Consolidating federal student loans interest rates
That’s what our Student Loan Smarts series is all about—helping you understand all of your options so you can make decisions that fit with your financial goals. Choosing to consolidate or refinance student loans.But what is consolidation, what is refinancing, and how do you know which one (if either) is right for you? Here’s a simple overview of the different types of student loan consolidation, how they differ from student loan refinancing, and how to evaluate whether you should do one of these things.
But the truth is, you have more control than you think.Now, in practice, holding on to multiple loans doesn’t really affect your daily life much.Your federal loan servicer (the company that takes your payments) will apply your payments automatically across all of your DIRECT loans for you (your Perkins loans, if you have any, will be due separately from the rest).Consolidating your federal loans into a DIRECT Consolidation from the federal government (as opposed to private refinancing, discussed here) does make things look nice and tidy in that you’ll now have a single loan with a weighted-average interest rate based on the rates of the individual loans it replaced, but this paperwork trick isn’t particularly meaningful in and of itself. In fact, a slight rounding change could give you a trivially higher rate (it’s rounded up to the nearest one-eighth of 1%).But there are definitely a few reasons to consider consolidating your loans, early as you can, in large part due to government’s newest income-driven repayment plan: REPAYE.Most medical students won’t get a ton in Perkins a year, so we’re not talking about huge amounts of money.
That being said, having my $4,500 in Perkins forgiven would be another $4,500 that I didn’t have to pay and $50/month less in payments.
Read the other posts in the series here—and get all the info you need to make intelligent decisions about your student loans.
And while you’re at it, check out So Fi’s new Student Loan Debt Navigator tool to assess your student loan repayment options.
This option doesn’t save you any money, but there are still a few potential benefits: 1.
Fewer bills and payments to keep track of each month. The ability to switch out older, variable rate federal loans for one fixed rate loan, which could protect you from having to pay higher rates in the future if interest rates go up.
Private loan consolidation Like federal consolidation, a private consolidation loan allows you to combine multiple loans into one, and offers the same potential benefits listed above. Choose a variable interest rate loan, which can be a cost-saving option if you plan to pay off your loan relatively quickly. Enjoy the benefits of consolidation, including one simplified monthly bill.