How to transfer student loans to another lender
Key points to remember
You can consolidate federal student loans to get another service agent; you can get a longer repayment term which decreases your payment but increases the total interest.
You can refinance your student loans with a private lender and get a lower interest rate and a different repayment term. Federal borrowers shouldn’t refinance right now.
You can transfer Parent PLUS loans to your child through private refinancing and serve as a co-signer if your child does not qualify on their own.
Transferring your student loan to another lender may give you a lower interest rate and a different repayment term. It could also allow you to transfer a parental loan to your child.
But just as no loan is right for all borrowers, no loan transfer method is right for everyone.
How you should go about it depends on your current situation and what you want to get out of a new loan and a new lender. Consider these options.
Options for Federal Student Loans Borrowers
Federal Student Loan Consolidation
Federal Student Loan Consolidation will not change your lender, but it will allow you to choose a new student loan service. This process allows you to combine multiple Federal Student Loans into one more manageable Federal Student Loan. While it doesn’t lower your interest rate, it can lower your payment by extending the term. The downside is that the extended term means you’ll pay more over time.
Consolidation may be right for you if:
You are not satisfied with your servicer or have several servicers and want to simplify your loan into one.
You want to reduce the amount of your monthly payment.
You have federal variable rate loans and want to switch to a fixed rate loan.
Consolidation is not right for you if:
You want to pay off your student loans faster.
You want to decrease the total amount of your refund.
Private student loan refinancing
Refinancing your federal student loans means that your loans will be transferred to a private lender. This can give you a lower interest rate and give you the option of choosing a shorter or longer repayment term.
While refinancing can be a good option to lower your loan payments or the amount you will be paying on your student loans overall, now is not a good time for federal student loan borrowers to refinance. Federal student loans are currently subject to interest-free, no-payment forbearance until October 2021. Refinancing will cause you to lose this benefit. You will also lose access to others federal student loan benefits by refinancing with a private lender.
After the interest-free forbearance period is over, refinancing may be right for you if:
You have strong finances, a strong credit profile, and a stable income to help you qualify for a low rate.
You won’t need to access federal student loan benefits like the IDR.
Refinancing a student loan is not right for you if:
You will need to access federal student loan benefits.
You are not entitled to a lower rate than the one you currently have.
Options for private student loan borrowers
If you have private student loans, refinancing will allow you to get a different lender with a new interest rate and a new repayment term.
Unlike federal student loans, private student loan borrowers do not risk losing their benefits by refinancing. So take advantage of refinancing if you have private loans and can qualify for a lower interest rate.
Private student loan companies only offer their lowest rates to those with the strongest financial and credit profiles. But you can save money – monthly or in full reimbursement – even if you don’t qualify for the lower advertised rate. And you can refinance as many times as you qualify, so check your student loan refinance rates periodically.
Lenders typically look for these qualifications for refinancing:
Credit score within 600 s.
Debt-to-income ratio less than 50%.
A diploma from a qualified institution.
If you are not eligible on your own, you may still be able to refinance with a qualified co-signer.
Options for Parent PLUS borrowers
If you’ve taken out Federal Parent PLUS Loans and want to transfer them to your child, refinancing may be one avenue.
To do this, first identify Parent PLUS refinancing lenders who authorize loan transfers. Have your child prequalify with several lenders to see where they can get the best rate.
If your child meets the lender’s qualifications on their own, you can transfer the loan in full to them.
If they don’t, you can serve as co-signer on the refinanced loan and work with them to meet the lender’s co-signer release requirements. Many lenders allow the co-signer to be released after a set number of successful payments.