How to transfer a student loan to another lender

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Key findings

  • You can combine federal student loans to get different attendants; you can get a longer maturity that will decrease your payment but increase your total interest.

  • You can refinance your student loans to a private lender and get a lower interest rate and a different maturity. Federal borrowers shouldn’t refinance now.

  • You can transfer Parent PLUS Loans to your child through private refinancing and act as a co-author if your child does not qualify on their own.

Transferring your student loan to another lender can give you a lower interest rate and a different maturity. It can also allow you to transfer the parent loan to your child.

But just as no loan is suitable for all borrowers, no loan transfer method is suitable for all.

How you should do this depends on your current situation and what you want to get from the new loan and lender. Consider these options.

Options for Federal Student Loan Borrowers

Federal Student Loan Consolidation

Federal Student Loan Consolidation will not change your creditor, but will allow you select a new student loan servicer… This process allows multiple federal student loans to be consolidated into one federal student loan that is easier to manage. While this does not lower your interest rate, it can lower your payment by extending the term. The downside is that the extended term means you will pay more over time.

Consolidation can be useful for you if:

  • Are you unhappy with your service center or you have multiple service centers and want to simplify your loan to one.

  • You want to reduce your monthly payment.

  • You have federal variable rate loans and want to upgrade to a fixed rate loan.

Consolidation is not suitable for you if:

  • You want to pay off student loans faster.

  • You want to reduce the total repayment amount.

Refinancing a Private Student Loan

Refinancing your federal student loans means your loans will go to a private lender. This can lower the interest rate and give you the option to choose a shorter or longer maturity.

While refinancing can be a good option for reducing loan payments or reducing the amount you will pay on your student loan in general, now is not the time to refinance federal student loan borrowers. Federal student loans are currently exempt from interest and payments until October 2021. Refinancing will result in the loss of this benefit. You will also lose access to others federal student loan benefits by refinancing to a private lender.

After the interest-free grace period has elapsed, refinancing may be suitable for you if:

  • You have solid finances, a strong credit profile, and a stable income that will help you qualify for a low rate.

  • You will not need access to federal student loan benefits such as IDR.

Refinancing a student loan is not suitable for you if:

  • You will need access to federal student loan benefits.

  • You are not eligible for a lower rate than what you currently have.

Options for Private Student Loan Borrowers

If you have private student loans, when you refinance, you will get a different lender with a new interest rate and maturity.

Unlike federal student loans, borrowers of private student loans do not risk losing any benefits due to refinancing. So take the opportunity to refinance if you have a private loan and can qualify for a lower interest rate.

Private student loan companies offer the lowest rates only to those with the highest financial and credit profile. But you can save money – monthly or by repayment – even if you are not eligible for the lowest advertised rate. And you can refinance as many times as you can, so check student loan refinancing rates periodically.

Lenders usually look for the following refinancing requirements:

  • The credit rating is around 600 points.

  • Debt to income ratio is below 50%.

  • Diploma from a qualifying educational institution.

If you don’t qualify on your own, you can still refinance with a qualified collaborator.

Options for borrowers Parent PLUS

If you have taken out federal Parent PLUS loans and would like to have them transferred to your child, refinancing can provide you with a way.

To do this, first define Refinancing Parent PLUS lenders authorizing the transfer of loans. Ask your child to pre-qualify with several lenders to find out where they can get the best rate.

If your child qualifies for the lender on his own, you can transfer the loan to him / her in full.

If they don’t, you can co-author on the refinanced loan and work with them to fulfill the lender’s requirements for allowing joint signatures. Many lenders allow the release of a co-signer after a certain number of successful payments.

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