Can I Refinance a Consolidated Student Loan?
Can I Refinance a Consolidated Student Loan?
“Can I refinance a consolidated student loan?” is a common question for students who
have consolidated their student loans but are still having a hard time paying the
monthly payment. So, is it possible?
The answer for this question depends on whether your consolidated loan is a federal
consolidated loan or a private consolidated loan. In the case of a federal student loan,
your refinancing opportunities are limited.
You can only refinance your loan if you are adding new money to the federal loan, or you must be switching into the Direct Loan program in order to obtain public service loan forgiveness or a handful of other very limited circumstances. However, re-consolidating a federal consolidation loan does not relock the rates on the original loans. Rather, the interest rate on the new consolidation loan will be based on the current fixed rate of the old consolidation loan. It does not depend on your credit score.
Private consolidation loans have a variable interest rate that is based in part on your credit score. So if your credit score has improved significantly (minimum of 50 points, but ideally at least 100), you might be able to obtain a better interest rate on your private student loans by consolidating them. However, lenders have increased the interest rates on private loans by 2% to 4%, depending on credit scores.
It is more difficult to obtain a private student loan these days; a 700 FICO score might not be good enough. Also, a 6% rate on a private student loan would be among the best available, so you’d be unlikely to obtain a better rate on a refinance.
Federal loans cannot be consolidated into a private consolidation loan. Even if it’s possible, the interest rates on private loans are generally higher. Likewise, private student loans cannot be consolidated into federal consolidated loans.
I hope I was able to answer question, “Can I refinance a consolidated student loan?” I hope you’d be able to seek other options that could help lighten your financial load.