Consolidating graduate plus loans
Student Loans that can be consolidated Not all federal student loans can be consolidated, and there are limitations.
Additional considerations Federal loans may have higher interest rates than private loans, but they include a variety of repayment plans.
Students who took out federal loans, such as the Federal Stafford and Plus loans before 2006, had variable-rate loans, and consolidating them through a federal program was a way to get a lower rate.
As explained by Connecticut’s Office of Legislative Research, rates for these federal student loans changed from variable to fixed as a result of the 2005 Deficit Reduction Act.
For example, students can apply to have their monthly payments be based on their income, change their repayment plans, and may be eligible for debt forgiveness.
You lose those benefits if you refinance federal loans (which means going with a private lender) instead of consolidating them through the government.
Refinancing parent loans can have an additional benefit – assuming the now-graduate is ready to take on the debt, the parent can refinance the loan in the graduate’s name—the student has to apply for the refinancing– as long as all parties agree.
Refinancing Parent PLUS loans has the same implications as refinancing student loans – the new loan, which is from a private lender, has new terms and will not include repayment options, such as extended and graduated repayment, that came with the original loan.
Instead, the government programs establish the new rate by averaging the rates of the loans being combined.You can consolidate and refinance Something to note when considering these two options is that consolidating and refinancing student loans is not an either-or situation.