This guide provides an in-depth explanation of the differences between federal loan consolidation and private loan refinancing, the pros and cons of each and insight into which options are best for different situations. News compared private lenders to come up with recommendations for different kinds of borrowers.There are a variety of private lenders that offer student loan refinancing, each with different potential interest rates, loan terms and features. When you consolidate your student loans, you essentially combine multiple loans into one.Some debt relief companies offer to consolidate your loans for a fee, but this isn’t necessary. You’ll have to submit your name, address, Social Security number, driver’s license state and number, contact information and two references who’ve known you for at least three years. This information should be on your monthly billing statement.“Never pay a fee to consolidate your student loans,” says Kantrowitz. You don’t need to consolidate all your loans, and doing so may be a bad idea in some circumstances.With private student loan consolidation, a private lender repays your student loans, which may include private and federal loans.The lender issues a new loan based on your creditworthiness.Contact the servicer if you have questions about your application after submitting it. News recommends the following five top performers based on how they can address certain borrowers’ needs and their overall performance compared with other lenders.
In several instances, your monthly payment could be lower (sometimes significantly lower), but you will pay thousands of dollars more in interest. You’ll need to have information about each of your loans, including the loan code, loan account number and estimated payoff amount.You may be able to save money and lower your monthly payment by refinancing your student loans with an interest rate reduction.However, when you refinance federal loans, they’ll become private loans and will no longer be eligible for federal programs, including income-driven repayment plans and forgiveness programs.Dealing with long-term debt can be difficult, but having a strategy and tools can help.Consolidating or refinancing student loans are two popular options that could help you manage your payments, save money and open up additional options for loan forgiveness and repayment.To facilitate the consolidation, a lender will pay off your current loans and issue you a new loan for the total amount you owe.This type of consolidation won’t save you money on interest, but it can make it easier to manage your loans with a single payment each month.Here are some additional requirements: If you just graduated with three federal Direct Subsidized loans, one for ,000, one for ,000 and one for ,000, and you get a job earning ,000 a year in San Francisco, you’ll pay off the loans in 10 years and pay a total of ,409 once you start making payments under the Standard Repayment Plan.Kantrowitz encourages borrowers to compare both the monthly payment and the total payments over the life of the loan when considering consolidating or refinancing loans.By contrast, federal loan consolidation won’t change how much interest accrues, and eligibility doesn’t depend on your creditworthiness. You can consolidate your federal student loans and refinance your private loans, or consolidate some of your federal loans and refinance others.Or, you may research your options and determine you shouldn’t use either.