Whilst the whole idea to consolidate student loans is a noble one, you will find that you will be better off with refinancing after consolidation. For instance, you can consolidate the private student loan with the federal loan. The refinancing makes it possible to consolidate both the federal and private one.
Direct consolidation is a popular option whereby the government facilitates the combining of multiple loans into one large loan that is then paid for as one. The interest rate that you will be charged is weighted average of the other loans before you consolidated them into one. When you consolidate student loans, it might mean that you will have longer repayment period. However, you will still end up paying more in terms of the interest.
The federal loan consolidation will definitely not help you save in the long run but still to consolidate student loans via refinancing makes it an attractive option.
The main reason why you should opt for refinancing as opposed to sticking to just consolidation is bade on the fact that you will be able to consolidate both the federal and private loans as noted above.
The student loans are consolidated by a private lender as a way of refinancing you. They buy your loan at the current interest rate and then they revise the loan so that you can afford reduced interest rates. The idea to consolidate student loans is not a bad after all.
Is saving possible through this program?
Technically yes but this will be dependent on 2 important factors. The first one is the credit scores. If you have high credit scores, you will attract far much lower interest rates than you had imagined. The other important factor is your financial position. If you have healthy bank balance, the lender may be encouraged to give you better terms of the loans in terms of interest.
The comparison between the direct student loan consolidation and refinancing will give us a peek into what they are all about and why to consolidate student loans is not necessarily a bad idea.
In both of them, you will be eligible for the federal loans. Please note that we are not talking about private student loans or the federal student loans individually but direct and refinancing options.
Student loan refinancing is only possible with private loans but not the direct loan consolidation. Perhaps the only problem here is that with refinancing, you will have credit check as a prerequisite whilst under direct student loan consolidation, this is not necessary.
Student loan refinancing enables you to have lowered interest rate which is not feasible under the direct student loan consolidation. By getting to know these subtle differences, you will greatly benefit on account of to consolidate student loans through refinancing.
Student loan refinancing is your best bet so far because you will be able to save money, unlike in the direct student loan consolidation.
However, in both, you will have the benefit of having one loan to pay instead of multiple.