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Posted by / 27-Aug-2019 05:55

Consolidating federal student loans information

This guide provides an in-depth explanation of the differences between federal loan consolidation and private loan refinancing, the pros and cons of each and insight into which options are best for different situations. News compared private lenders to come up with recommendations for different kinds of borrowers.

There are a variety of private lenders that offer student loan refinancing, each with different potential interest rates, loan terms and features. When you consolidate your student loans, you essentially combine multiple loans into one.

To facilitate the consolidation, a lender will pay off your current loans and issue you a new loan for the total amount you owe.

With ICR, IBR, PAYE and REPAYE, your monthly payment will be 10 to 20 percent of your annual discretionary income, the difference between your actual income and 100 to 150 percent of the federal poverty guideline for your family size and state.

By contrast, federal loan consolidation won’t change how much interest accrues, and eligibility doesn’t depend on your creditworthiness. You can consolidate your federal student loans and refinance your private loans, or consolidate some of your federal loans and refinance others.

Or, you may research your options and determine you shouldn’t use either.

If the servicer delays processing, you won’t have to make your first payment until the end of your loan’s grace period. You can submit it online or mail the completed paper application to one of the servicers that manages Direct Consolidation Loans.

The servicer you choose for your consolidated loan will inform you when it pays off the existing loans, at which point you can stop making those payments and start repaying your Direct Consolidation Loan.

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When you refinance your loan, you can choose a five-, seven-, 10-, 15- or 20-year term.