You’ll use the money you borrowed to repay existing student loans you owe that you want to refinance.
That’s just the start of their differences though; there are several other important points to consider.
The advantages and disadvantages are really based on each person’s unique situation and goals.
The impact of either refinancing or consolidating student loans will vary depending on whether you have private student loans or federal student loans. consolidation guide: When you refinance student loans, you are taking a loan from a private lender to repay existing student loan debt.
The government doesn’t offer refinance loans, so you can’t get one through the Department of Education.
The first and most important thing to understand is that you lose access to federal student loan benefits – such as Public Service Loan Forgiveness and income-driven repayment plans – when you refinance federal student loans with a private lender.
Make sure you understand what those federal benefits are and, if you’re likely to use them, before you refinance federal loans. When you refinance student loans with a private lender, your interest rate is typically based on your credit history.Our editorial staff does not receive direction from advertisers on our website or our Partnerships Team.Our company may receive compensation from partners seen on our website. When you borrow money for school, it can take a long time to pay it back.Sometimes, during the payback period, you’ll want to change the terms of your loans.You may want to find a different student loan repayment plan, a lower interest rate, or combine multiple loans into one new loan.When you want to change the terms of your loan or change who your loan servicer is, you have two primary options: student loan consolidation and student loan refinancing.