Published: December 2016

Finding private refinancing options for student loans

Whether you're ready to tackle your student loan debt or feeling overwhelmed by your repayment options, you have choices. A new tool by Consumer Affairs helps borrowers review the private student loan consolidation options available to them in today's market.

There are two types of student loan consolidation: federal and private. These processes are often confused — but they’re very different. Here’s how:

Federal student loan consolidation: To participate in some federal loan repayment programs, you must first consolidate your loans -- a process won’t lower your interest rate, but will help make your repayment easier every month by condensing the loans into one mothly payment. Doing so will also allow you to enroll in an income-based repayment plan in order to reduce your monthly payments. If you are thinking about consolidating your loans, be sure to find out what the consolidation origination fee will be. Most loans, including federal loans, will charge you a percentage of the loan balance as a fee for consolidation. You won’t have to pay this out of pocket, but it will be added to the loan balance.

Private student loan consolidation: If you qualify, a private lender will offer you a new, potentially lower interest rate. This process is also referred to as student loan refinancing. You can refinance both your federal and your private student loans or you can choose to just refinance your private student loans. There are some risks to refinancing your federal student loans using a private loan: Many of the hardship provisions offered by the federal government, including forbearance and deferment, student loan forgiveness programs and income-driven repayment plans, won't likely be offered by the private lender. You also have more flexibility to change your repayment plan with federal loans repayment plans.

If you are interested in refinancing your student loans with a private lender, Consumer Affairs's new tool can help you research the features, benefits, and consumer reviews attached to each before choosing a private refinancing company.

 

 

For More Information

For more information, please visit Consumer Affairs' website.

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Banking   ♦   Consumer Protection   ♦   Credit   ♦   Money Management   ♦