Can You Refinance Consolidated Student Loans?

Student debt is a way of life in the United States. But just because you have loans doesn’t mean you can’t help yourself by making their repayment easier on your finances. Consolidating and refinancing student loans can both be viable paths to this outcome. But can you refinance consolidate student loans?

What Is Student Loan Consolidation?

Consolidation is a popular way for borrowers to restructure their debt in order to get a more attractive repayment terms. When you think about the term “consolidation,” you likely imagine bringing things together. This is exactly what happens when you consolidate student loans—or any kind of loan, for that matter. 

Debt consolidation is the process of taking several loans and combining them into one. These old loans are then paid off at the inception of the single new loan. There are a few advantages to consolidation:

  • Oftentimes, borrowers will be able to get a better interest rate on the combined loan than they were previously paying in aggregate across their previous loans. It’s important to note, however, this only applies to private student loans. Federal student loan consolidation just takes the weighted average of the previous loans to determine the new rate
  • It’s possible to set up the new loans so there’s no long a co-signer on it. Some students require a co-signer in order to qualify for certain loans. By consolidating later when the primary borrower has a more substantial credit history and income, that co-signer can likely be removed from the loan. This is beneficial to the co-signer, who probably doesn’t want to be named on the loan unless it’s totally necessary, as it implies an obligation of repayment if the student doesn’t meet their obligations. 
  • Consolidating student loans can make your life less complicated, as several outstanding loans can be combined into a single payment. This reduces some of the complexity and effort required to continually pay your debt. 
  • You can change the repayment terms when you consolidate your loans. If your previous loans were for a longer or shorter repayment period than what makes sense for your current financial position, borrowers can often get different loan terms when they consolidate. Doing so will align your financial needs and reality. Furthermore, with a private lender, you can switch between fixed or variable rates depending on your current situation. It’s important, however, to understand how variable rates can change over time and what this could mean for your ability to repay the loan. 

Clearly, there are some advantages to consolidating loans. At the same time, it’s important to know that student loan consolidation is a little different than consolidating other kinds of debt. The majority of student loan borrowers get their initial funding through federal loans. While some of these might be worth consolidating either through the federal program or via private loans, it’s important to note what benefits you might lose if you refinance certain federal loans. 

For instance, income-based repayment and other assistance programs might go away if you consolidate to a new loan. You need to understand the full implications of this decision before going through with anything. 

Now that you have an understanding of what it means to consolidate loans, let’s look more at student loan refinance options. 

How Do You Refinance Student Loans?

People often realize after refinancing their student loans that it’s much easier than they expected it to be beforehand. There’s no shortage of lenders out there willing to refinance student loans. The questions you should be asking are what is refinancing; how do you refinance; and why is refinancing a good idea?

Refinancing is really just a more overarching version of consolidation. Think of a square being a rectangle, but a rectangle not being a square. In the same way, debt consolidation is a form of refinancing, whereas not all refinancing is debt consolidation. 

You can refinance some of your loans individually—allowing you to get better terms on the ones worth altering, but keeping other ones with beneficial terms in-tact. Just as with consolidation, refinancing is taking out a new loan to replace your current one—ideally with more optimal terms. 

Refinancing your student loans is a good idea for many of the same reasons it makes sense to consolidate. You can end up saving money over time if you lower your interest rates or shorten your repayment period. Furthermore, unlike with many other types of loans that can be plagued with fees, refinancing student loans is free. 

But this all begs the question: Can you refinance consolidated student loans?

Can You Refinance Consolidated Student Loans?

So, is it possible to refinance a student loan that was previously a debt consolidation? The easy answer to this question is “Yes.” Just because a student loans have been consolidated in the past doesn’t preclude them from being refinanced today or in the future. Remember, refinancing is simply taking out a new loan and paying off an old one. 

Again, the crux of the question here is whether it makes sense to do this or not. For individuals with private or federal PLUS loans, the choice is generally pretty clear: If you can get better loan terms, there’s no reason not to go for it. Refinancing is one of the best ways to lessen the burden of repaying student loans. 

There is, however, one catch to all of this. Especially when dealing with private lenders, your credit score is going to play a key role in your ability to refinance for better terms. There’s some industry variance in terms of minimum required credit scores. But generally speaking, you’re probably going to need a score of 650 or higher, as well as show you have an income, to qualify with many lenders. If you’re thinking about refinancing, consider if you can do anything to raise your credit score, as this will help you in your bid to secure a new loan.

Refinancing and consolidating loans are both things that can be advantageous to borrowers. And yes, refinancing your consolidated loan can be as well. Determine if refinancing is the right choice for your student loans. 

 

 

 

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