Can You Consolidate Private and Federal Loans Together?
Students with both private and federal student loans wonder, can you consolidate private and federal loans together? Consolidating your loans gives you the convenience of a single monthly payment. Continue reading to learn if you can consolidate private and federal loans together!
Consolidating vs. refinancing
“Consolidating” and “refinancing” are often used interchangeably. However, there are some distinct differences between the meanings of the words. Both involve combining multiple loans into one single loan. The lender pays off your existing loans and gives you a new one in exchange. Let’s take a look at some of the key information about consolidating and refinancing loans.
Consolidating federal loans
Consolidation means combining multiple federal student loans. Department of Education loans are the only loans eligible for consolidation. Private loans cannot be exchanged for federal loans.
Why consolidate student loans?
If you have federal loans with multiple servicers, consolidating them can get you a single monthly payment. Consolidation can also lower the amount of your monthly payment by extending the repayment period. However, you’ll pay more in interest over the life of the loan.
Federal student loan consolidation also allows borrowers to combine multiple types of federal loans. This includes Direct, FFEL, PLUS, and Perkins loans. Consolidating FFEL or Perkins loans into a Direct Consolidation loan can make borrowers eligible to repay those loans on an income-driven repayment plan.
Refinancing private and federal loans
Refinancing is the consolidation of private or federal student loans. There are several banks and other financial entities that offer refinanced loans. The new lender you select will repay your loans in exchange for a single private loan. Federal loans can be combined with private loans by refinancing.
Why refinance student loans?
Refinancing private or federal student loans gives borrowers one monthly payment to one lender as opposed to several. Refinancing can also earn borrowers a lower interest rate. This will save you money over time.
Keep in mind, however, that refinancing federal loans will cause you to lose access to the benefits that come with them. You’ll lose access to income-driven repayment plans, Public Service Loan Forgiveness, and lenient deferment and forbearance options. If you plan on taking advantage of any federal student loan benefits, you can refinance only your private loans and keep your federal loans.
Refinance private and federal loans together
To sum it all up, you can combine private and federal student loans by refinancing them. Be sure to shop around and choose the lender that best fits your financial needs!