Student Loan Basics – Consolidation vs Refinancing

Sometimes you can’t help but take out numerous student loans to pay for your higher education. It can be stressful to keep up with a handful of different due dates every month, plus the extra money you’re spending on multiple interest rates adds up over time. In this case, it may be in your best interest to combine your loans into a single, more manageable one. Your advisors at College Funding of Tampa Bay are here to teach you the difference between consolidation and refinancing so you can make the right choice depending on your needs.

The Main Difference

Let’s cut to the chase. Consolidation is the combination of multiple federal loans while refinancing is done by a private lender to combine both federal and private loans. Those are the big differences, but there’s much more to it. Each side has its own pros and cons which we’ll get into now, and it’s up to you to decide on which option works best for your personal situation.

Student Loan Consolidation

With a student loan consolidation, you can only combine federal loans. While this may seem like a major restriction (especially if you also have private loans), this is a great option if you happen to only have federal loans. This is because you’ll have the benefit of having only a single monthly payment to worry about as well as all of the usual perks that come with federal loans such as income-based conditions regarding repayment and loan forgiveness programs. The one downside is that rather than lowering your interest rate, your new rate will just be a recalculated average between all the loans that you’ve combined. While you could lower your monthly payment by spreading it out through a longer-term, you’ll actually be paying more in interest over that extended time.

Student Loan Refinancing

Refinancing is more flexible in terms of being able to combine both federal and private loans into a single payment since the process is done through a private lender. As long as you either have good credit or a qualifying co-signer, you will most likely be able to lower your interest rate thus saving you money in the long run. Having a lower interest rate could help you pay off your loan faster since you’ll be spending less money just trying to keep up with fees and having that saved cash go towards the loan amount itself. The major downside to this option is that you’ll lose out on any federal loan benefits that you may have had before refinancing, but that can be such a small sacrifice for having a lower interest rate.

Speak to an Expert Financial Advisor

Take control of your loans today by either consolidating or refinancing your student loans into a more manageable monthly payment. Less financial responsibilities each month will help you get back on track and relieve tons of unnecessary stress. If you need help getting started on the process, consult one of the expert advisors at College Funding of Tampa Bay. Call us today at (813) 755-6834 for a free consultation and see how you can improve your student loan situation for the better!