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You’ll save money if your new loan has a lower interest rate.
» MORE: Best student loan refinance companies Your financial history — including your credit score, income, job history and educational background — will dictate your new interest rate when you refinance.
Roughly 80% of student loan debt comes from federal loan programs.
If you’ve ever used a debt consolidation loan to take care of credit card debt problems, you may think you understand how a Federal Direct Consolidation Loan works for student loan debt. You use a Federal Direct Consolidation to consolidate federal student loan debt into one easy payment.
You are left with one payment to one lender every month.
The typical student borrower receives money from federal loan programs every semester in school.Use a consolidation calculator to compare monthly payments under three different scenarios: federal student loan consolidation, private student loan refinancing and income-driven repayment plans.Federal loan consolidation doesn’t have a credit requirement, and it offers the benefit of a single loan bill and potentially lower payments.The government offers plans that cut payments to 10% or 15% of “discretionary” income and offer forgiveness on the remaining balance after 20 or 25 years. If you have a large loan balance and a low income, income-driven repayment is probably your best option for the lowest monthly bill.default on their student loans and though the average repayment time varies by amount owed, it’s safe to say it’s probably going to take at least 10 years and might take as long as 30 years.But it’s only for federal loans, and it won’t cut your interest rate.