Study Loan : Refinance or consolidate student loans?

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Study LOAN
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Refinance or consolidate student loans?
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• Student loan consolidation and refinancing have
  one result in common You end up with a single
  monthly payment thats a lot easier to keep track
  of than separate bills from multiple loan
  services.
• Which route you take depends on your
  circumstances. If you have strong credit and want
  to pay off your loans as quickly as possible,
  look at refinancing. If hanging onto your federal
  loan benefits is your top priority, consolidating
  is the way to go.
• Our breakdown of both approaches will arm you
  with the information you need to make the best
  decision.

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The basics Consolidation

• You might hear consolidation and refinancing
  used synonymously. But at Nerd Wallet, we refer
  to consolidation only when we describe the
  process of combining your federal student loans
  into a single Direct Consolidation Loan. Heres
  what happens when you consolidate
• The government pays off your individual loans and
  combines those balances into a new one. So if you
  have three Stafford loans of 1,000, 5,000 and
  7,500, youll receive a 13,500 Direct
  Consolidation Loan. Youll pay it off for 15
  years, but the term can range from 10 to 30
  years, depending on your balance.
• Your new interest rate will be the weighted
  average of all your prior rates. That means that
  in its final calculation, the government will
  more heavily weigh the interest rate on a large
  loan balance than on a small loan.
• That new interest rate wont be a straight
  average, though. Its rounded up to the nearest
  one-eighth of 1. It will also be fixed, meaning
  it will stay the same each year you pay down the
  loan.

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The basics Refinancing

• When you refinance federal loans, a private
  lender pays them off and issues you a new loan
  equal to your previous balances, similar to the
  consolidation process. But thats where the
  similarities end. Heres how it works
• Refinancing federal loans turns them into a
  private loan. You wont have the opportunity to
  take advantage of federal loan protections, since
  the government will no longer own your student
  loans.
• Your new lender will determine your interest rate
  based on your credit score and other
  requirements, such as your income and job
  history. Many lenders also have minimum and
  maximum loan balance guidelines.
• You can use a co-signer to get a better interest
  rate than you would on your own, or if your
  credit score is lower than the minimum required.
  Nerd Wallets refinancing partner Credible
  suggests you have a score of at least 680.

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• If you have built up strong credit, have a steady
  employment history and have earned a good income
  in the years after graduation, you might be able
  to lower your interest rate by refinancing your
  original loan. Keep in mind that youll maximize
  your interest savings if you choose as short a
  repayment term as you can manage many lenders
  offer five-, 10-, 15- and 20-year loan terms.
• Most lenders will allow you to choose between a
  fixed interest rate, which stays the same year
  after year, and a variable rate, which increases
  or decreases according to market conditions.
  Refinancing lender Common Bond also offers a
  10-year hybrid loan, which has a fixed interest
  rate for the first half of your loan term and a
  variable rate for the second half.
• If youre thinking youre going to pay these off
  quickly, like in five years, going with a
  variable interest rate isnt as much of a risk
  as if you were on a long-term repayment
  schedule, says Jill Stone, director of financial
  aid at Yale Law School.
• But in the end, it comes down to personal
  preference, she says. If youre the kind of
  person thats really debt-averse and really
  risk-averse, you want the fixed interest rate
  even though thats going to cost you more money
  over the long term.

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Which is best for you?

• Borrowers who qualify for refinancing should
  first consider whether theyll want to take
  advantage of federal loan protections, Stone
  says.Theyll keep those benefits if they
  consolidate, but lose them if they refinance.
• Consolidation would only make sense if they are
  interested in Public Service Loan Forgiveness or
  if they were just very concerned about having
  deferment and forbearance options in the
  background, Stone says.
• Learn about deferment and forbearance, two ways
  you can temporarily postpone your federal student
  loans if youre having trouble making payments,
  in Nerd Wallet Student Loan Central.
• Another key difference between consolidation and
  refinancing the interest rate youll get.
  Consolidating your loans wont save you money
  over time in fact, you might pay more in total
  interest if you extend your repayment term.
  Refinancing, on the other hand, offers the
  potential to pay a lower interest rate if you
  have strong credit.
• The amount of time you plan to spend paying down
  your loans should also influence your course of
  action. Refinancing with a variable interest
  rate, as opposed to consolidating with a fixed
  rate, makes more sense for grads who plan to get
  rid of their loans sooner.

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Whats next?

• Consolidation Apply to consolidate your loans
  for free through Federal Student Aid at
  studentloans.gov. Nerd Wallets Guide to
  Consolidating Student Loans will walk you through
  the process step by step.
• Refinancing At Nerd Wallets partner Credible,
  an online loan marketplace, you can compare
  refinancing offers from up to nine lenders at
  once.
• To get started, follow the link below to
  fill out a short form with your current loan
  information
• Estimate your refinancing savings.
• Next, complete a longer form on Study
  Loan , where youll see actual loan offers based
  on your financial information. There, youll pick
  the refinancing lender and interest rate thats
  best for you.
• Source http//studentdebtcenter.org/refinance-co
  nsolidate-student-loans/
•  

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