Simplest Way to Consolidate and Refinance your Student Loan

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Every student goes through the same phase of education loan debt after their graduation, and trust me if you think that you’re the only one then you’re not.

Most of the times students find it difficult to pay off their student loan debt and at that point comes in the concept of Debt Consolidation and Debt Refinancing.

But before we begin with your debt settlement plan, you first need to understand the basic concept and the difference between the two.

Read more: Is Student Loan Refinancing Risky? Here is What You Should Know

What is Student Loan Consolidation?

It’s common to have a mix of Federal and Private Loan after school. You can easily have multiple loan services, due dates and minimum payments.

Keeping a track of what you owe every month and when it’s due can be very confusing.

In such cases, deciding to consolidate student loans could help you manage your debt more efficiently.

Difference between Consolidation and Refinancing?

Although some people use these terms “consolidation” and “refinancing” interchangeably, they’re very different.

So, it’s important to first understand the difference between both.

Consolidation Refinancing

What it Does?

Consolidation combines multiple federal loans into one federal loan

Refinancing combines private and federal loans into one private loan

Will it Reduce your Interest Rate?

No, it won’t

Yes, it will

Will you Save Money?

No, Consolidation does not provide you the facility of reducing your interest rate so, you can’t save money

Yes, you can definitely save money with Refinancing

Which Loans can be Combined?

Only Federal Loans

Both Private and Federal Loans

Will you have to pay just one monthly bill?

Yes

Yes

Before addressing various questions related to this topic, check out a few options available for Consolidating your Student Loan.

Here we are providing you with the best banks offering the best rates.

LENDER APR AVailable For Next STEPS
APR:

Fixed: 3.89% - 7.89%
Variable: 2.57% - 6.97%

Available For:

Graduate and Under- Graduate

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APR:

Fixed:3.89% - 7.97%
Variable: 2.47% - 6.99%

Available For:

Graduate and Under- Graduate

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APR:

Fixed:3.67% - 7.25%
Variable: 2.5% - 7.24%

Available For:

Graduate and Under- Graduate

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APR:

Fixed:5.13% - 8.97%
Variable: 2.57% - 8.44%

Available For:

Graduate and Under- Graduate

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APR:

Fixed:3.9% - 9.99%
Variable: 3.01% - 9.75%

Available For:

Graduate and Under- Graduate

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APR:

Fixed:3.5% - 7.02%
Variable: 3.23% - 6.65%

Available For:

Graduate and Under- Graduate

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APR:

Fixed:5.74% - 8.49%
Variable: 4.99% - 7.99%

Available For:

Graduate and Under- Graduate

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Even after understanding the basic concept of Consolidation and Refinancing, there still are various unanswered questions.

When to opt for Loan Consolidation?

Before opting for Loan consolidation, you need to understand whether this solution is even required in your case or not. There might be a few cases of debt where consolidation might not work.

You will be needing the help of Student Loan Consolidation when:

  • You want a fixed interest rate

If you have any previous federal loans, then your interest rates might be variable.

This means that the interest rate will change according to the market condition, which sometimes might prove heavy on your pocket.

So, if you want the stability of a fixed loan rate with steady payments, then you should go ahead with getting your student loan consolidated.

  • You want to lower your monthly payment

Once students graduate, they are automatically enrolled in a 10-year standard repayment plan. So, if you can’t afford this payment, then consolidation will help you.

In this case, you will have to take a Direct Consolidation Loan where you can extend your repayment term for up to 30 years, which will help you in reducing your payment in the initial stage of your career.

Before Consolidating or Refinancing your Federal and Personal Student Loan, Please Note:

If you are refinancing and consolidating your loans through a private lender and not through the Federal government then this means that you are taking a private loan;

Hence, you will no longer be eligible for federal repayment options that might help you out during tough times, such as Public Service Loan Forgiveness or income-driven Repayment Plan.

Most of the private lenders don’t offer these same plans, though some banks might grant you forbearance (or temporarily pause your payments) during a time of financial hardship.

So before turning any federal student loans into a private student loan through refinancing, make sure that you’re confident about your ability to keep up with the repayment, as you’ll lose all access to the federal protections.

Basics of Federal Student Loan Consolidation.

  • Federal Loan Consolidation doesn’t have a credit requirement.
  • Federal Loan Consolidation offers the benefit of paying a single loan bill with potentially lower payments.
  • Federal Loan Consolidation doesn’t help in reducing your interest rate.

And if any other question of yours is unanswered then please leave your questions in the comment section.

When to consider Federal Student Loan Consolidation?

What all are the student loans that can be Consolidated?

How to Consolidate Federal Student Loans?

Are you eligible for a Consolidation Loan?

Do you have to consolidate all of your loans?

How much loan amount can you consolidate?

Which all are the loans that are NOT eligible for Consolidation?

Can you consolidate the loans that you have previously consolidated?

Can you add a loan to your consolidation loan once it has been approved?

Can you change your mind and reverse loan consolidation after it is complete?

How long will it take to get your consolidation loan?

Do you need a co-signer?

How is your interest rate determined?

What is the difference between a Fixed Interest Rate and Variable Interest Rate?

Is there any Auto Debit Reward?

Can you consolidate your loan while you are still in school?

Is there any penalty for paying off your loan early?

When to consider Federal Student Loan Consolidation?

You only need to go with the option of Federal Student Loan Consolidation:

  • If you want a single federal loan payment.
  • If you’re in student loan default and want to improve your condition.
  • If you need to consolidate to become eligible for income-driven repayment or public service loan forgiveness. (This last point only applies if you have a Federal Family Education, Perkins or parent PLUS loans).

What all are the student loans that can be Consolidated?

According to the U.S. Department of Education, most of the federal student loans can be consolidated, including:

  • Parent Loans for Undergraduate Students
  • Auxiliary Loans to Assist Students
  • Federal Insured Student Loans
  • Guaranteed Student Loans
  • Supplemental Loans for Students
  • Nursing Student Loans and Nurse Faculty Loans
  • PLUS loans from the Federal Family Education Loan (FFEL) Program
  • Direct PLUS Loans
  • Subsidized and Unsubsidized Federal Stafford Loans
  • Direct Subsidized and Unsubsidized Loans
  • Federal Perkins Loans
  • Health Education Assistance Loans
  • Health Professions Student Loans
  • Loans for Disadvantaged Students
  • National Direct Student Loans
  • National Defence Student Loans

How to Consolidate Federal Student Loans?

Please Follow the Step by Step process mentioned below:

  • You need to Log in to studentloans.gov and click on “Complete Consolidation Loan Application and Promissory Note”.
  • You will have to finish the application in one session, so I advise you to gather all the documents required.
  • All the documents that are required will be available under the section “What do I need?”.
  • Then the next step is to enter which loans you do and do not want to consolidate.
  • Then choose a repayment plan, via which you can either get a repayment timeline based on your loan balance or you can pick the one that ties payments to income.
  • If you choose an income-driven plan, then you will fill out an Income-Driven Repayment Plan Request, simply click on next.
  • Please make sure that you read the terms before submitting the form online.
  • Then continue making student loan payments as usual until you get a confirmation that your Loan Consolidation process is completed.

Are you eligible for a Consolidation Loan?

In order to qualify to get a Consolidation loan:

  • You must be 18 years or older when you apply.
  • You must be a US citizen or permanent resident with a US-based address.
  • You must not have more than $150,000 in aggregate student loan debt.
  • You must have a verifiable income that should support your debts and show that you’re capable of repaying your loan in the future.
  • You must be the primary borrower of the loans that you want to consolidate.

Do you have to consolidate all of your loans?

It is not necessary, you can choose to consolidate one, some or all of your loans which are eligible for consolidation according to the loan terms.

How much loan amount can you consolidate?

The minimum consolidation amount is $5,000 and the maximum limits may apply according to your bank’s terms.

Which all are the loans that are NOT eligible for Consolidation?

Mentioned below are the loans that are Not eligible for consolidation:

  • The loans that were not used for qualified education expenses.
  • The loans that were taken out while enrolled less than half-time.
  • The loans that originated or were serviced outside of the US.
  • The loan for K-12 education.
  • Post-graduate loans like residency loans, bar exam loans etc.

Can you consolidate the loans that you have previously consolidated?

Yes, if the loans that you consolidated previously were used solely to pay off qualified higher education expenses and they meet the minimum loan amount of $5,000 then you can include these loans for consolidation.

Can you add a loan to your consolidation loan once it has been approved?

No, once you have received the approval disclosure and accepted the loan term, then no additional loans can be added to it.
But still, if you need to add a loan, then you can cancel your existing application and re-apply with the additional loans.

Can you change your mind and reverse loan consolidation after it is complete?

Yes, you will be having 30 days from approval disclosure to accept the loan terms and a three-day “right-to-cancel” period, following the Final Disclosure, before the consolidation is complete.

How long will it take to get your consolidation loan?

It can take around 30 to 45 days to process your loan once you have applied for it.

Firstly, the credit review process is completed where you and your co-signer (If Applicable) will sign the loan document and you will need to obtain the payoff statements from your current loan service provider.

Once these steps are completed, you will be notified when your loans are consolidated and you will be provided with the new minimum monthly payment amount and due date.

You need to continue making your monthly payments until you get notified that your consolidation loan has been disbursed.

Do you need a co-signer?

If you apply with a creditworthy co-signer then there are chances that you receive a lower interest rate.

It is always advisable to co-sign with a person with good credit history.

How is your interest rate determined?

Your interest rate will be based upon:

  • Your credit history,
  • Your choice of Fixed or Variable Interest Rate, and
  • Your co-signer’s credit history (only if a co-signer is required in your case)

What is the difference between a Fixed Interest Rate and Variable Interest Rate?

A Variable Interest Rate may change quarterly during the life of the loan, depends on the change in market condition. This may lead to an increase in monthly payment or an increase in the total number of payments.

A Fixed Interest Rate is set at the time of the application and does not change during the term of the loan.

Is there any Auto Debit Reward?

Yes, you can get Interest Rate DEDUCTION when you enroll yourself in automatic payments during your repayment term.

But you need to check with the bank whether they provide this facility or not as only a few banks have this facility.

Can you consolidate your loan while you are still in school?

Yes, you can get your loan consolidated while you are still in school, during your grace period or after your grace period expires.

But if you choose to consolidate your loan while you are still in school or during your grace period, then you will lose any remaining grace period on the loans that you are consolidating.

In this case, you will begin making payments approximately 30-45 days after your loan is disbursed.

Is there any penalty for paying off your loan early?

No, there is no pre-payment penalty.

Making these additional payments can help you in lowering the total cost your loan.

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