Consolidating federal school loan
One of the biggest myths when it comes to student loans is whether you can consolidate your Federal and private student loans. Well, since 2014, you can actually refinance and consolidate both your Federal and private student loans into a single loan with many private lenders.Think about it: you just graduated from college with about five different student loans. However, there are times when combining all of your loans (both Federal and private) makes sense, and there are times when it may not.A common scenario is a graduate who has Federal student loans but is just on the standard repayment plan.If your Federal loans are at 6.8%, and you aren’t taking advantage of any of the special repayment plans, you may benefit by consolidating to a private student loan with a lower interest rate.There are several ways to consolidate student debt, depending on the types of loans you have, your budget and your credit.When you’re talking about consolidation, student loans fall into two categories: For the purposes of consolidation, it doesn’t matter if you have subsidized or unsubsidized loans; both consolidate in the same way.By contrast, if you consolidate through a private (for profit) lender, you can include both your private and federal school loans.
That way, you could take advantage of the lower rates potentially offered through a private student loan refinance, while still maintaining your benefits on your Federal student loans.However, if you use federal loan consolidation options, those only apply to your government-backed debt.In other words, you can use federal consolidation and repayment plans for private student loans.On the other hand, if you are taking advantage of benefits of your Federal student loan, such as income-based repayment plans or forgiveness plans, you should not consolidate your Federal student loans into your private student loans.Your Federal benefits will disappear if you do this, and you’ll end up owing the full balance of your loan over time.