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On average, student loan borrowers have between three and four student loans on their financial plate.And that mix of debt might include both federal loans backed by the U. government, and private loans from a bank or credit union.If you’re one of the more than 44 million Americans with student loan debt, you know that managing the repayment of those loans often feels like an exercise in cat herding.Chances are, you’re juggling multiple loans taken out in different years or semesters.Student loan consolidation, which is also called student loan refinancing, comes in two main flavors: Getting schooled on the differences of each option will help you choose the student loan consolidation that makes the most sense for you. You are not permitted to add any private student loans you obtained from a bank or credit union into loans you want to consolidate through the Federal Direct Consolidation Loan program.
Consolidation doesn’t always work to your benefit, however.
In that instance you’re essentially finding a private lender that will refinance your private loans.
If you have private debt and you’re offered a lower rate and better terms through refinancing with a reputable lender, that’s worth pursuing.
Be wary of consolidating if you’ve already made progress toward loan forgiveness under the 10-year period for public sector employees or the 20-year period under income-driven plans.
Consolidating starts that clock over, so if you’ve been in an income-based repayment plan for five years and plan to stay in that plan until you hit forgiveness in another two decades, it’s not generally worth it to consolidate. Federal consolidation and private refinancing are very different.
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But that doesn’t mean consolidation is always a smart move.