Student loan consolidation merges multiple loans into a single loan to potentially lower monthly payments or save money. Federal student loans can be consolidated through the Department of Education into a single federal loan, while private or federal loans can be combined into a new private loan through refinancing.
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Key Differences:
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• Federal consolidation doesn't reduce interest rates but extends loan terms for lower monthly payments.
• Refinancing, available for private and federal loans, can lower rates but turns federal loans into private ones, losing federal benefits like income-driven repayment or forgiveness programs
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Consolidation vs. Refinancing:
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• Consolidation combines federal loans into one; refinancing merges private and/or federal loans into one private loan.
• Consolidation doesn't lower rates or save money, but refinancing can.
• Only consolidation retains federal loan protections and forgiveness options.
• Both result in a single monthly bill.
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Consolidating private student loans through refinancing can be beneficial if you secure a lower interest rate. Eligibility often requires a credit score in the high 600s or above, with rates varying from around 5% to over 9%. Refinancing is advisable for those with good credit, steady income, and existing private loans. Federal loan holders might delay refinancing until after the current payment pause and potential loan cancellations.
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How to Refinance Private Student Loans:
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• Research lenders for suitable refinance options.
• Obtain multiple rate offers without impacting your credit score.
• Select a lender and loan terms based on the best interest rate and repayment terms.
• Complete the formal application process.
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Federal Student Loan Consolidation:
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This combines multiple loans into a single federal loan without credit requirements but doesn't offer lower rates. It's suitable for those needing to consolidate for income-driven repayment or loan forgiveness eligibility, wanting a single payment without drastically lowering it, or getting out of loan default.
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How to Consolidate Federal Loans:

• Use studentaid.gov for the direct consolidation loan application.
• Select loans to consolidate and choose a repayment plan.
• Agree to the terms and continue current loan payments until consolidation is confirmed.