Refinancing vs. Consolidation and What It Means For Your Student Loans
- Refinancing your student loans
- The benefits of refinancing student loans
- Private student loans and refinancing
- The benefits of Federal student loans
- Student loan consolidation
- Which should I choose? Refinance or consolidation?
- The bottom line
Refinancing your student loans
The benefits of refinancing student loans
- Potential lower interest rate. Depending on your new loan terms, your new interest rate may be lower. This means less money paid towards interest over the life of the loan, potentially saving you money over the years.
- Longer time for repayment. If you stretch your payments over additional months versus your old loan, then it may provide additional relief in your monthly budget with lower payments. The only downside to this is you’re potentially paying more for interest over time.
- Remove a co-signer. If you have a co-signer on your student loan currently, you can get the co-signer removed by refinancing.
- New lender, new relationship. Refinancing allows you to choose a new private loan lender, which in turn may result in better customer service or an improved relationship with your lending institution.
- Simplified payment process. If you’re refinancing several loans, by combining the loans into one new loan, you’re simplifying monthly payments and making your life a tad bit easier.
Private student loans and refinancing
Federal loans and refinancing
The benefits of Federal student loans
- Student loan forgiveness program. The Public Service Loan Forgiveness, or PSLF program is for federal loans only. You may qualify for the remaining balance of your federal loans to be forgiven if you’ve worked at a non-profit organization for 10 years or 120 loan payments.
- Income-based repayment plans. Repayment programs are offered that are based on your income. This means your monthly payments may be lower when your paycheck hasn’t reached its full potential.
- No credit check. Federal loans do not require a credit check for qualification, but your payment history does get reported on your credit report.
- No co-signer required.
- Fixed interest rates.
- Potentially lower interest rate. Depending on what you qualify for with private loans, a federal loan may have a lower interest rate.
- Forbearance and deferment options: There are federal forbearance and deferment options available if you’re unable to make payments.
- Your interest accrual begins after graduation, versus a private loan which begins right away.
- Repayment grace period. A 6-month grace period is available for some federal loans.
- Longer default period. The default period is 90 days for federal loans, while most private loans have a shorter default period.
- Loans can be discharged. If a borrower passes away or is permanently disabled, the government can discharge the loan.
Student loan consolidation
Consolidation of federal loans
Which should I choose? Refinance or consolidation?
How do I refinance student loans?
When should I refinance my student loans?
- When you graduate from school
- When you take a full-time job
- You’ve improved your credit score
- You’re offered an improved interest rate
How many times can I refinance student loans?
How do I refinance student loans after consolidation?
What are the average student loan refinancing rates?
The bottom line
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