If you’re burdened with student debt and worry about making payments on your federal loans during the coronavirus outbreak, it’s time to stop worrying! Whether federal, private, or both, consolidation or refinancing your student loans may help you lower your student debt, better manage payments, and aim towards other investment plans. Here, we have curated a complete guide on student loan refinance/ consolidation!
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Student Loan Refinance vs. Consolidation
Although the terms ‘consolidation and ‘refinancing’ are often used interchangeably, they are two distinct repayment choices.
|Student Loan Refinance||Student Loan Consolidation|
|Combines private and/or federal loans into one private loan||Combines multiples federal loans into one federal loan|
|They combine federal and private loans||They only combine federal loans|
|You are allowed to lower your interest rates||You are not allowed to lower your interest rates|
|You can save money||You can’t save money. Your payments may get lowered by extending the loan term but the interest will increase.|
|You are not allowed to access the federal loan protections, repayment options, and forgiveness programs.||You are allowed to access the federal loan protections, repayment options, and forgiveness programs.|
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How to Refinance Student Loans
In a nutshell, you should decide whether refinancing is right for you, find lenders, compare them and start applying.
- Decide if refinancing is right for you: You can decide if you really want to refinance your federal student loans or private loans. It makes sense only when it saves money but everyone should not go for it. Refinancing federal student loans will make you unsuitable for income-driven repayment and student loan relief due to the coronavirus pandemic, whereas refinancing private student loans has few drawbacks. It won’t make you qualify for federal programs.
- Research best lenders: Most lenders appear to be relatively similar at first sight. However, depending on your situation, you should look for specific aspects.
- Get the estimation on rates: Once you’ve found a few lenders who suit your criteria, acquire rate quotes from each of them. Finally, the best refinance lender for you is the one with the lowest interest rate.
- Select a lender and loan terms: Select the loan terms such as if you want them to be fixed rates or variable rates. It is suggested to go for fixed rates rather than variable rates as they are comparatively low and change monthly and quarterly.
- Attach documents and apply: To move forward with a lender, you will need some documents to complete the application process. Sign the final paperwork to accept the loan. But before that, the following are the supporting documents you might need to submit.
- Government-issued ID
- Residence proof
- Loan or payoff verification statements
- Employment proof
- Proof of graduation
How to Consolidate Student Loans
The best way to consolidate student Loans is to log in to studentloans.gov and tap on “Complete Consolidation Loan Application and Promissory Note”. Gather all the documents needed to finish the application process. Candidates are eligible for student loan consolidation after they graduate or leave school.
- Enter student loans you want or do not want to consolidate
- Decide on a payback plan. You can choose a repayment schedule that is based on your loan balance or one that is based on your income. You’ll need to fill out an Income-Driven Repayment Plan Request form if you choose an income-driven plan.
- Before submitting the form online, read the terms. Continue to make regular payments on your student loans until your servicer confirms that consolidation is complete.
Student Loan Consolidation Calculator
Below are is the step by step guide on how to use the student loan consolidation calculator:
- Enter all your details about your federal and private student loan
- Check your loan balances and weighted average interest rates
- Choose the option to lower your interest rates
- Remember that refinancing with a private lender can help you save money on both your federal and private student loans, whereas the other choices will only affect your federal loans. It’s possible that a mix of two or maybe all three approaches will work best for you.
Best Student Loan Refinance and Consolidation Companies
Below are the best student loan Consolidation companies:
- Earnest Student Loan Refinance
- PenFed Student Loan Refinance
- SoFi Student Loan Refinance
- Laurel Road Student Loan Refinance
- Education Loan Finance Student Loan Refinance
- LendKey Student Loan Refinance
Also Read: Documents Required for Education Loan
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