. Some (but not all) private lenders have a forbearance option in the case of unforeseen financial hardship, for example if you’re laid off from your job. The details of each lender’s offering will be different, so it’s good to learn what it is before refinancing.
  • Income- driven repayment. Many federal loans offer the option of an income-based repayment plan, such as Pay As You Earn (PAYE), which allows you to make reduced monthly payments based on your income level. Most borrowers who qualify to refinance with a private lender at a lower rate don’t typically benefit from this program because their income is too high, but if you’re unsure, you should do the math on your own loans before refinancing.
  • Potential loan forgiveness. The three most common forgiveness options are for borrowers who teach, work in the public sector or participate in one of the aforementioned income-driven plans. You’ll want to read up on these forgiveness options to see if you qualify before refinancing federal loans.

Bottom line? If your priority is saving money, then refinancing both federal and private loans can be a great strategy. The benefits of consolidating – simplifying your life with one monthly bill and payment – are simply an added bonus.

This article is intended to provide useful information about personal finance, but it is not intended to provide legal, investment or tax advice.

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Dan Macklin is one of the founding members of SoFi. a marketplace lender that offers student loan refinancing, personal loans and mortgages. He is a thought leader whose perspectives on education debt and personal finance have been featured in a variety of media outlets including CNBC, ABC, Fox Business and Fast Company, as well as his personal favorite, Italian Vogue!

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