In addition to raised interest payments, benefits that previously applied to the multiple student loans may be lost after consolidation.
Benefits such as interest rate discounts or principal rebates may be nullified for the “new” consolidated loan.
The line of thought is simple: one payment versus many payments each month is easier.
There are, however, key differences between these two types of student loan consolidation, and understanding these differences is important in deciding which is right for you.
On this page: The act of consolidating federal loans such as Direct Loans is an option offered by the government through the Federal Direct Consolidation Loan program in an effort to simplify payments.
This means if you refinance federal student loans they will become a new private student loan.
When you refinance student loans, you will receive a new variable or fixed interest rate and new repayment terms which may be longer or shorter than your current plan.
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Our editorial staff does not receive direction from advertisers on our website or our Partnerships Team.Not only will you wipe out any progress you’ve made toward your 120-payment mark, but you won’t be able to get any type of forgiveness with a privately consolidated loan.The same goes for Income-Driven Repayment programs; if you’re currently taking advantage of those programs with your federal loans, consolidating them with private loans will put you in a new repayment plan not dependent on your income.If you have federal and private student loans that you want to consolidate, you’ll need to follow a few simple steps: Read More: Should You Consolidate Your Student Loans?Before refinancing and consolidating federal student loans with a private lender, decide if you will likely need loan forgiveness or income-driven plans in the future.Applications for federal student loan consolidation can be made through the government website, Student