Student Loans Without Cosigner

Student loan borrowers with high interest rate student loans often want to consolidate student loans.

How do you consolidate student loans?

You consolidate student loans in one of two ways: federal student loan consolidation and private student loan consolidation.

Let’s start with how to consolidate student loans with the federal government.

Consolidate Student Loans With The Federal Government

When you consolidate student loans with the federal government, all of your current federal student loans combine into a single student loan with one student loan interest rate.

This is advantageous because you may be managing multiple student loans, each with different interest rates, monthly due dates and student loans servicers.

If you consolidate student loans with the federal government, you receive a Direct Consolidation Loan.

The interest rate with a Direct Consolidation Loan will be equal to the weighted average interest rate of your current federal student loans, rounded to the nearest 1/8%.

It is important to note that when you consolidate federal student loans with the federal government, your interest rate will not decrease.

In fact, your interest may increase slightly, since the weighted average interest rate is rounded to the nearest 1/8%.

Also, it is important to note that you student loan payment period when you consolidate student loans can vary based on your total student loan balance. For example, you could have up tot 30 years to repay student loans.

It is possible, however, for your monthly payment to decline, even if your student loan interest rate does not.

For example, if the standard repayment period is 10 years, and now a Direct Consolidation Loan enables you to repay student loans in 30 years, your monthly payment would decline relative to your current student loan payment.

However, when you consolidate student loans and have a longer repayment period, that means more interest will accrue on your student loans.

How, if at all, can you lower your interest rate on your student loans?

Consolidate Student Loans With A Private Lender

When you consolidate student loans with a private lender, it is known as student loan refinancing.

To consolidate student loans with a private lender means that you are issued a new student loan with a lower interest rate and monthly payment.

This is a central difference compared to borrowers who consolidate student loans with the federal government.

When you consolidate student loans with a private student loan company, the new student loan that is issued is used to pay off the old student loans.

The result is a lower interest rate, lower monthly payment, new student loan servicer and one payment date.

While the notion to consolidate student loans helps you organize your student loans, be sure to differentiate between federal student loans and private student loans because the results can be markedly different.