If you’re like millions of Americans with student loans, you may be looking for ways to make repayment more convenient and faster. Whether you want to potentially pay off your loan balances sooner, lower your interest rate, or refinance and consolidate multiple loans into one, you may want to consider student loan refinancing and consolidation. With the help of a Wells Fargo Student Loan Consultant, you can determine which course of action (if any) may be best for your circumstances.
All federal student loans are made by the federal government with terms and conditions set by law. They usually include special benefits not offered with private student loans. On the other hand, private student loans are funded by private, publicly traded organizations, such as a bank like Wells Fargo. The terms and conditions are set by the lender (not the government) and are generally more expensive than federal student loans.
Now, let’s define what it means to refinance and consolidate student loans:
- When you have multiple student loans (federal, private, or both), you may be able to refinance and consolidate these loans into one loan to make one monthly payment, lower your payment, change your repayment term, or in some instances, do both. The payment reduction may come from a lower interest rate, a longer loan term, or a combination of both. By extending the loan term, you may pay more in interest over the life of the loan.
- If you only have one student loan (federal or private), you may be able to refinance that student loan in order to lower your payment, change your repayment term, or in some instances, do both.
- You may be able to refinance and consolidate your federal and private student loans through a private lender.
- You can also refinance and consolidate your federal student loans through the federal government.
What are the benefits of refinancing and consolidating student loans?
Here are some of the key benefits for refinancing and consolidating your student loans:
- You may have more control over your time and finances with just one monthly student loan payment to manage instead of multiple loan payments with different due dates.
- You may be able to ask someone to cosign on your new loan, possibly lowering your rate and managing your monthly student loan debt over time.
Are there any disadvantages to refinancing and consolidating student loans?
While refinancing and consolidating student loans have many benefits, there are also some things that may negatively impact your loan(s):
- You may be able to extend the repayment term of your new loan. If you do, you may end up paying more in interest over the life of the loan.
- When you refinance and consolidate federal student loans, you may lose some borrower protections, including public service loan forgiveness, income-based repayment plans, and unique deferment and forbearance options if you ever encounter difficulty during repayment.
- When you refinance and consolidate federal or private loans into a private student loan, your credit will play a part in determining your new rate. If you don’t have credit, or you are in the process of building your credit, you may not get a better rate than what you have on your existing loan — and you may end up paying more for your loan over time. As mentioned above, a cosigner may help you obtain better loan terms.
Because this is such an important decision, it’s critical to compare your current student loan amounts, monthly payments, interest rates, and key loan benefits before you decide to refinance and consolidate. Take a moment to review the benefits here.
If you have any questions or would like to learn more about refinancing and consolidating your student loans, talk to a Wells Fargo Student Loan Consultant at 1-877-315-7723. We’re ready to help.