FAQs: We asked all the questions so you don't have to

Refinancing is a great way to save money, and pay off your student and all other loans quickly.

You will get a new loan with a better rate & terms to pay off your old loans, leaving you responsible to pay off only one, low rate loan instead of multiple with higher rates. Nothing from your old loans will carry over to your new one.

Consolidation

This simply means combining multiple loans into one single loan – one lender, one interest rate, one monthly payment. This is similar to refinancing in that you are combining your loans into one.

The catch? Your new interest rate becomes the weighted average of rates from your previous loans. It won’t decrease. Even with a lower monthly payment, it may require paying more in interest over time. Also, private student loans do not qualify for a direct consolidation loan. Criteria to qualify vary among private lenders, so you can never be sure.

Refinancing

All the “pro’s” of consolidation, but with a better rate so it saves you money! And you can use it on private loans. It replaces your other loans completely. No need to worry about private vs public loans.

Timing.

Of course, both have their respective pros and cons, and the length of your education may qualify you for one, but not the other.

PAYE caters to students who borrowed and graduated in 4 years, and took out additional loans for graduate school. Further narrowing the application pool, only students with federal direct loans qualify for PAYE.

Like the income-based repayment (IBR) plan, PAYE requires proof of partial financial hardship. Your payment must also be lower than what you would pay under the standard 10-year plan. If so, it's 10% of the difference between your monthly income and 150% of the federal poverty line. When your income increases, your adjusted payment caps at what you would pay on the standard plan.

REPAYE is the Department of Education’s 2015 update to PAYE. It is an income-driven repayment (IDR) program that depends on your earnings. Although similar to PAYE, it does not contain the same time restrictions to qualify. REPAYE extends PAYE’s 20-year forgiveness for graduate students to 25 years. REPAYE also does not require the borrower to prove the burden of student loan debt.

Under REPAYE, the government picks up unpaid interest on subsidized and unsubsidized direct loans. PAYE lets the government cover unpaid interest on subsidized student loans for three years if the monthly installment didn’t cover all of the interest. REPAYE matches this to expand subsidy to unsubsidized federal loans and unpaid interest on subsidized loans over the designated three years. This makes REPAYE a better choice for low-income borrowers because the 10% cap rarely covers the entire payment.

REPAYE is the more recent, relaxed version of PAYE. But if you qualify for PAYE, this is likely the more beneficial route. These programs best reflect the reality of student loan debt in America today. This makes them the most common ways to refinance.

Other income-driven repayment (IDR) plans include income-based (IBR) and income contingent (ICR). Under ICR, payments vary based on income, family size, loan balance and interest rate. Under IBR, payments strictly reflect income and family size. Payment is limited to 10-15% of your discretionary income.

There are also the less desirable standard and graduated repayment plans. With a standard repayment plan, monthly payments are fixed to pay off all loan principal and interest in 10 years. With a graduated plan, a lower initial payment increases every two years to pay off all loan principal and interest in 10 years. The reason these are less than desirable? They take all the power and leverage away from the borrower.