Federal Student Loan Consolidation vs. Private Student Loan Consolidation

To get out of debt, the private and government/federal student loans are consolidated. In this system, all your existing loans are consolidated into one, and the interest rates are average. This means that you are not saving, but making the whole process of paying debts organized by paying just one loan instead of paying multiple loans.

There are chances that you will get lower interest rates by consolidation. The reality is that it is both hard and easy to do this as there is whole research that you have to do to conclude.

Government/Federal Student Loan Consolidation

When it comes to the government student loans, they are easy to consolidate. You can do it directly through the department of education, or you can also ask the loan servicer, often they give the right information about it. You can look on the websites about the direct consolidation loans. They do not charge a fee for consolidation. You can wrap all your government or federal loans into typically one new loan, and now you can make regular payments.

When you apply for a direct consolidation loan, you can opt to repay your loan by using the plans that are flexible, that is, the income-based plans. This means that your payment will be based on your available income. There are some consequences that you should know when you go for this option. But, this allows you to direct your loan payments within the reasonable amount of your budget.

If your income is low, then your government direct consolidation loan payment is one of the income contingent programs. It can be as low as $0 per month. It is best for the people to know that their income is going to increase in the future and they just need help right know.

Private Student Loan Consolidation

While, in case of private student loans, there is no program like the one for federal student loans. A private student loan is just like a consumer loan, such as a car loan, etc. There are also chances that the private student loans cannot be discharged to bankruptcy after a certain period.

Now, if you get a private student loan and you want to consolidate it. From secure private student loan consolidation to the hybrid programs that allow you to consolidate your loan but it just includes your graduation expenses.

Because it is not easy to consolidate all your private student loans and you it is very difficult that you find a lender who is willing to wrap all of your private student loans into one single loan. In this case, you have to be aware that is this new consolidated amount is less than the amount that you collectively pay all your debts.

The interest rates could be pretty much close to what you are paying for consolidation of your loans. In such a scenario, there is no benefit of consolidating your loans besides the one payment that you are now making as compared to the 2 or 3 payments you were paying before. It’s up to your research and rational decision about consolidation that can help you draw benefit from it.