Consolidating student loans and private loans
On the other hand, if you are taking advantage of benefits of your Federal student loan, such as income-based repayment plans or forgiveness plans, you should not consolidate your Federal student loans into your private student loans.
The key here is to look at your own repayment situation and see if a lower interest rate is worthwhile.
According to Student Aid.gov, the following types of student loans are eligible for consolidation: • Direct Subsidized Loans • Direct Unsubsidized Loans • Subsidized Federal Stafford Loans • Unsubsidized Federal Stafford Loans • Direct PLUS Loans • PLUS Loans from the FFEL Program • Supplemental Loans for Students (SLS) • Federal Perkins Loans • Federal Nursing Loans • Health Education Assistance Loans • Some previous consolidation loans When you consolidate your Federal student loans, you will get a new loan through the Department of Education, which you can then setup a repayment plan that works for you.
The interest rate will also be fixed at the current Federal Direct loan rate.
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.