But some people find it easier to think of the process as “consolidation” to directly compare private student loan refinancing with federal student loan consolidation.
So we’ll use the two terms interchangeably in this chapter.
In that instance you’re essentially finding a private lender that will refinance your private loans.
If you have private debt and you’re offered a lower rate and better terms through refinancing with a reputable lender, that’s worth pursuing.
What’s more, consolidation typically results in the borrower paying more in total interest because consolidated loans are generally stretched out over a longer period, says Jessica Ferastoaru, a student loan counselor with Take Charge America. Consolidation usually gives you more repayment options, but it can limit them too.
Consolidation is often the first step borrowers must take to enroll in some of the government’s more flexible repayment plans, including income-driven plans, many of which are restricted to borrowers with Direct Loans.
Private consolidation is a completely different story, though.Borrowers who graduated before 2010, when the government shifted to Direct Loans, for example, need to consolidate their loans to access the latest income-driven plan, Revised Pay As You Earn.Parent PLUS borrowers most consolidate their loans into the federal Direct Loan program if they want to enroll in the only earnings-based plan available to them, income-contingent repayment.Some of the well-known companies that offer private student loan refinancing as of November 2017 include So Fi, Earnest, Lend Key, Sun Trust, Laurel Road, Common Bond, Wells Fargo, Citizens One, College Ave and Discover.Many lenders that issue private student loans also refinance them.