Transferring your student loan to another lender can get you a lower interest rate and different repayment term. It could also allow you to transfer a parent loan to your child.
But just as no one loan is right for all borrowers, no one method for transferring a loan is right for everyone.
The way you should go about it depends on your current situation and what you want to get out of a new loan and lender. Consider these options.
Options for federal student loan borrowers
Federal student loan consolidation
If you want to keep the Department of Education as your lender and continue receiving the perks of federal loans, consider student loan consolidation. During this process, you can choose a new student loan servicer.
Consolidation lets you combine several federal student loans into a single, easier-to-manage federal student loan. While it does not reduce your interest rate, it can lower your payment by extending the term. The downside is that the extended term will mean you pay more over time.
You can complete a consolidation loan application at studentaid.gov.
Consolidation might be right for you if:
- You are unhappy with your servicer or have several servicers and want to simplify your loan under one.
- You want to decrease your monthly payment amount.
- You have a Federal Family Education Loan loans and want to qualify for Public Service Loan Forgiveness, or PSLF.
- You have variable-rate federal loans and want to switch to a fixed rate loan.
Consolidation isn’t right for you if:
- You want to pay off student loans faster.
- You want to decrease your total repayment amount.
- You don’t want to lose credit for payments made toward PSLF or your existing income-driven repayment plan, or IDR.
Private student loan refinance
Refinancing your federal student loans means that your loans will move to a private lender. Doing this can get you a lower interest rate and give you the flexibility to choose a shorter or longer repayment term.
While refinancing can be a good option for decreasing your loan payments or decreasing the amount you’ll pay on your student loans overall, you will lose access to federal student loan benefits by refinancing to a private lender.
Refinancing might be right for you if:
- You have solid finances, a strong credit profile and a stable income to help you qualify for a low rate.
- You won’t need access to federal student loan benefits, like IDR.
- You have already taken advantage of the interest-free forbearance period.
Student loan refinancing isn’t right for you if:
- You’ll need access to federal student loan benefits.
- You don’t qualify for a lower rate than what you currently have.
Options for private student loan borrowers
If you have private student loans, refinancing will get you a different lender with a new interest rate and repayment term.
Unlike with federal student loans, private student loan borrowers don’t risk losing any 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 offer their lowest rates only to those with the strongest financial and credit profiles. But you can often save money — monthly or in total repayment — even if you don’t qualify for the lowest 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 in the high 600s.
- Debt-to-income ratio below 50%.
- A degree from a qualifying institution.
If you don’t qualify on your own, you might still be able to refinance with a qualified co-signer.
» See the list: best student loan refinancing companies
Options for Parent PLUS borrowers
If you took out federal Parent PLUS loans and are looking to have them transferred to your child, refinancing can provide a pathway. Use the following steps to do this.
1. Identify Parent PLUS refinance lenders that allow loan transfers.
2. Have your child prequalify with multiple lenders to see where they can get the best rate.
3. If your child meets the lender's qualifications on their own, you can fully transfer the loan to them.
4. If they don’t, you can serve as a co-signer on the refinanced loan and work with them to meet the lender’s co-signer release requirements. Many lenders allow co-signer release after a set number of successful payments.
