Consider refinancing if you have: Refinancing federal loans into a private loan means losing consumer protections specific to federal loans.
Those include the option to tie payments to income and get loans forgiven if you work for the government or a nonprofit.
It's important to understand and carefully consider all factors before consolidating.
Learn more about Direct Consolidation Loans on the Federal Student Aid site Apply now at Student Private student loans are NOT eligible for consolidation into a Direct Consolidation Loan.
Federal loans are lent or backed by the federal government, while private loans are typically lent or backed by banks, credit unions and other private lenders.
Federal loans are generally seen as the better option for most students because of their fixed interest rates, which are often lower than those available through private loans.
In the United States, there are two common types of student loans: federal and private.
But it’s only for federal loans, and it won’t cut your interest rate.
Consider federal consolidation if you: Your new fixed interest rate will be the weighted average of your previous rates, rounded up to the nearest one-eighth of 1%.
The application takes most borrowers less than 30 minutes, according to the Federal Student Aid website. You must complete the application in a single session, so gather the documents listed in the “What do I need? If you’re considering either federal or private student loan consolidation in order to get a drastically lower loan bill, look further into income-driven repayment instead.
The government offers plans that cut payments to 10% or 15% of “discretionary” income and offer forgiveness on the remaining balance after 20 or 25 years. If you have a large loan balance and a low income, income-driven repayment is probably your best option for the lowest monthly bill.