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Under these plans, the government extends your repayment term and caps your payments at a percentage of your income.
That can help give you more breathing room in your budget.
You’ll pay more in interest over the length of your new repayment term, but an income-driven repayment plan can make keeping up with your payments possible on a small salary. If you have older federal loans, you may have some with variable interest rates.
The new, refinanced loan can have completely different terms, too.
While the terms are sometimes used interchangeably, consolidating your loans is different than refinancing them.
Because the interest rate is a weighted average, rounded up, consolidation is unlikely to save you money.
Here are three situations when consolidating your student loans might make sense for you: 1. If you’re struggling to make your payments under a 10-year, Standard Repayment Plan, consolidation can help reduce your monthly payments.
When you take out a Direct Consolidation Loan, you can extend your repayment term to up to 30 years and get a smaller payment.
If your goal is to save money on your student loans, refinancing may be a better option for you than consolidation.