Consolidating parent plus loans to student
However, when you refinance federal loans, they’ll become private loans and will no longer be eligible for federal programs, including income-driven repayment plans and forgiveness programs.While both options involve combining multiple loans into one, private loan consolidation is generally referred to as refinancing. Student loan consolidation 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. Department of Education, a federal Direct Consolidation Loan can help you streamline your federal loan payments.A federal Direct Consolidation Loan has a fixed interest rate based on the average interest of your federal loans rounded up to the nearest one-eighth of 1 percent.
If you’re using the paper application, you’ll mail the application to the servicer of your choice. You could also choose the Income-Based Repayment Plan, the Pay As You Earn Repayment Plan or Revised Pay As You Earn Repayment Plan as long as your consolidated loan doesn’t include a parent PLUS Loan.
In several instances, your monthly payment could be lower (sometimes significantly lower), but you will pay thousands of dollars more in interest. You’ll need to have information about each of your loans, including the loan code, loan account number and estimated payoff amount.
Some debt relief companies offer to consolidate your loans for a fee, but this isn’t necessary. You’ll have to submit your name, address, Social Security number, driver’s license state and number, contact information and two references who’ve known you for at least three years. This information should be on your monthly billing statement.
This is because you’ll finance the new student loan based on a variety of factors, including your income, debts, employment and credit.
By contrast, federal loan consolidation won’t change how much interest accrues, and eligibility doesn’t depend on your creditworthiness. You can consolidate your federal student loans and refinance your private loans, or consolidate some of your federal loans and refinance others.