Consolidating federal school loan
If you want to consolidate your Federal and private student loans, you have to do it through a private lender.
The Federal Direct Consolidation Loan program does not consolidate private loans into Federal loans.
For example, a ,000 Federal student loan at 6.8% will cost a borrower ,619 to repay – ,619 in interest.
By contrast, if that student refinanced into a private student loan, they could significantly lower their interest rate and monthly payments.
That would also reduce the total repayment over the lifetime of the loan – saving the borrower thousands in interest over the same 10 years.
You are eligible for any “Direct” repayment plan – and you can setup a timeline from 10 to 30 years to pay back the loan.Going back to our original situation, you could still refinance your private student loans and consolidate your Federal student loans through the Direct Consolidation program.That way, you could take advantage of the lower rates potentially offered through a private student loan refinance, while still maintaining your benefits on your Federal student loans.A common scenario is a graduate who has Federal student loans but is just on the standard repayment plan.
If your Federal loans are at 6.8%, and you aren’t taking advantage of any of the special repayment plans, you may benefit by consolidating to a private student loan with a lower interest rate.
However, students tend to have much better credit histories after graduation.