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Refinancing has the added benefit of reducing the cost of your loans if you qualify for a lower interest rate or monthly payment.
Be sure to weigh the tradeoffs before refinancing, though, especially if you include federal loans in the bundle.
Choosing one could make your payments much more affordable.
Any remaining debt after 20 or 25 years of on-time payments toward an income-driven plan will be forgiven, though you'll pay tax on that amount.
Federal student loan consolidation is, as it sounds, available only for federal loans, or those the government makes.
You do not need to meet credit requirements to consolidate federal loans, and after consolidating you'll pay a single bill to your student loan servicer, the company that accepts payments on behalf of the government. Your new interest rate will be a weighted average of your previous loans' rates, rounded up to the next one-eighth of 1 percent.
That means the interest rate on your largest loan balance will have the biggest impact on your final rate. Consolidating federal loans comes with several unique benefits: No credit or income requirements: Anyone with federal student loans can get a consolidation loan.
That means your estate or heirs don't have to pay back the debt.A parent, sibling or other responsible co-borrower can improve your eligibility or help you get a lower interest rate. They'll have to repay the debt if you can't, and that can be a major burden on parents nearing retirement age, for instance.Variable interest rates may go up: Most refinance loans offer both variable and fixed interest rates.You may even consolidate as a way to get out of student loan default, as long as you either make three on-time payments beforehand or choose an income-driven repayment plan. Flexible repayment options: Federal student loan borrowers can choose among several repayment programs.The standard payback period is 10 years, but there are other programs, called income-driven repayment plans, that tie loan bills to income.
You'll be a strong candidate if your credit score is in the good-to-excellent range, which is 670 or higher using the FICO credit scoring model.