Last Updated on July 29, 2023
If you’re a student and you’re looking for the best loan consolidation for student loans, you’ve come to the right place. Let’s take a look at how student loans work and what your options are.
Student loans are more complicated than most people realize. They don’t just help you pay for college—they can also be used to help pay for grad school, vocational training, or certification programs. These loans can be taken out by anyone who wants to attend school, which means that they are often taken out by parents as well as students.
The good news is that there are many different types of student loans available today, and all of them have different benefits and drawbacks. Some loans have low interest rates while others have high ones; some require no down payment while others require a large one; some offer repayment terms that are long but fixed while others offer them with shorter periods but adjustable rates that change over time according to market conditions.
Best Loan Consolidation For Student Loans
Whether you have federal, private or both types of student loans, consolidating or refinancing them might help you reduce your student debt, better manage payments and work toward other financial goals. Too much student debt can hamper your ability to save for retirement or qualify for other loans, such as a mortgage. This guide explains the differences between refinancing private student loans and consolidating federal student loans, the pros and cons of each, and the best options for different situations. Keep in mind that federal student loan payments are paused through at least Aug. 31, as this may influence your decision to refinance or consolidate.
Best Student Loan Refinance Companies in 2022
No student loan refinance company is perfect for every borrower. These lenders are a good starting point for most people, but you should read reviews and research each company on your own.
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Our Student Loans Refinancing Methodology
U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. For student loan refinance companies, we consider each company’s customer service ratings, refinancing fixed APR, refinancing variable APR, refinancing minimum and maximum loan terms, refinancing maximum loan amounts, refinancing minimum FICO score, product availability, and online features.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
What Is Happening With Student Loan Refinancing Interest Rates in May?
Several top-scoring student loan refinance companies in the U.S. News database recently increased their annual percentage rates.
Among student loan refinance companies that earned a U.S. News score of 4.5 stars or more, five out of six increased their minimum fixed APR since March. Three out of six lenders increased the maximum APR for their fixed and variable-rate refinancing products.
At the same time, one lender decreased the maximum APR for its fixed and variable-rate refinancing products.
Make sure you shop around to get the best rate possible. Good credit also can help you secure a more competitive rate, so make sure you pay your bills on time and keep your credit card balances low.
What Does It Mean to Refinance a Student Loan?
When you refinance student loans, a private lender repays your existing loan, or loans, and issues a new loan based in part on your creditworthiness that can help you get lower rates. If you can qualify for a better interest rate, you could save money and get lower monthly payments. The federal government does not offer refinancing for federal student loans, and refinancing these loans with a private lender will leave you ineligible for federal benefits you may have had.
And What Does it Mean to Consolidate Student Loans?
Consolidating student loans means combining multiple loans into one monthly payment. You can consolidate federal loans through the U.S. Department of Education. With a Direct Consolidation Loan, you will have one monthly payment with a fixed interest rate that is the weighted average of your previous rates, rounded up to the closest one-eighth of a point.
What Are the Benefits and Drawbacks of Student Loan Refinancing?
Refinancing student loans can save you money, but it can be difficult to decide whether you should refinance. Note that these pros and cons apply to refinancing student loans and may not be relevant to borrowers considering consolidating their federal loans.
Pros
- Could get a lower interest rate. If your credit history has improved since you took out your loans, you may be well-positioned to get a lower rate if you refinance.
- Fewer payments per month. Refinancing makes it possible to combine multiple loans into one, so you’ll have fewer payments to worry about each month.
- Co-signer could be removed. Refinancing is one way to remove your co-signer if you want your student debt to be your responsibility alone.
Cons
- Won’t be able to use federal loan forgiveness programs. If you are hoping to get forgiveness on a federal loan, you’ll no longer be eligible for any relevant federal loan forgiveness programs if you refinance that loan.
- Lose access to federal income-driven repayment programs. If you are using a federal income-driven repayment plan for a federal loan, you’ll lose access to it if you refinance that loan.
How Can You Refinance or Consolidate Student Loans?
Student Loan Refinance
Many factors, including your income, debt, employment and credit can determine whether you are able to refinance a private student loan. You’ll want to prequalify with more than one lender so you can compare offers before submitting an official application.
You can refinance federal student loans through private lenders, but it’s not always a good idea. That’s because you can lose access to benefits including federal income-based repayment plans and student loan forgiveness programs.
Federal Student Loan Consolidation
Eligible borrowers can apply for a Direct Consolidation Loan online or by mail. Consolidating your federal college loans requires no hard credit check and could offer you access to more flexible repayment options and Public Service Loan Forgiveness.
