The decision to consolidate federal student loans or to refinance student loans is an important one. Since federal student loan consolidation and private student loan consolidation (also known as student loan refinance) are different, it is essential that you understand the differences before deciding which path to pursue.
Student Loan Consolidation • When you consolidate student loans, you can only consolidate your federal student loans. Consolidation of your federal student loans means that you combine more than one student loan into a single student loan, and the resulting interest rate is a weighted average of the student loans that were combined. With a single monthly payment, you are still afforded borrower protections such as flexible, income-driven student loan repayment plans and student loan forgiveness. More to come on those topics below.
Make Lemonade Tip If you have a Perkins loan and are considering consolidating your Perkins loan, you are better off keeping your Perkins loan outside of your student loan consolidation.
Refinance Student Loans • How To Apply For Federal Loan Consolidation In 5 Steps: Create a Federal Student Aid (FSA) ID through Federal Student Aid. • Log on to the National Student Loan Data System (NSLDS) to view your loan types as well as balances and interest rates. • Choose a repayment plan (income-based or basic) • Apply for direct consolidation • Pick a student loan servicer (FedLoan, Great Lakes, NelNet, or Navient) • Income-Based Repayment Option • Income-based repayment • Pay As You Earn • Revised Pay As You Earn • Income-Contingent Plan
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