As a federal student loan borrower, you’ve got certain rights that aren’t typically available with private loans. While refinancing your federal student loans into a personal student loan can sometimes lower your rate of interest , your private student loan won’t necessarily have an equivalent terms and conditions as your federal student loan.
You should carefully review the terms of a personal student loan before you hand over the advantages available on federal student loans. the subsequent are some samples of benefits that you simply may lose if you refinance your federal student loan into a personal student loan:
Access to temporary loan payment relief through approved periods (deferment or forbearance) once you don’t need to make payments due to financial hardship, continuing your education, or military service
No interest accumulation on subsidized student loans during times when payments are deferred
Access to repayment plans supported your income that provide loan forgiveness once you’ve got been in repayment for 20 or 25 years
Access to varied sorts of loan forgiveness and discharge, like Public Service Loan Forgiveness, teacher loan forgiveness, total and permanent disability discharge, and borrower defense to repayment discharge
Apply for an immediate best student loan consolidation. you’ll complete and submit the appliance online, otherwise you can download and print a paper application for submission by U.S. mail.
After you submit your application electronically or by mailing a paper application, the consolidation servicer you chose will complete the actions required to consolidate your eligible loans. The consolidation servicer are going to be your point of contact for any questions you’ll have associated with your consolidation application.
Unless the loans you would like to consolidate are during a deferment, forbearance, or grace period, it’s important for you to continue making payments on those loans until your consolidation servicer tells you that they need been paid off by your new Direct Consolidation Loan.
Despite the benefits of Federal Student Loan Consolidation mentioned above, it may not be the optimal choice in every case. For instance, while consolidating Federal student loans, your payback period will be longer. This means that in the long run, it will not make you financially better off. As a result, you will have to pay interest for a longer-term. This, in turn, will result in a lot of payments to be made over the term of the loan. Apart from this, you are allowed to consolidate your Federal Student Loan only once. The interest rates may go down after you are done consolidating. If this happens, that is bad luck, as you won’t be capable of changing. You should not forget that private lenders offer a discount on interest rates in specific cases. If you meet those criteria and go for the Consolidation of Federal Student Loan, these benefits will go away. Lastly, you are unable to consolidate your private loans to your federal loan consolidation.
In brief, you need to take into consideration the upsides and downsides of the Consolidation of Federal Student Loan. Direct Loan Consolidation might be less risky, yet it may become more costly in the long run. So think twice before submitting the documents.
Private Student Loan
The federal student loan is not the only way to finance your education. The private student loan is available as well, for the same purpose. Usually, banks, private agencies, online lenders, and other entities offer this type of loan. Around 10 percent of students who take a loan for studies, apply for private student loans. This might look like a small number, yet it makes more than $180 billion, which is a big enough amount. Just like Federal Student Loan, this option also has some pros and cons.
Private Student Loan Consolidation
There are numerous reasons why the Consolidation of Private student loans may be more beneficial for students. One of the critical points is you can apply for it when you are unable to take a federal loan. This might occur when you are on the limit for a federal loan. Another advantage of Private Student Loan Consolidation (PSLC) is you may get a lower interest rate for your loan. This will be based on your or co-signer’s credit score. In this case, you would pay less for your loan in the long term. Besides, if you have not performed well enough during your university years, this choice may benefit you. Not all students can get a Federal Loan because of their academic performance. This does not affect them while choosing to consolidate private student loans. It is also necessary to emphasize that students can consolidate their federal loans to PSLC. This is impossible in the case of government-backed loans.
As you can see, there are vast and noticeable differences between Federal Student Loan consolidation and Private Student Loan Consolidation. Even though government-backed loans are more common, we must not forget about the benefits of the Consolidation of Private Student loan. In short, compare these two sources of funding for yourself and choose wisely. You will have to pay back for many years.