Repaying student loans? Know your options

You may benefit from making changes to how you’re repaying student loans.

Paying Off Debt Fast: Student Loan Repayment Options

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If you’re like millions of Americans with student loans, you may be looking for ways to make repayment easier and faster. Whether your goal is to pay off your loan balance faster, reduce your interest rate, or simplify multiple monthly payments, you may want to consider student loan consolidation or refinancing. As a result, your loan payments may also decrease — just note that by extending the loan term, you may pay more in interest over the life of the loan.

First, let’s take a look at the difference between consolidating and refinancing student loans:

  • Student loan consolidation allows you to combine multiple outstanding student loan balances together under a single loan with a single interest rate and single monthly payment. This can be more convenient than tracking multiple loans: There’s one payment per month, to one lender.
  • Student loan refinancing allows you to combine multiple outstanding student loan balances together under a single loan with a single interest rate and single monthly payment. This can be more convenient than tracking multiple loans: There’s one payment per month, to one lender.

The benefits of consolidation and refinancing are similar:

Benefits Consolidation Refinancing
Reduce the number of remaining payments with a shorter loan term

Reduce interest rate based on current rates and/or improved credit situation

Lower monthly payments based on extended loan term or lower interest rate. By extending the loan term you may pay more in interest over the life of the loan.

Simplify monthly payments

Because the process and the benefits are so similar, “consolidating” and “refinancing” are terms that are often used interchangeably. However, before deciding if consolidating or refinancing your student loans is right for you, it’s important to understand the implications of consolidating/refinancing federal student loans versus private student loans.

Federal student loan consolidation

Federal student loans — such as the Stafford Loan, Direct Loan, and PLUS programs — are offered by the U.S. Department of Education. Federal loans represent the vast majority of outstanding student loan debt, wherein some industry experts estimate the total outstanding federal student loan balance in 2017 to be as high as $1.4 trillion, according to the Federal Reserve.

These loans are typically consolidated using a Direct Consolidation Loan offered by the U.S. Department of Education. When consolidating federal student loans, all of your federal loans will be combined into one new loan, and you will be offered a new fixed interest rate based on the weighted average of the loans being consolidated. The key benefit is a single monthly payment instead of multiple payments. There is no application fee to consolidate your federal student loans with a Direct Consolidation Loan, so it’s prudent to be wary of companies offering to do this for a fee.

Consolidating your federal education loans can simplify your payments, but it can also result in loss of some important benefits. Learn about federal consolidation so you can weigh the pros and cons and decide whether a Direct Consolidation Loan is right for you.

Also be aware that some private lenders may be willing to refinance your federal loans. But proceed with caution because federal loans come with a range of borrower protections, including public service loan forgiveness, income-based repayment plans, and unique deferment and forbearance options if you ever encounter difficulty during repayment. Most of these federal protections may be lost if you refinance federal loans with a private lender, so do your research about which option is best for you.

Private student loan consolidation and refinancing

These loans are typically consolidated using a Direct Consolidation Loan offered by the U.S. Department of Education. When consolidating federal student loans, all of your federal loans will be combined into one new loan, and you will be offered a new fixed interest rate based on the weighted average of the loans being consolidated. The key benefit is a single monthly payment instead of multiple payments. There is no application fee to consolidate your federal student loans with a Direct Consolidation Loan, so it’s prudent to be wary of companies offering to do this for a fee.

Consolidating your federal education loans can simplify your payments, but it can also result in loss of some important benefits. Learn about federal consolidation so you can weigh the pros and cons and decide whether a Direct Consolidation Loan is right for you.

Also be aware that some private lenders may be willing to refinance your federal loans. But proceed with caution because federal loans come with a range of borrower protections, including public service loan forgiveness, income-based repayment plans, and unique deferment and forbearance options if you ever encounter difficulty during repayment. Most of these federal protections may be lost if you refinance federal loans with a private lender, so do your research about which option is best for you.

Learn More: Private Student Loan Consolidation

Congratulations. You got your degree. And you’re ready for your future to take flight. But if you’re like most graduates, you might be feeling, well, a little grounded.

If you have one or more student loans, you have payments to make. Perhaps multiple payments. Fortunately, there’s a way to refinance your single loan, or turn multiple loans into one loan, and perhaps lower your monthly payment in the process.

It’s called Student Loan Consolidation.

There are two types of student loans: federal and private. Federal loans are financed by the government.

You can learn more about consolidating federal loans at studentloans.gov.

Private student loans are financed through a non-government lender, such as a bank. If you have private student loans, Wells Fargo can give you options for combining or refinancing your loans.

Once you qualify, you may get a lower rate, or you may choose to lengthen the time it takes to repay your loan to help lower your monthly payment.

Of course, extending your repayment time may add more interest over the life of your loan.

At Wells Fargo, you’ll work with a dedicated student loan consultant who can help you complete the application and determine what your new monthly payments will be.

To get started, apply online or give us a call at 1-877-425-2613. Take care of your student loan debt, and you can take on the world.

1. The Wells Fargo Private ConsolidationSM loan is subject to completion of a loan application/consumer credit agreement, verification of application information, credit qualification, and a benefit to borrower determination. Federal student loans cannot be consolidated into a Wells Fargo Private Consolidation student loan.

2. A payment reduction may come from a lower interest rate, a longer loan term, or a combination of both; however by extending the loan term you may pay more in interest over the life of the loan. For further details or for additional student loan information, including the most recent terms and eligibility requirements, please call a Student Loan Consultant at the number above.