Student Loan Consolidation and Refinance

Combining student loans into one new loan can potentially result in a lower single monthly payment at a lower interest rate, which are reasons borrowers consider consolidating or refinancing their student loans.

Federal Direct Consolidation Loans

The Federal Direct Consolidation Loan Program offered by the federal government allows borrowers to combine any of their outstanding federal student loans into a single new loan. The fixed-rate is based on the weighted average interest rate of the loans being consolidated, rounded to the next one-eighth of one percent, and cannot exceed 8.25 percent.

Private Education Refinance Loans

Private education refinance loans are variable or fixed interest rate loans offered by banks, credit unions, and state agencies that allow borrowers to combine their outstanding federal and private student loans into a single new loan. The interest rate on a refinance loan is based on credit criteria set by the lender which can include credit scores of a borrower and, if applicable, co-borrower.

FAME developed as Maine’s student loan resource. This website has tools and information to help Maine residents become more informed about refinancing/consolidating student loan debt, as well as a list of local Maine private student loan refinance providers.

Things to Consider Before Consolidating or Refinancing Your Student Loans

  • Are your monthly payments manageable? If you have trouble meeting your monthly payments, have exhausted your deferment and forbearance options, and/or want to avoid default, consolidation, or refinance may help you lower your monthly payment.
  • Are you making multiple payments? If you send payments to more than one lender every month, and want the convenience of a single monthly payment, consolidation or refinance may be right for you.
  • What are the interest rates on your loans? Consolidating variable rate loans into a fixed rate or refinancing higher interest rate loans into a lower rate may be a reason you consider consolidation or refinance.
  • How much are you willing to pay over the long term? Like a home mortgage or a car loan, extending the years of repayment increases the total amount you have to repay.
  • How many payments do you have left on your loans? If you are close to paying off your student loans, it may not be¬†cost-effective¬†to consolidate or extend your payments.
  • What benefits, if any, will you give up if you consolidate or refinance? Be sure you understand the terms of the loans you are refinancing or consolidating so you can weigh the pros and cons of taking out a new loan that may not have the same benefits as your current loans.