Consolidating private student loan debt
And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward –- and free. " Debt consolidation is a strategy to roll multiple old debts into a single new one. We believe everyone should be able to make financial decisions with confidence. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. We're on your side, even if it means we don't make a cent.It takes borrowers an average of 21 years to repay their student loans, while 28% of students are in default (or miss payments for 270 days or more) within five years of entering repayment.The picture painted by these statistics is clear: many borrowers are in over their heads with student loan debt and are looking for relief.The last section is dedicated to identifying the best private consolidation loans for those with a few different financial profiles.There are two types of consolidation loans: federal and private, and they each come with distinct advantages and drawbacks.Because the interest rate is a weighted average and rounded up, borrowers won’t ever save money on interest by opting for a federal consolidation loan unless the loans are pre-2006 and have a variable interest rate.The new interest rate would still be equal to the current interest rates in that situation, but it might save money in the future if the variable rates rise (the new fixed rate would stay the same).
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The following table illustrates how a weighted average works.
In this example, there are three students that each have three loans.
Getting a federal consolidation loan isn’t usually considered as “refinancing” since the interest rate of the new loan is equal to the weighted average of the loans being consolidated.
With a private consolidation loan, a private lender writes a new loan that pays off the old loans.