What is Student Loan Consolidation?
Student loan consolidation is the process of uniting some or all of your student loans into one new loan. By consolidating, the borrower would have only one student loan, with one monthly payment, interest rate, and term. People usually consolidate or refinance their student loans to lower and/or simplify their payments.
The Complete Guide to Student Loan Consolidation
4 Easy Steps to Student Loan Consolidation (And Everything Else You Need to Know)
The process of consolidation begins with four easy steps:
- Understand the Difference Between Federal vs. Private Consolidation – Both of these programs can lower your payments but in very different ways. Federal consolidation offers payment flexibility and long-term forgiveness options, while private consolidation can lower your interest rate (thereby lowering your monthly payment as a result). Understanding the benefits and risks of each program will help you decide which one is the better fit.
- Understand Your Monthly Payment and Total Repayment – Both consolidation options allow you to go from multiple loans to a single new loan with one payment, one interest rate, one term, and one lender. With federal consolidation, you have the choice of multiple repayment options which can base your monthly payments directly on your income and family size. Your interest rate will be a weighted-average from your previous federal loans. You will also be able to see your total repayment amount at any time with this new loan and enjoy forgiveness of any remaining balance once your term is completed. With private consolidation, a private lender can directly lower your interest rate, thereby making your monthly payments that much lower as a result. They can also increase the length of your repayment term which can make for lower monthly payments (but possibly a larger total repayment once the term is completed). The private lender and program you go with will ultimately decide how your monthly payment and total repayment amounts are affected.
- Determine Your Eligibility – Whether your student loans are federal or private will determine which consolidation programs are available to you. Federal consolidation and forgiveness requires that you have direct federal loans, while both federal and private loans are eligible for private consolidation/refinancing (much more on this below).
- Take Action – Once you understand the differences and benefits of both consolidation programs and your eligibility for either one, the fourth step is to take action and begin the application process. Call today to speak to one of our Student Loan Consultants at 1-855-885-DEBT to see which program is best for your situation.