Consolidation vs Refinancing Your Student Loans
Which Is Better For You?
Consolidation and refinancing your federal student loans can be a fantastic way to mitigate the stress of paying multiple student loans at high interest rates. It may be in your best interest to do one or both – so get familiar with each to determine what avenue you should go with.
What is Consolidation?
Essentially, consolidation is combining multiple loans into one, singular loan. The really nice thing about this option – is one does not have to worry about having to pay multiple different student-loan payments. In easier words – One Loan vs Multiple. The Department of Education pays the borrowers loans off and then the debtor just pays the Department of Education back with one payment. Easy, breezy! The interest rates are assessed by taking the average of all the singular loans’ interest rates, so one should not see much of a change there.
Consolidation is distributed to mainly Federal Student Loans, however one could potentially combine multiple private loans into one by one loan.
What is Refinancing?
A popular reason people refinance many different types of loans is to get a lower interest rate to reduce the overall sum of interest one must pay for the life of the loan. Refinancing is replacing one or multiple loans with a new *and ideally* better one.
Refinancing & Consolidating with Private Lenders:
Refinancing is more of a luxury of having Federal Student Loans. A person can only consolidate private loans by refinancing their debt. Consolidation is really a benefit of having Federal Student Loans. Private Lenders might be willing to compete for a barrower’s loans – but credit then would become a factor. A wise action to take for private student loans would be to look around, gage one’s options, and see who promotes the lowest interest rates.
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