The difference between consolidating and refinancing How federal loan consolidation works When it makes sense to consolidate The downsides of consolidation How to consolidate your loans At Nerd Wallet, we use the word consolidation when we refer to combining your federal student loans into a single direct consolidation loan.
We’ll walk you through the consolidation process below.
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It’s important to note that when you refinance federal loans into a private loan, you’ll lose the protections specific to federal loans.
Those protections include: When you consolidate your federal loans, the government pays them off and replaces them with a direct consolidation loan.
You’ll get a new interest rate, which is the weighted average of all your prior loans’ rates rounded up to the nearest one-eighth of 1%.
Student loan consolidation is a relatively easy concept to understand: it is the process of taking multiple student loans and combining them into one.
Before consolidation, a student borrower might have multiple loans to pay back and many different loan balances to track.
After consolidating his or her loans, a student borrower will have just one monthly payment and just one loan balance to maintain.
The decision whether or not to consolidate can be tricky.
There are many different factors for students to consider in order to ensure that they’re making the right choices for their families and their wallets.
These are just a few of the issues to keep in mind when students, or former students, are contemplating consolidation.