Are there advantages to refinancing student loans?
Yes, there are advantages to consolidating your student loans. Instead of making several payments a month, you will be making a single payment, and it could mean more money in your budget for other things. Also, you could extend out your payments in order to make it fit your budget. However, I do not recommend consolidating your student loans until the 6 month grace period is almost over because in some cases, it will end your grace period. The only bad reason not to consolidate your student loans is if you qualify for a loan forgiveness program in either the teaching or medical professions because some loan forgiveness programs will not handle consolidated loans. Good luck!
Most students consolidate (federal student loans) for two reasons: one, to get one monthly bill instead of multiple bills to keep track of, and two, to extend their repayment term, so that the monthly payment amount is lower. Keep in mind that if you pay the minimum amount each month, you’ll end up paying more interest over the life of the loan (just like a credit card) so it’s smart to start paying more than the minimum as soon as you can afford to.
By law, lenders are required to use the same interest rate formula for Consolidation Loans. However, many lenders offer interest-rate reductions for paying on time or via direct debit. It is important to read the fine print and understand how you become qualified for or disqualified for a lender’s borrower benefits programs. Beyond savings, you should consider customer service, flexible repayment options, online account access and applications, reputation and industry experience when selecting a lender.
Sallie Mae has a lot of good info on their site, including an FAQ and a quick interactive tool that will show you how much you could save if you consolidate.
Now that all federal student loans have a fixed interest rate, the only reasons to consolidate a loan are to help with default issues, have all your loans with one lender or take advantage of some repayment incentives (ie if you autodebit, receive .25% off your monthly payments, etc.). Otherwise, it doesn’t help the student or parent borrower.