Student Loan Consolidation: Why Consolidate or Refinance?
Student loan consolidation, or refinancing, pays off your existing loans with a new student loan. A consolidation loan simplifies and streamlines your finances by replacing multiple loan payments with a single loan payment.
There are two types of consolidation loans: federal and private. A federal consolidation loan can refinance federal student loans such as the Federal Stafford loan, Federal PLUS loan and Federal Perkins loan. A private consolidation loan can refinance non-federal student loans from private financial institutions, such as banks and credit unions, as well as non-federal student loans financed by states or colleges/universities.
- Cut monthly student loan payments
- Simplify repayment with a single loan instead of multiple loans
- Potentially qualify for a lower interest rate
- Total cost of loans could increase if the repayment period is extended
- Some benefits of subsidized federal loans (subsidized Federal Stafford and Federal Perkins loans) will be lost
- The remaining grace period on the existing loans will be lost if they are consolidated before the end of the grace period