Consolidating private student loans federal student loans
You do this by taking out a new loan for the amount of the balances of the existing loans, use the newly borrowed money to repay all the older loans, and then focus on repaying your one new loan.
Private student loan consolidation, or refinancing, means replacing multiple student loans — private, federal or a combination of the two — with a single, new, private loan.[Back to top] Applying for consolidation takes most borrowers less than 30 minutes, according to the Federal Student Aid website.As part of the process, you’ll need to provide details about your existing federal student loans, and choose a federal loan servicer and repayment plan for your new consolidation loan.You’re generally eligible once you graduate, leave school or drop below half-time enrollment.Consolidating your federal loans through the Department of Education is free; steer clear of companies that charge fees to consolidate them for you.Each of these loans likely comes with different terms, payments, servicers, and statements.
The sheer amount of information and numbers can be difficult to track.
When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%.
So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.
If you’re a parent with PLUS loans and you also have other federal student loans, you may want to consolidate your PLUS loans in a separate consolidation loan; consolidating them with your other federal loans will make that consolidation loan ineligible for all income-driven repayment plans except income-contingent repayment.
If you have Perkins loans, think twice before consolidating them; you’ll lose access to Perkins loan cancellation if you do.
You can opt out, but you’ll have to submit a copy of your most recent federal tax return directly to your loan servicer after you finish the consolidation application.