Sometimes, student loan debt can start to feel like it’s slowing you down. If you’ve spent a significant amount of time with the same lender, you might become frustrated with the loan terms, the loan servicer, or even the lender themself. It might seem like the right time to search for a new lender to take over the loan, so you can transfer your debt to a different creditor.
Student loan transfers are one way to take matters into your own hands, but the process could involve taking out an entirely new loan, moving the balance of the existing loan, consolidating the loan, or refinancing.
Ultimately, it’s up to the borrower to decide what works best by shopping around for a lender with better terms, but being stuck with a student loan that leaves you feeling stonewalled isn’t necessarily the only option.
How Do I Transfer Student Loans to Another Private Lender?
Once a borrower has successfully landed on another lender to take over their student loan, there are several different ways to go about transferring the debt. The transfer process, however, typically starts the same way:
First, the borrower submits an application to the lender and the lender performs a credit check. Then, the lender uses the information on file to decide if they’d like to initiate the transfer. If the borrower’s application is accepted, they’ll agree to the new lender’s terms and fees, create a new account with the lender, and transfer their debt accordingly.
Moving forward, the borrower will work exclusively with the new lender and any servicer associated with them (more on that below) and make payments according to the new loan agreement.
Recommended: How to Find Out Who Your Student Loan Lender Is
Can I Transfer My Sallie Mae Loans to Another Lender?
While Sallie Mae no longer offers consolidation for their private loans, borrowers can still refinance their Sallie Mae loans and other private loans through a private bank or lender. This allows the borrower to change the management of their newly refinanced loan to a different lender and loan servicer.
What’s the Difference between a Lender and a Loan Servicer?
An important distinction to make is the one between a loan lender and a loan servicer:
• A lender is an institution or company that underwrites the student loan. For instance, federal student loans are underwritten by the U.S. Department of Education. While private student loans are underwritten by a private bank or institution like SoFi.
• A loan servicer is the company or organization that manages the loan once it’s been disbursed. It acts as a third party between the borrower and the lender and usually processes the payments and handles any customer service issues that may arise. There are a number of loan servicers that work with the federal government to manage federal student loans.
Can I Change My Student Loan Servicer?
Federal student loan borrowers aren’t necessarily able to hand-pick their student loan servicers, since they’re assigned at the time the loan is disbursed. But if they want more control over the process, there are a couple of options they can take before selecting a new student loan lender to ensure they get a servicer who’s a good fit for their future financial goals:
• Visit the My Federal Student Aid site to find out who their current student loan servicer is.
• Conduct a credit report check to see who’s managing their existing student loans.
• Review the Consumer Financial Protection Bureau’s Annual Report on Student Loan Complaints to see which loan servicers are creating obstacles for borrowers and how they responded to borrower complaints when filed.
Although borrowers can’t change their student loan servicers directly, they can do a little legwork and decide if it’s worth it to transfer student loans to another lender.
What about Consolidating My Student Loans?
Borrowers with federal student loans can consolidate them through the Direct Consolidation loan program. Consolidating student loans is a way for borrowers to streamline their student loan payments into a single fedloan payment. Consolidating through a Direct Consolidation Loan allows borrowers to continue to take advantage of federal student loan perks like federal student loan forgiveness and flexible repayment plans. The interest rate on a Direct Consolidation loan is the weighted average of all of the previous loans, so the interest rate won’t be reduced during this process.
While borrowers can’t use a Direct Consolidation Loan to combine federal student loans and private student loans, they can opt to refinance their federal and private loans with a new private lender to capitalize on having a single monthly payment, potentially lower interest, and a shorter timeframe to pay the loan in full. Refinancing federal loans with a private lender eliminates them from borrower protections and programs like Public Service Loan Forgiveness.
Related: Private vs. Federal Student Loans
What About Student Loan Refinancing?
Whether a borrower has federal student loans or private student loans, one way to transfer their student loans is by refinancing with another lender. To initiate this process, the borrower will decide on a new lender who fits their financial goals, take out a new loan in the amount of their existing private or federal student loan, and start making payments to the new lender.
With refinancing, borrowers also sign on with a new servicer, which can be beneficial for those who feel like they’re in a rut with their existing servicer. Additionally, if they consolidate more than one loan in the process, they only have to make one monthly payment moving forward.
Overall, neglecting to explore refinancing options could potentially mean missing out on some unique student loan benefits like lower interest rates, shorter repayment terms, and the flexibility of choosing between variable or fixed-rate loans. For borrowers who have federal loans, however, certain perks—like income-driven repayment plans and student loan forbearance—come off the table when refinancing with a private lender.
SoFi is the leading student loan refinancing provider, with $30 billion+ in refinanced student loans and satisfied customers across the country.
What About Transferring My Student Loan Balance to a Credit Card?
Another option for student loan transfers is for borrowers to move the balance onto a credit card and pay their monthly bills there. Some credit card issuers allow student transfers, but not all.
Generally speaking, this tactic only makes sense if the borrower qualifies for a card with a 0% introductory rate and can pay off the entire balance before that promotional period expires (usually 18-21 months). Otherwise, they could be left paying even more in interest than they would with the original loan.
According to CreditCards.com , the average credit card interest rate as of January 2021 is 16.11%. Compare that to the interest rates on federal student loans which are 2.75% for unsubsidized and subsidized federal student loans for undergraduates, 4.30% for graduate and professional students, and 5.30% for PLUS loans.
As for private student loans , the average interest rate is 6.64% for a 10-year fixed-rate student loan and 4.06% for a 5-year variable-rate student loan. In every one of these interest rate scenarios, student loans interest rates are less than credit cards.
Is It Possible to Transfer Student Loans From Parent to Student?
A Parent PLUS loan is a type of federal student loan for parents paying for children who are enrolled in eligible education programs.
As it stands, no federal loan programs allow parents to transfer their Parent PLUS loans to their children. And transferring the loan, even through a private lender, is not technically doable. That said, some select lenders (like SoFi) allow the student to apply for a refinanced loan and, if approved, use it to pay off the existing Parent PLUS loan.
The Takeaway
Transferring student loans involves finding a new lender (and their associated loan servicer), moving existing student loan debt into an account with their company, and making payments directly to the new lender moving forward.
There are special scenarios where student loan transfers can get a bit more complicated, like for borrowers with Sallie Mae loans, parents who take out Parent PLUS loans and want to transfer the debt back to their children, and borrowers looking to transfer their student loan debt onto a credit card.
Consolidating student loans is a way for borrowers to streamline their student loan debt into a single monthly payment. Those with federal student loans can opt to consolidate through a Direct Consolidation Loan that maintains the many benefits of their federal student loan program—like student loan forgiveness and flexible repayment plans.
Another option for borrowers looking to transfer their student loan debt involves refinancing their loan under a new lender. If they have federal student loans, however, they lose many of the perks that come with the federal student loan program.
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If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE THAT THE WHITE HOUSE HAS ANNOUNCED UP TO $20,000 OF STUDENT LOAN FORGIVENESS FOR PELL GRANT RECIPIENTS AND $10,000 FOR QUALIFYING BORROWERS WHOSE STUDENT LOANS ARE FEDERALLY HELD. ADDITIONALLY, THE FEDERAL STUDENT LOAN PAYMENT PAUSE AND INTEREST HOLIDAY HAS BEEN EXTENDED TO DEC. 31, 2022. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE THE AMOUNT OR PORTION OF YOUR FEDERAL STUDENT DEBT THAT YOU REFINANCE WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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