Paying for college isn’t easy. With the costs of a college degree rising, many students are faced with some difficult decisions when it comes to how they will pay for it all. For the vast majority of students, the answer is student loans.
But student loans, while helpful in paying for school, come with their own unique set of challenges. Repayment can cause significant financial strain for college grads. Not to mention the hassle and headache of paying off multiple types of student loans with different loan servicers, interest rates, monthly payment amounts, and due dates.
That’s why student loan consolidation is such a popular repayment strategy for graduates. It makes student loans easier to handle with just one payment and one due date to remember.
The only problem? Consolidating student loans through the federal government — AKA a Direct Consolidation Loan — doesn’t save you money or provide you with more favorable terms. It simply combines your federal student loan debts.
However, consolidating student loans through a private financial institution — AKA student loan refinancing — provides additional benefits beyond consolidation including the opportunity for lower rates to save big on lifetime interest.
Learn more about what student loan consolidation is, which method of consolidation is best for you, and the benefits of consolidating student loans.
What is student loan consolidation?
Repaying student loans after graduation can lead to financial hardship for many graduates. With the national student loan debt as high as $1.7 trillion, it’s no wonder the issue has gained such attention and become such a common concern among borrowers. One of the best ways to avoid financial struggle after graduation may be to learn how to consolidate student loans.
Why consolidate student loans? For one, dealing with several different lenders and bills can be problematic once repayment kicks in. Not only can juggling payments become complicated, but you also be paying way more in interest than you’d initially intended, and this can be devastating for your bottom line.
You have options when it comes to student debt consolidation. Here are a few choices you have.
Federal Direct Consolidation Loan
Typically, when borrowing money for college, you would have borrowed from the government or a private lender. If you borrowed from the government, you may choose to pursue a Federal Direct Consolidation loan.
This type of loan applies only to students who have taken out federal loans. But it’s a solid solution, nonetheless. With a Federal Direct Consolidation Loan, you’ll consolidate all of your federal education loans into just one loan. Free of charge, this type of loan will rid you of dealing with multiple lenders each month.
To qualify, all you’ll need to do is complete your loan application and Promissory Note, then agree to the new loan terms through your Direct Consolidation Loan. After this, you’ll be responsible for just a single monthly payment. This is a great option for federal student loan borrowers hoping to simplify their monthly expenses and begin living a more stress-free financial life.
Why consolidate student loans through refinancing
Student loan refinancing is another good option if you are hoping to save money on your school loans. Whether you have federal loans or private student loans, or perhaps even a combination of the two, student loan refinancing is a wise choice for taking charge of your finances as you enter the workforce. And there are plenty of benefits to doing this, too. Here are a few student loan refinancing benefits.
Save money with a lower rate
Securing a lower interest rate on your loans is the number one way to save money, all else being equal. This is one of the many student loan consolidation benefits borrowers can take advantage of.
One of the easiest ways to secure a lower rate on your student loans is to refinance through a private lender. You may have agreed to less than stellar loan terms when you first signed on. This is all too common in borrowers facing a desperate financial situation that requires fast loan approval. But just because you agreed to a high interest rate once upon a time doesn’t mean you need to live with this forever. You can negotiate a lower rate once you make the choice to consolidate your loans. By lowering your interest rate and securing a lower monthly payment, you can use that extra money to put toward other debt or for discretionary spending.
Extend your term to lower monthly payments
Renegotiating your loan terms can save you money throughout the course of your loan. By extending your term, you’ll be able to make lower monthly payments and start saving money for the future.
Extending your loan terms and making lower monthly payments is particularly beneficial if you are currently living paycheck to paycheck and have little money for additional expenses. This is one of the many ways student loan consolidation benefits that can alter the course of your financial direction.
Shorten your terms to pay off debt faster
While extending your loan terms can yield lower monthly payments, the opposite may also be useful. You can pay off your loan much faster by shortening your loan repayment terms. This will save you interest throughout the course of your loan, as well as get you that much closer to a student debt-free life. Whether to improve your credit score or simplify your financial life, learning how to consolidate student loans and ridding yourself of student debt sooner can have a great impact on your financial future.
How to find the best student loan consolidation rates
Deciding to consolidate your student debt with student loan refinancing is a wise move for your financial health and one that can reap big rewards in the long run.
Once you decide to consolidate student loans through refinancing, you can begin shopping different lenders. And luckily, Purefy is here to make the process simple, convenient, and fast.
Use our Compare Rates tool to see your pre-qualified rates from our marketplace of top lenders — all in one place, all at once, and with no impact to your credit score. You’ll get a birds-eye view of what different lenders have to offer, and you can then make a sound decision about which terms will work best for your long-term financial goals.