Consolidating key alternative loans
If your life circumstances are changing, you may want to adapt your loan repayment plan to match.For instance, if you’re on a ten-year repayment plan with your original loans, consolidation could get you an extension or offer the income-contingent payback plan.Refinancing is the process of taking out a new private student loan to pay off and combine multiple private and/or federal loans.Refinancing may give you more options to reduce your monthly payment and interest rate, but refinancing federal loans can eliminate some of the benefits of federal loans.Consolidation will allow you to switch from a variable rate to the new fixed rate. A variable rate can save you money if you have strong credit – and if interest rates don’t rise significantly.If you plan to repay loans over time, and you’d rather have a steady interest rate than a fluctuating one, a fixed rate may work best for you. For long-term savings, it’s best to lock in a fixed rate when interest rates are low. The Federal Direct Consolidation Loans website offers an online calculator to compare interest rates. If you have private loans, they won’t be covered under the Bipartisan Student Loan Certainty Act, but you can still lower your interest rate through consolidation.
PLUS loans, for instance, may have flexible repayment options unavailable after consolidation. But before you make the switch, here’s what you need to know.And depending on your lender, you may need to meet a minimum balance.(The Federal Loan Consolidation Program doesn’t require a minimum.) If short-term savings are your priority, consolidation is worth a look.Fixed interest rates stay the same for the life of the loan.You’re more likely to have the same monthly payment each month.
Loan consolidation may offer just the wiggle room you need, however, if your original loans are more rigid. If you took out federal loans before 2013, you may have one of two types of interest rates: variable or fixed.