Consolidate student loans what does it mean

An extended repayment term means saving money on your monthly payments, but it also means paying more in interest in the long run. Make sure you understand all of the fine print before you refinance federal student loans. Federal loans often allow a host of deferment and forbearance options in case you lose your job or experience other financial hardships.

They also offer income-driven repayment plans and loan forgiveness. Consolidating with a private refinanced loan could mean that you'll forfeit those protections and opportunities under the terms of the new loan. If you're thinking about consolidating, take the time to understand:.

Use a consolidation calculator to find out what your payments would be by consolidating with the federal government or by refinancing with a private company. Pros of student loan consolidation. Pro: It will be easier to manage your debt. Loan amount. Term length. Pro: You could get a lower monthly payment. Pro: You can pick your federal loan servicer. Cons of student loan consolidation. Through this website you can access information about your federal student loans. A private consolidation loan or refinancing a student loan allows you to combine all or some of your student loans, private and federal student loans, into one larger private consolidation loan through a private lender or bank.

If you are approved to refinance or consolidate your existing private student loans into a new private loan, the terms of the consolidation loan may allow you to lower your interest rate, lower your monthly payment by extending the length of the repayment term, or release a co-signer from your student loan.

Consolidating federal student loans into a private consolidation loan has risks. You should weigh the benefits and risks of refinancing your federal student loan into a private student loan, because changing from a federal to a private student loan eliminates some of these protections and benefits. If you have a secure job, emergency savings, strong credit, and are unlikely to benefit from forgiveness options, then refinancing federal student loans into a private student loan may be a choice worth considering.

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Skip to main content. Student loans. Federal Direct Consolidation Loan If you have federal student loans, you have the option to combine all or some of your federal student loans into a federal Direct Loan Consolidation. Private consolidation loan A private consolidation loan or refinancing a student loan allows you to combine all or some of your student loans, private and federal student loans, into one larger private consolidation loan through a private lender or bank.

Look closely if you are switching from a fixed rate loan to a variable rate loan. Loan forgiveness programs allow a borrower to cancel their obligation to repay all or a portion of the remaining principal and interest owed on a student loan.

With loan forgiveness , borrowers are not required to pay income tax on loan amounts that are canceled or forgiven based on qualifying employment. Department of Education at participating schools. Before getting a direct consolidation loan, it is important to consider any benefits associated with the original loans, such as interest rate discounts and rebates.

Once the loans are rolled into a new direct consolidated loan, borrowers typically lose those benefits. Additionally, if the new loan increases the repayment period, the borrower may wind up paying more interest.

Federal student loan payments are on hold and interest is waived through Sept. The consolidation of federal educational loans is free and the process is fairly simple.

Private companies may reach out to borrowers to offer to help with this process for a fee, but they are not affiliated with the Department of Education or its federal loan servicers. After completing an application, the borrower confirms the loans they are seeking to consolidate, then agrees to repay the new direct consolidation loan. Once this process is complete, the borrower will then have a single monthly payment on the new loan, instead of multiple monthly payments on several loans.

The advantages of a direct consolidation loan are fairly straightforward. You may be eligible for lower monthly payments because the repayment term is extended up to 30 years. You can also get a lower interest rate because direct consolidation loans have a fixed interest rate. Since July 1, , all federal student loans have had a fixed interest rate.

However, if any of your loans were disbursed before this date, it's possible you could have a variable interest rate. In addition, you only have to make one payment per month. This can make it easier to keep track of your student loan balance. Borrowers may also get access to different repayment options. These types of repayment plans are available for direct consolidation loans:.

You must make three consecutive monthly payments on the defaulted loan first or agree to repay your new direct consolidation loan through one of several different options of repayment plans. You don't have to wrap everything into the consolidation loan. Applicants using the studentloans. The form on the website will automatically import all the federal loans under the applicant's name.

However, borrowers should keep in mind that their interest rate may also increase; because consolidation extends the repayment period—perhaps to 30 years—your monthly payment is lowered but this also results in you paying more interest over the life of your loan. You don't get a grace period with a direct consolidation loan; the repayment period starts immediately upon consolidation, and the first payment will be due in around 60 days.

In addition, if your loans were in default, you won't get an automatic credit boost if you consolidate your loans. Prior loan payments before you consolidated will not count towards loan forgiveness requirements.

And finally, there are some benefits you may lose by consolidating your loans. There are several different reasons why you might choose direct loan consolidation. If tracking all of your student loan payments is difficult, consolidating all of your federal loans into a single monthly payment may be beneficial for you. Not all federal loans are eligible for income-driven repayment plans. By opting for direct loan consolidation, you will be able to access income-driven repayment plans.

You may also opt for direct loan consolidation if you want to be eligible for certain loan forgiveness programs. With an income-driven repayment plan, you can qualify for forgiveness of the remaining balance at the end of the repayment term. Additionally, direct loan consolidation may be the right choice if you want a fixed interest rate. If you have federal loans that were disbursed before July 1, , one or more of your loans may have a variable interest rate.