Refinancing, on the other hand, is done by private lenders. We’ll get into the details below, but the primary reason to consolidate your federal student loans is to qualify for beneficial income-driven repayment plans you wouldn’t otherwise be eligible for.
And the major downside is simply that consolidating won’t get you a lower interest rate, which is often a big point of confusion.
Lenders often add to the confusion by using the term consolidation when they’re actually talking about refinancing.
So before we dive into the specifics of each option, let’s first clear up what they are.
The government offers a number of income-driven repayment plans for federal student loans, and these plans are a real bargain for three main reasons: The catch is that only Direct federal student loans are eligible for some of these repayment plans.So you should be confident that you won’t default again in the near future before proceeding.Otherwise, you may want to consider alternative ways to get out of default, such as rehabilitation.To help ease the burden of student loan payments, many borrowers opt to consolidate or refinance their student loans.Both options have the potential to help you pay your student loans off quicker and pay less interest along the way, but there’s a lot of confusion around how they work, how they differ, and whether they’re right for you.By the end of this post you will understand both options and have a good idea whether one, or both, are right for you.The terms student loan consolidation and student loan refinancing are often used interchangeably, but they actually mean two very different things, and they have very different sets of pros and cons.To provide more complete comparisons, the site features products from our partners as well as institutions which are not advertising partners.While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products."Advertiser Disclosure Wednesday, February 1, 2017 The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.I haven’t met a single person with student loans who doesn’t want them gone as soon as possible.It’s hard enough to start a career or raise a family, and when a large chunk of your income is going toward student loans every month, it can feel downright impossible.