Rates for consolidating student loans
These processes are often confused, but they’re very different.
Here’s how: » SIGN UP: Get a free plan to ditch your debt Federal student loan consolidation basics How to consolidate federal student loans Student loan refinancing basics Compare student loan refinance lenders When you consolidate federal loans, the government pays them off and replaces them with a direct consolidation loan.
Federal loan servicers are private companies that manage federal loans for the Department of Education.
You can choose one of four servicers for your new direct consolidation loan: Fed Loan Servicing, Great Lakes Educational Loan Services Inc., Navient and Nelnet.
You have to complete the application in a single session, so do your research before you start.
When you’re ready, go to studentloans.gov, log in, and follow these steps to apply: You can consolidate all your federal loans or just some of them.
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On the standard repayment plan for direct consolidation loans, you’ll make equal monthly payments for 10 to 30 years, depending on your total federal student loan balance.
You typically need a credit score at least in the mid-600s to qualify, and rates range from around 2% to more than 9%.
When you consolidate multiple student loans or refinance a single student loan, you may receive a lower monthly payment with a reduced interest rate or an extended repayment term.
When you consolidate federal loans, your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next ⅛ of 1%.
So, for instance: If the average comes to 6.15%, your new interest rate will be 6.25%.