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When it comes to choosing to consolidate, refi, or both, ask yourself: What are you hoping to achieve?
This is where the terms can get a little confusing.
If you choose private loan consolidation, you may choose to extend your repayment term to as long as 20 years with some lender options.
Extending your payments will likely cost you more in the long-run, but the trade-off is keeping your payments within your budget and on-time.
The Direct Consolidation Loan program is for federal student loans only.
This free program combines all of your existing federal student loans into one with an interest rate based on the weighted average of the loans you want to consolidate. This article on Direct Consolidation Loan goes into greater detail.) With this program, you retain all of the benefits and protections that are part of the federal student loan program.
For example, under the Public Service Loan Forgiveness Program (PSLFP), your Direct Loan balance may be eligible for forgiveness after 120 payments if you’ve worked in the public sector that entire time.
Similarly, the Teacher Loan Forgiveness Program is available for teachers who work in schools that serve low-income families full-time for five consecutive years.
This is particularly true for grad school borrowers who use unsubsidized Direct loans and Graduate PLUS loans to finance their education.
offer benefits and protections that do not transfer to private lenders.
You may hear this option referred to as "consolidation" or "refinancing," interchangeably.
Note: The federal government does not have a student loan refinancing program.
Not only can this process simplify your payments, but you may also lock in a lower interest rate and increase your repayment term options.