Consolidation vs. Refinancing
Loan consolidation is combining multiple loans into one loan, with one monthly payment. Instead of having a lot of different student loans with separate monthly payments. Consolidation periodically, means a better interest rate or cheaper monthly payments than the original loan.
Refinancing is the replacement of an existing debt obligation with another debt obligation under different terms. Ideally with a lower interest rate, monthly payment, and shorter loan term. Which ultimately saves you money.
To obtain a federal loan, submit the Federal Application for Federal Student Aid, or FAFSA. You don’t need to complete the FAFSA to get a private loan, but you should do it anyway. The application is also the means to accessing free economic aid like grants, scholarships and work-study.
Refinancing means changing one or more federal and/or state and/or private student loans with a single new loan from a private lender.
Private student loans can help to pay for college, but they originate with a bank or credit union lender rather than the federal government.
Obviously, it’s better to borrow from the federal government, then once you’ve depleted federal options, you can close in the cracks by exploring your options with a private lender. You also want to keep mind, private loans don’t offer benefits like income-driven repayment options and forgiveness opportunities.
If you are considering refinancing, make sure you explore your options to make sure you’re getting the best possible rate.
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There are other options to pay for your education. Have you considered borrow the money from another origin, such as an unsecured personal loan and use the funds to pay off your student debt.
A personal loan or a LOC would be great, if you win by saving more than the modeled options. It’s typically easier to get approved for a personal loan than refinancing student loans.
Another option to know about is using special student loan forgiveness programs for residents of their state.
A Full list of Student Loan Forgiveness by STATE
Many of the programs are in public service fields, such as health care, teaching, dentistry, legal, and more. If you aren’t employed in a public service field and are looking for ways to save on your student loans, check out Credible to compare rates from different LENDERS in 5 minutes