Should I Consolidate Student Loan Debt?

graduateRefinancing or consolidating your student loan debt:

Whether you want to lower your monthly payment or pay less in interest on your student loans, the first thing you need to understand are the differences and similarities between refinancing and consolidating. Below we’ve provided a helpful guide.

The Breakdown

Refinancing a loan combines either federal or private student loans (or a combination of both) into one, new private loan. When you refinance, it’s possible to save money by getting a lower interest rate. However, remember that if you refinance a federal loan, you can lose payment provisions, like income-based payments. By refinancing, you’ll also pay just one bill per month, which makes things easier.

Consolidation is only available with federal student loans. Therefore, you can only combine multiple federal student loans into one, new federal loan. You won’t likely save any money, as your interest rate will be the weighted average of the loans you consolidate, but it may prove to be easier to manage because again, you’ll pay just one bill per month.

How They Work

If you want to consolidate your federal loans, you must apply via the Federal Student Loan website. If you want to refinance, a private lender considers your application and decides if you qualify for a new, private loan.

How to Decide

You might want to consolidate if you have multiple federal loans and are not eligible for any federal debt payment program. On the other hand, you may consider refinancing if you have private student loans and are looking to save some cash.

Do One Thing: Look into refinancing your private student loan if you have the option and can secure a lower interest rate.

-Article by Chris O’Shea of Savvy Money

Public Service Credit Union works with ISL Education Lending to offer private loans to help you pay for college as well as refinance existing student loans. ISL Education Lending is a nonprofit organization with decades of student loan experience offering lower-priced loans.*  Learn more