Understanding Student Loans
Loan consolidation and refinancing are two options to simplify student loan repayment. Consolidation combines multiple loans into one, while refinancing replaces one or more loans with a new one that often has a lower interest rate. Consolidation is available for federal loans through the government, while refinancing is available through private lenders.
Consolidation can simplify payments by combining multiple loans into one monthly payment. In some cases, it can also lower your monthly payment by extending the repayment period. However, it typically won't lower your interest rate, and may even result in a higher overall cost due to the longer repayment period.
Refinancing, on the other hand, can potentially lower your interest rate and overall cost of borrowing. This option is typically only available for borrowers with good credit and income, and may require a cosigner. If you're considering refinancing, be sure to shop around for the best rates and terms.
It's important to note that both consolidation and refinancing may result in the loss of certain benefits, such as loan forgiveness programs, income-driven repayment plans, and deferment or forbearance options. Make sure you weigh the pros and cons before making a decision.
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