The purpose of this article is to help borrowers identify and avoid student loan scams. Much of the advice contained below comes directly from the Federal Trade Commission (FTC) or the Consumer Financial Protection Bureau (CFPB). I’ve also included details on some of the types of scams I’ve seen over the years.

Calling Out Scammers by Name: I’d love to make a list of known scammers as a resource for borrowers. Sadly, a scary experience dealing with a scam company makes going that route especially difficult.

What Does a Student Loan Scam Look Like?

The most effective scams that I have seen create a sense of urgency with borrowers. Act now before the opportunity disappears.

For many responsible borrowers, a limited offer is worth investigating. If there is even a chance that the offer is legitimate, the potential savings would be enormous.

While the rules for student loans do change, it never happens quickly, and it never costs any money to benefit. All federal student loan programs are free to enroll. Additionally, paying for expert help just to fill out paperwork is almost always a mistake.

This graphic from the FTC best summarizes some of the telltale signs of a scam:

Lower Student Loan Interest Rates: Real or Scam?

The good guys and the bad guys both promise lower interest rates.

What is Legitimate – There are many student loan refinance companies that can actually lower your interest rates. Most of them work with both federal and private student loans.

The legitimate companies make money by offering lower interest rates to borrowers who are highly likely to pay back their student loans. These lenders pay off your existing debt with your old lenders. Then, you pay back the new company at, what is hopefully, a lower interest rate. The aggressive advertising, lower interest rates, and sign-up bonuses often trigger the “too good to be true” alarm for many consumers.

The best way to know you are dealing with a legitimate company is that good credit will be required. They will need your credit report to determine if you are a borrower who pays back your debt and can afford the loan.

This service is normally advertised as student loan refinancing, and there are many lenders in the refinance business. I’ve ranked and reviewed the nationwide companies offering student loan refinancing. Note that although some lenders received negative reviews, they are still legitimate companies. They just provide rates and terms I think could be better.

When a Lower Rate is a Scam – One of the biggest red flags to be aware of is when a company promises you lower interest rates and student loan forgiveness. You can get lower rates by refinancing your federal loans. However, those loans become private loans and lose eligibility for federal forgiveness programs. Alternatively, you can pursue federal forgiveness, but the government won’t be cutting your interest rate.

If everybody gets a lower interest rate, it is also probably a scam. Refinance companies only make money if they are smart in choosing their customers. If they pay off the loans for people who won’t pay back their debt, they will lose money.

Obama, Trump, or Biden Student Loan Forgiveness

Scammers love to advertise forgiveness programs associated with the current president. They try to benefit from the harsh political climate by appealing to a particular point of view.

However, it isn’t fair to say that all federal forgiveness programs are a scam. It has just been my experience that if somebody attaches the President’s name to the program, it is more likely to be fraudulent in some way.

What is Legitimate – Many student loan forgiveness programs exist for federal student loans. The most common are the forgiveness programs offered through income-driven repayment plans and Public Service Loan Forgiveness. There are also programs for borrowers in certain occupations, such as teachers and military personnel.

You can enroll in the legitimate programs directly through your federal student loan servicer. No special expertise is required. Although, researching and understanding the programs is very helpful for preventing errors. Furthermore, there is no cost to signing up for any of the student loan forgiveness programs. Federal law created these programs and are often a term in your student loan contract with the government.

Legitimate student loan forgiveness does not immediately wipe away all of your debt. It takes years to reach. It is a good idea for some borrowers, while others are better off aggressively paying off their debt.

Student Loan Forgiveness Scams – One of the biggest giveaways to a student loan forgiveness scam is a high-pressure sales environment. If somebody is aggressively trying to push you into a program that will erase your debt, it should be a red flag. Another huge red flag is any fees associated with the program. Again, student loan forgiveness is federal law, and signing up costs nothing. There should be no enrollment fees or monthly costs.

Another common red flag is when a company advertises a special relationship with the Department of Education. Such a relationship doesn’t exist. Student loan programs are open to all federal borrowers. No outside company can change your eligibility.

Finally, if you are working with a company that requires your FSA PIN, now known as the FSA ID, you are likely getting scammed. The Department of Education makes it clear that the borrower is the only person who should have access to this number.

You can achieve enrollment in any student loan forgiveness program through your federal student loan servicer. Any third party that tries to enroll on your behalf likely has bad intentions. At best, they are charging you money to fill out forms that you could submit on your own. At worst, they are flat-out stealing your money or your identity.

Student Loan Consolidation Scams

Student loans are consolidated when multiple existing loans are combined into one new larger loan. There are two types of consolidation. One is federal student loan consolidation, and the other is private loan consolidation. For many borrowers, student loan consolidation is a helpful or even necessary step. Unfortunately, there are also scammers advertising student loan consolidation services.

Legitimate Student Loan Consolidation – Many borrowers elect to consolidate their federal loans to gain eligibility for certain programs. For example, FFEL loans are not eligible for public service loan forgiveness, but they can be included in a federal direct consolidation loan and gain public service forgiveness eligibility. You can consolidate your federal student loans only directly through the federal government. This process can only take place using the Department of Education’s consolidation site.

Student Loan Consolidation Scams – If you are paying for this service, it is almost definitely a scam. Whether you are consolidating your federal loans for program eligibility or consolidating on the private market for a lower interest rate, the cost to you should be $0. Another red flag is if the company you are working for asks for your FSA ID or FSA PIN.

$0 Per Month Student Loan Payments

Like many other scams, the $0 per month payment scams start with a legitimate federal program and use it to take advantage of borrowers.

What is Legitimate – Federal student loans do have income-driven repayment plans. If you don’t have any income or your income is below a certain level, your monthly payment could actually be $0. It is also possible that the government could eventually forgive your loan. This is something you can do directly with your student loan servicer and requires no expertise or special knowledge.

When $0 Payments are a Scam – If you see advertising for income-driven payments, the odds are pretty good that it isn’t legitimate. Loan servicers and the federal government don’t spend money advertising these options. They have no incentive to promote these programs. They simply make it available for the borrowers who need help. If you are seeing aggressive advertising from a company offering $0 payments, it is a huge red flag.

Private lenders don’t have income-driven repayment plans. If you see an advertisement for this, somebody is probably trying to sell you something, and you probably don’t want to buy it.

Personalized Student Loan Consultations 

There are numerous self-described student loan specialists offering personalized advice for individual student loan circumstances. This is a gray area in the world of student debt.

For the sake of transparancy, I should disclose that I am someone who falls into this category of self-described specialists offering individual guidance.

As such it probably isn’t fair for me to say who or what is legitimate and what might be a scam. What I will say is that when shopping for a service like this be wary of ongoing fees and lofty promises.

Paying someone for an hour of their time and insight is reasonable. There isn’t any reason for monthly charges, or charges based upon the amount of debt forgiven. Likewise, nobody can promise loan forgiveness or a specific outcome. Anyone engaging in either practice should be viewed with some skepticism.

Red Flags to Avoid

If the specific details covered so far don’t apply directly to your situation, the Consumer Financial Protection Bureau has some excellent general guidelines for identifying and avoiding student loan scams.

According to the CFPB, the following are all signs of a scam:

Pressure to pay high up-front fees. It can be a sign of a scam when a debt relief company requires you to pay a fee up-front or tries to make you sign a contract on the spot. These companies may even make you give your credit card number online or over the phone before explaining how they’ll help you. Avoid companies that require payment before they actually do anything, especially if they try to get your credit card number or bank account information.

Promises of immediate loan forgiveness or debt cancellation. Debt relief companies cannot negotiate with your creditors for a “special deal.” Federal law sets payment levels under income-driven payment plans. For most borrowers, loan forgiveness is only available through programs that require many years of qualifying payments.

Demands that you sign a “third party authorization.” You should be wary if a company asks you to sign a “third party authorization” or a “power of attorney.” These are written agreements giving them legal permission to talk directly to your student loan servicer and make decisions on your behalf. In some cases, they may even step in and ask you to pay them directly, promising to pay your servicer each month when your bill comes due.

Requests for your Federal Student Aid ID. Be cautious about companies that ask for your Federal Student Aid ID. Your FSA ID — the unique ID issued by the U.S. Department of Education to allow access to information about your federal student loans — is the equivalent of your signature on any documents related to your student loan. If you give that number away, you are giving a company the power to perform actions on your student loan on your behalf. Honest companies will work with you to develop a plan. Further, they will never use your FSA ID to access your student loan information.

A Couple Final Tips from the Sherpa

I once received a call from a student loan company that was going to fix my student loans. The glaring red flag was the fact that they didn’t even know my name. If you call me to offer a service and don’t even know my name, I know you are a spammer. Enough Americans have student loan debt that some scammers just call every phone number they can.

However, I’ve received mail from companies that had detailed information about my student debt situation. After some investigation, I determined that they were scams attempting to charge me for free federal student loan programs. The lesson: companies that have your loan information on file may not be legit. To this day, I have no idea how the scammers knew about my debt balance.

Finally, calls, texts, emails, letters, and ads about brand new laws and special programs from Congress are almost always scams. Any new student loan program from the government gets a ton of attention. These programs are easy to verify via a quick Google search. Don’t ever assume that some company has special access or information.

The post Student Loan Forgiveness Scams vs. Legit Programs – How to Tell the Difference appeared first on The Student Loan Sherpa.

Borrowers now have until June 30, 2024, to consolidate their federal student loans and take advantage of the generous rules for awarding pre-consolidation progress toward forgiveness. This extension is particularly crucial for Federal Family Education Loan Program (FFELP) borrowers.

Despite the deadline being extended multiple times, today’s announcement likely marks the final extension. The urgency stems from the impending implementation of the full version of the SAVE rules, set to take effect on July 1, 2024. Under these new rules, borrowers who consolidate will receive the weighted average amount of their existing loans’ progress prior to consolidation.

Key Rule Comparisons

Previous Rules:

• Before the Biden administration’s changes, consolidating federal student loans would reset a borrower’s progress toward forgiveness under both the Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) forgiveness programs.

Current Temporary Rules:

• The temporary rules count certain deferments, forbearances, and activity on balance-based plans that typically do not count toward forgiveness. This includes loans that were previously consolidated under the old rules.
• Borrowers receive maximum progress based on the included loans. For example, if a borrower has one loan with 10 years of progress and another with 6 years of progress, the consolidated loan will reflect the full 10 years of progress.

New SAVE Rules (Effective July 1, 2024):

• Borrowers will receive a weighted average of their progress. For instance, if a borrower has a $3,000 loan with 10 years of progress and a $1,000 loan with 6 years of progress, consolidating the two will result in a loan with 9 years of progress.
• Conversely, if a borrower has a $3,000 loan with 6 years of progress and a $1,000 loan with 10 years of progress, the consolidated loan will have 7 years of progress.

Why Consolidation Before June 30th is Crucial for FFELP Borrowers

For FFELP borrowers, consolidating before the June 30th deadline is almost essential. The temporary rules provide a unique opportunity to maximize progress toward forgiveness, which will no longer be available after the deadline.

A failure to consolidate means that prior payment activity on plans such as the standard repayment plan or the graduated-extended repayment plan will not count toward IDR or PSLF forgiveness.

Even for borrowers without FFELP loans, consolidation is often still advisable, especially for those with loans showing varying amounts of progress toward forgiveness.

Even though borrowers with federal direct loans will recieve the adjustment automatically, there are still potential benefits to consolidating before the adjustment happens.

For example, borrowers who have returned to school after working for a few years and those with loans reflecting different stages of progress should strongly consider consolidation. The temporary rules maximize existing progress. By not consolidating, these borrowers will have loans with different forgiveness timelines.

Final Thoughts

With the final extension in place, impacted borrowers should act swiftly to consolidate their loans before the June 30th deadline.

The benefits of the current temporary rules provide an unprecedented opportunity to maximize progress toward loan forgiveness. As the new SAVE rules take effect on July 1, 2024, this likely represents the final opportunity to take advantage of these generous rules.

If you have questions about how this deadline impacts you, consider calling your loan servicer, reading about the full terms of the adjustment at studentaid.gov or scheduling an consultation to discuss how to maximize the benefit of the adjustment as part of your broader repayment strategy.

The post Biden Administration Extends Student Loan Consolidation Deadline appeared first on The Student Loan Sherpa.

The total amount of time and the exact number of steps depends upon several factors. The most significant factor affecting the consolidation timeline is whether the consolidation is done through the federal government or a private company.

Before jumping into any specific timelines, it is important to first explain the difference between refinancing and consolidation: When you pay off your existing loans and replace them with a new one, it’s called consolidation if the government is handling it, and refinancing if a private company is doing it.

Federal Direct Consolidation

Consolidating federal loans with the government is a pretty straightforward process. There is only one form to complete, and then it is a waiting game. The tricky part is deciding if federal consolidation is a good idea.

All federal direct consolidation takes place at the Department of Education Website. According to the Department of Education, the application itself only takes about thirty minutes. After that, a long wait begins.

Once the application is complete, the consolidation people will reach out to the borrowers existing federal loan holders to get final payoff numbers. Once they have final payoff numbers, the borrower will receive a letter detailing the new consolidated loan, new interest rate (the weighted average of existing loans), and new loan servicer. At that point, borrowers can either call to cancel or move forward. To move forward, borrowers are not usually required to take any action. From this point, the remaining steps should take no more than a few weeks.

The work happening behind the scenes isn’t particularly complicated, but it does move at the speed of government, so it takes time. For borrowers, the important thing is to make sure that the proper loans are included in the consolidated loan. Borrowers should also be aware that hiccups along the way, such as loan balances temporarily appearing to double, are possible.

The full federal direct consolidation can take 2-3 months.

A Note About Consolidation Deadlines: Many deadlines, such as the upcoming deadline to take advantage of more generous IDR and PSLF math are based on the date you apply, rather than the date the process is complete.

Sherpa Tip for Parent PLUS Borrowers: If you have Parent PLUS loans and are considering taking advantage of the double-consolidation loophole, getting an early start on the process is critical.

Because mailing the application is suggested for double-consolidation, it will add extra time. Additionally, because you need to consolidate multiple times, the longer processing times could cause you to miss the deadline.

Private Student Loan Refinancing

For borrowers consolidating private loans or refinancing federal loans with a private company, the process is much different. The total time for consolidation can vary greatly.

One crucial step is shopping around. With many different student loan refinancing companies in the market, research at the beginning of the process is essential.

The initial application with each lender is not particularly time-consuming, and applying with several different lenders is a good idea because it will help find the best rate. Initial approvals can be instant or happen within a few days. Some may need more detailed income information, so it could take longer.

The next phase has a couple of steps happening at once. The refinance lender will be collecting information from the borrower to verify income and ability to pay. The refinance lender will also be reaching out to exiting loan holders to get final payoff information with the existing loan companies. The amount of time that this takes varies greatly.

Some companies will not reach out to lenders until all the borrower information reaches final approval; others will be working on both tasks at the same time. Getting final payoff information from existing lenders is a huge variable, because some companies make the process very easy, while others put more steps in the way.

Once the old loans are paid off, borrowers begin repayment with the new lender according to the terms of the new agreement.

In total, the process can take as little as a week or two and take as long as a couple of months. However, this passage of time occurs while the lenders are working. The borrower usually invests no more than a couple of hours of their own time.

Processing Times by Lender

Some lenders move faster than others. For borrowers looking to move quickly with a refinance, we contacted many lenders to determine the average processing time by lender.

The general consensus seemed to be that the complete process, from initial application to loan funding, took two to three weeks on average. The three fastest lenders were Earnest, CollegeAve, and LendKey. Earnest claimed that the average loan took under a week and CollegeAve and LendKey both said that the process took two weeks on average.

We should also note that just because the new loan has been funded, the old debt might still appear on a credit report. Borrowers in a rush should prepare for a lag time between loan creation and the new loan appearing on a credit report.

Tips to Speed Up the Process

Of the eight different lenders that were willing to report loan refinancing times, all but one reported between two and three weeks. Thus, we don’t think that the lender selected should have a considerable influence on the time the process takes.

The primary factor in determining the length of the process appears to be the borrower. Most borrowers will need to submit loan payoff statements from their existing lenders. Borrowers may also need to provide income verification documents. Finally, all borrowers will need to sign documents authorizing the loan to be funded. Getting through the refinance quickly doesn’t require a lot of borrower time, but it does require a borrower to respond to lender requests quickly.

Another way to speed up the refinance timeline is to start the process with several different lenders. Though rare, your loan may get stuck in underwriting with a lender. If you apply with several different lenders, you can ensure you are getting the lowest rate possible and avoid unnecessary delays.

The Bottom Line

Student loan consolidation takes a while since old loans must first be paid in full. At that point, a new loan is generated. For borrowers, consolation may be an opportunity to save money. As such, the consolidation wait is a good investment of time.

The post How long does student loan consolidation or refinancing take? appeared first on The Student Loan Sherpa.

Consolidation is quite straightforward: it replaces your old loans with a new one. You can consolidate just some or all of your loans.

After consolidation, your old loans are considered paid off, and you start repaying a new loan, ideally with better terms.

For AidVantage loans, you have two consolidation options: federal and private. Federal consolidation is done through the Department of Education, while private consolidation, often called refinancing, is through a private lender. These two options have major differences, so it’s crucial to choose wisely. Once you consolidate, you can’t reverse the process, so any decision you make is final.

Sherpa Note: This article originally covered Navient student loan consolidation. When Navient changed its name to AidVantage, this article was updated to reflect the new name.

Federal Direct Consolidation

The main benefit of federal loan consolidation is that you keep all the federal loan benefits, such as income-driven repayment plans and student loan forgiveness. Plus, anyone can consolidate their federal loans without needing to meet credit or income criteria.

The downside is that consolidating your federal loans doesn’t lower your interest rate. It just groups your loans. The goal behind a federal consolidation is to gain eligibility for preferred federal programs.

The danger is that federal loan consolidation might not be the best move for everyone. Mixing certain federal loans could disqualify you from the best repayment options. It’s important to weigh the advantages and disadvantages before proceeding.

Finally, you can only consolidate federal student loans into a federal loan consolidation. If you hope to convert your private loans into federal loans to get on IBR or qualify for student loan forgiveness, you are out of luck. Absent an act of Congress, this financial move is not possible.

Private Consolidation aka Student Loan Refinancing

When you explore the market for refinancing lenders, you’ll find many lenders advertising lower interest rates. Lowering your interest rates can reduce your monthly payments and help you pay off your loan sooner.

All types of loans, including federal ones, can be refinanced into private loans. However, if you’re considering refinancing your federal loans into a private loan, be cautious. While refinancing at lower interest rates can save you money, you’ll lose the benefits that come with federal loans, which is an important factor to consider.

If you decide to refinance, you’ll need a good credit score and a stable income. Since requirements and offers vary by lender, it’s wise to compare options from different companies.

	Splash is extremely focused on interest rates. They consistently have the lowest rates in numerous loan categories. Read more...
	ELFI is a traditional bank with a major focus on quality customer service. Getting approved is hard for some borrowers, but those that do get approved receive excellent interest rates. Read more...
	SoFi is the biggest name in the student loan refinance space. They consistently offer excellent rates with high approval numbers. Read more...
	Earnest attempts to look at the big picture for borrowers. The application requires a bit more information, but it doesn't take long to complete, and could result in an approval where other lenders might reject. Read more...
	LendKey partners with smaller banks and credit unions across the country. This approach results in higher approval numbers and competitive loan terms. Read more...

One thing many people forget about credit scores is that shopping around doesn’t hurt your credit score. As a result, it pays to apply at several places to find the best rate.

How To Start the Consolidation Process on AidVantage Loans

Given the enormous differences between private refinancing and federal consolidation, it shouldn’t be much of a surprise that starting each process is dramatically different.

Because the process is identical regardless of loan servicer, AidVantage borrowers will have the same consolidation process as MOHELA, Nelnet, and others. Additionally, AidVantage has no ability or authority to stand in the way of either process.

Federal Direct Consolidation – The Department of Education handles all federal student loan consolidation requests. Borrowers can start the consolidation by applying through this portal from the Department of Education. Completing the application usually takes less than half an hour. However, the full process takes several weeks or even months before the Department of Education finalizes everything.

Refinancing with a Private Lender – To refinance with a private lender, a borrower must pass a credit check to get approved. I usually recommend shopping around to get the lowest interest rate. This adds a bit of extra time to the process but can result in significant savings. Our student loan refinance company list has links to the various lender application forms. The entire private refinance process can be done in as little as a week from start to finish.

Consolidating AidVantage Loans

Just because you can’t pay off your AidVantage loan tomorrow or next week doesn’t mean you are stuck with the same loan and the same terms for years to come. Student loan consolidation offers ways to get lower payments, lower interest rates, change servicers, and pay off your loan faster.

The post How to Consolidate AidVantage Student Loans appeared first on The Student Loan Sherpa.

In most cases, federal student loan consolidation benefits those who need to resolve eligibility issues. For some, consolidation can be a pathway to qualify for student loan forgiveness or income-driven repayment plans.

In this article, I’ll go over the essentials of federal direct loan consolidation, along with many useful tips to maximize the benefits of consolidation.

What is Federal Student Loan Consolidation?

At its core, federal student loan consolidation involves merging multiple federal loans into a single loan.

To better understand the complex rules and details of student loan consolidation, it’s helpful to view it as a transformation process. Essentially, it turns old federal loans into a new one. While this often means combining several loans into one, borrowers also have the option to consolidate just a single loan.

This emphasis on “transformation” is important because the outcomes can vary greatly. Some borrowers make a mistake and transform a loan they might like into a lousy loan. Other borrowers use consolidation wisely and transform a flawed loan into a better federal loan.

What makes a good loan or a bad loan is all about perspective and circumstances. To best illustrate how to navigate this transformation, let’s look at some examples of what to do and what to avoid.

When Should Federal Student Loans be Consolidated?

A prime example of wisely using federal direct consolidation involves Federal Family Education Loan Program (FFELP) loans. Before 2010, these were issued by private lenders but guaranteed by the federal government. While they mostly functioned like federal student loans, they had certain restrictions.

One key limitation is that FFELP loans aren’t eligible for Public Service Loan Forgiveness (PSLF). But, by consolidating them into a federal direct loan, they become “federally held” loans, which then qualify for more forgiveness programs.

Another smart consolidation move is for Parent PLUS loans. These loans are not eligible for income-driven repayment plans or PSLF. However, converting them into a federal direct loan through consolidation makes them eligible for the Income-Contingent Repayment Plan and student loan forgiveness.

These consolidation strategies are beneficial for many borrowers because they transform loans with limited federal program access into ones with broader eligibility.

Nevertheless, it’s important to remember that this transformation isn’t always the best course of action.

When is Federal Student Loan Consolidation a Huge Mistake?

One major misstep in Federal Student Loan consolidation occurs when a borrower combines a Parent PLUS loan with other federal student loans. As mentioned earlier, consolidating a Parent PLUS loan alone can make it eligible for the Income-Contingent Repayment (ICR) plan. However, if this loan is combined with other federal loans, the new consolidated loan becomes ineligible for more favorable repayment plans like IBR, PAYE, and SAVE.

This misstep could end up costing the borrower a significant amount of money and is arguably one of the biggest blunders one can make with Parent PLUS loans.

Due to a potentially harmful outcome from consolidation, borrowers must consider program eligibility and progress before consolidating. While consolidation is a crucial step in some scenarios, it can be a huge mistake in others.

How do I Consolidate Federal Student Loans?

The actual process of federal direct consolidation is very simple.

The Department of Education will process all of the paperwork electronically. They estimate that filling out the form takes about 30 minutes.

Borrowers should be wary of third-party student loan consolidation services. Often masquerading as legitimate companies, these entities are better described as scams. They falsely claim to have a special connection with the Department of Education and offer assistance in qualifying for Income-Driven Repayment Plans and Student Loan Forgiveness. In reality, these companies are just middlemen who charge for their services without adding any real value. In many cases, they end up making errors and making the process even more difficult than necessary.

These companies have gotten so bad that at the top of the Department of Education’s Student Loan Consolidation information page, it displays the following:

As long as borrowers stick with the official Department of Education Student Loan Consolidation page and are careful only to consolidate when necessary, the process is relatively simple.

Other than deciding which loans to include in the consolidation, borrowers will also need to consider their repayment plan options. One of the options will allow borrowers to pick the plan with the lowest monthly payments. However, because multiple plans may have the same low monthly payment, borrowers should research their preferred repayment plan before consolidating. There are several repayment options that borrowers should consider.

Student Loan Consolidation and Forgiveness Progress

Many borrowers who choose to consolidate may have already made progress toward loan forgiveness under Public Service Loan Forgiveness or IDR forgiveness.

Historically, consolidating meant restarting the “forgiveness clock” at zero.

Fortunately, this old harsh rule has been eliminated. Now, borrowers can consolidate their loans without losing credit for their previous payment efforts.

This rule change makes signing up for the new SAVE plan considerably less risky.

Student Loan Consolidation vs. Refinancing

Student loan consolidation and refinancing are terms that are often confused or used interchangeably, but they refer to different processes. Some lenders that offer student loan refinancing label their services as consolidation, which can add to the confusion.

Here’s an easy way to distinguish the two:

• Student Loan Consolidation is a process exclusively handled by the federal government. It involves combining various federal loans into one federal direct loan. Importantly, consolidation does not change your interest rate in the traditional sense. Instead, the Department of Education calculates a weighted average of your existing loans’ interest rates and rounds it to the nearest 1/8th of a percent. The only exception is for some borrowers with FFEL Consolidation Loans, who may see an interest rate increase if they had a premium interest rate discount from their lender.
  
• Student Loan Refinancing is offered by private lenders. This process involves the private lender paying off your old loans, and in exchange, you agree to repay a new loan under the new lender’s terms. Refinancing is typically pursued to secure a lower interest rate. It can be applied to both federal government loans and private loans. There are various companies that offer refinancing services, so it’s crucial for borrowers to do their research and fully understand the implications, especially when refinancing federal student loans into private ones.

Important Details to Know Before Starting Federal Direct Consolidation 

Consolidation may result in two loans instead of one – Federal consolidation typically is presented as a way for borrowers to combine all of their federal student loans into a single loan. Many borrowers will end up with two separate loans if they consolidate. This is because the Department of Education keeps the subsidized loans separate from the unsubsidized.

Consolidation is one of the rare opportunities to switch federal servicers – During the student loan consolidation process, borrowers have the option of selecting their preferred loan servicer.

The credit score impact is minimal – When borrowers consolidate their loans, there might be a slight change in their credit score. For some, the score may increase because the old loans are marked as paid in full, and it’s often better for credit to have one larger debt instead of many smaller ones. However, for others, the score might decrease if their student loans were the oldest accounts on their credit report, as the average age of credit is a factor in credit scoring. Overall, consolidation doesn’t typically cause significant shifts in credit scores. The financial savings from consolidation are generally a more substantial benefit.

Hold off on Consolidation if you are about to buy a house – A ton of major changes on a credit report can cause some concern with mortgage companies. Borrowers who are about to buy a house should discuss consolidation with their mortgage company before starting the process.

The consolidation process can take months – Filling out the form may only take 30 minutes, but the actual process may take months. To consolidate, all of the old loans must be paid off in full, and doing this math takes the Department of Education some time. Don’t be surprised if there are some minor issues with this process.

After the math has been done, the borrower should receive a letter giving them one last chance to opt out of the consolidation. Though no action is required from the borrower during this time, the consolidation process is a bit time-consuming.

Consolidation can be used as a way out of default – Borrowers who have fallen way behind on their student loans can use consolidation as a quick fix to get out of default. However, borrowers also have the option to rehabilitate their loans before consolidation. There are several factors borrowers should consider when deciding between rehabilitating and consolidating their defaulted loans.

Private loans cannot be included in a federal consolidation – Being able to transform a private student loan into a federal government loan would be great, but it is not an option.

There is no minimum credit score or income requirement – Unlike refinancing with a private company, all federal borrowers are allowed to consolidate their federal loans. There is no credit check.

The post The Complete Guide to Federal Direct Student Loan Consolidation appeared first on The Student Loan Sherpa.

Consolidating loans can turn loans that are not eligible for certain programs into loans that are eligible. Years of legislative changes to student debt, combined with Department of Education fine print, can make things confusing.

Things can get especially difficult with Parent PLUS loans because of the limited options available for repayment and the steps required to enroll.

It is in this tangled-up web of rules and regulations that some borrowers make an incredibly expensive mistake. They consolidate their Parent PLUS loans with other federal loans.

Parent PLUS Loan Consolidation

Why is it a mistake to combine Parent PLUS loans with other federal loans?

There are certain limitations that apply to Parent PLUS loans. For example, Parent PLUS loans are not eligible for the best repayment plans. These plans include income-driven plans such as IBR (Income-Based Repayment), PAYE (Pay As You Earn), and SAVE (Saving on A Valuable Education). The only income-driven plan that Parent PLUS loans are eligible for is the Income-Contingent Repayment Plan (ICR).

To the average borrower, these plans all sound pretty much identical.  In reality, there are huge differences between these plans. All of these plans require borrowers to pay a certain portion of their discretionary income towards their student loans each month. The idea is that you pay what you can afford, regardless of how much you owe.

However, these plans require different percentages of your discretionary income. PAYE and SAVE are great because they only require 10%. IBR is a little bit more expensive, requiring borrowers to pay 15%. ICR is the most expensive, requiring 20%. Outside of the percentages, there are other differences between these repayment plans, but the important part is this: for many borrowers, signing up for ICR will result in double the monthly payment.

Why Does ICR Even Exist?

Once upon a time, ICR was the very best plan available.

For borrowers who didn’t have jobs, or who could afford their monthly payments, ICR was awesome. Payments were based upon income, not debt levels.

As time passed, Congress and the Department of Education decided that 20% was too high. A new plan came along requiring only 15% of a borrower’s monthly discretionary income, and IBR was born. As more time passed, new plans came along requiring only 10%.

Even though ICR was once the best, it has become an outdated dinosaur.

Unfortunately, for borrowers with Parent PLUS loans, it is the best plan that their loans are eligible for. Borrowers with a Parent PLUS loan cannot sign up for IBR, PAYE, or SAVE with that loan.

Sherpa Tip: If you have parent PLUS loans, the typical solution is to do a split consolidation. Parent PLUS loans go into one consolidated loan, and all other federal loans go into another consolidated loan.

One other option that is temporarily available for some borrowers is the double-consolidation loophole. This loophole will eventually get closed, but for now some borrowers may be able to get around the strict Parent PLUS rules.

The Big Parent PLUS Error To Avoid

The borrowers with their own federal loans and Parent PLUS loans have mixed eligibility problems.

Some loans can sign up for preferred repayment plans while others cannot. In this situation, the best option is usually to pay off the Parent PLUS loan first. Once that loan is eliminated, the other loans can be enrolled in the more generous repayment plans.

The worst thing that can be done is consolidating a Parent PLUS loan with other federal student loans into a federal direct consolidation loan. The government will then apply the restrictions that applied to the Parent PLUS loan to the new larger loan.

As an example, suppose a borrower has $25,000 in federal loans from when they went to school and $5,000 in Parent PLUS loans to pay for their child’s education. The borrower can combine the loans into a $30,000 direct consolidation loan. The problem is the government will treat the new loan with all the limitations of a Parent PLUS loan. The $25,000 that would have been eligible for IBR or REPAYE is now only eligible for ICR. It can be an expensive mistake.

Avoiding the Parent PLUS Consolidation Mistake

Combining Parent PLUS loans with other federal loans is almost always a mistake. There are many ways borrowers can get tripped up when consolidating.

First, the many different federal repayment plan options can make things confusing.

Second, even though combining Parent PLUS loans with other federal student loans is a huge mistake, borrowers do have the right to combine the loans in a consolidation.

Finally, many customer service representatives do not understand the magnitude of the mistake. If they don’t understand why it is a bad idea, they cannot warn borrowers before it is too late.

The Severity of the Situation

Once the loan is consolidated, there is no undo button. There is no fix.  A consolidated loan cannot be “unconsolidated.”

For many borrowers, this can mean decades of higher student loan payments due to one single mistake.

Sherpa Thought: I think there is a great argument for this rule to change. However, making that change a reality will require action from affected borrowers.

Bottom Line

Combining Parent PLUS loans with other student loans in a direct consolidation loan can be a lasting error. Unfortunately for many borrowers, it is an easy mistake to make, and there is no good way of fixing it.

(Editor’s Note: There are also Graduate PLUS loans… these loans sound very similar to Parent PLUS loans, but combining them with other federal loans is not the same huge mistake. The Graduate PLUS loans are eligible for the preferred repayment plans. Dealing with these loans is an entirely different circumstance.)

The post The Biggest Parent PLUS Loan Mistake… appeared first on The Student Loan Sherpa.

This particular mistake is so severe because it is permanent. There isn’t a mechanism currently available for borrowers to undo this consolidation.

There should be.

More importantly, there can be — if the government is sufficiently motivated to make it happen.

The Need to Separate Parent PLUS Loans from Other Consolidated Loans

The problem with combining Parent PLUS loans with other federal student loans in a single consolidation loan boils down to eligibility.

Most federal loans are eligible for a range of income-driven repayment plans, including the new SAVE plan. Monthly payments can be as little as 5% of a borrower’s discretionary income, and forgiveness can take as little as 10 years.

The only income-driven repayment plan for Parent PLUS loans is the ICR plan. On ICR, forgiveness takes 25 years, and borrowers must pay 20% of their discretionary income. Making matters worse, the discretionary income definition is different for the ICR plan, meaning a larger portion of a borrower’s income is subject to student loan payments.

When a Parent PLUS loan gets added to a consolidation loan, it acts as a poison pill. The entire consolidated loan loses eligibility to all of the income-driven repayment plans except ICR. This means larger payments each month and a longer wait until forgiveness.

The Need to Undo Federal Consolidated Loans

Outside of taking advantage of a temporary loophole or utilizing the one-time IDR Count Adjustment to fast-track forgiveness, borrowers shouldn’t be combining their Parent PLUS loans with their other federal loans.

Unfortunately, it still happens all the time.

In many cases, it is a student loan servicing issue. Sometimes, borrowers make this mistake on their own. Other times, they make the mistake under the guidance of their servicer. Either way, there should be protections in place to prevent this mistake from happening.

The Blueprint to Unconsolidate Loans

For decades, a consolidated loan was final. It is a new loan; it paid off the old loans in full, and there was no going back.

Recently, legislation was passed to allow spouses to separate Federal Joint Consolidation loans. Though Joint Consolidation loans haven’t been available for years, many couples were stuck with limited repayment options for massive loans. The fix for Joint Consolidation is complicated,q and implementing it has taken a lot of time.

Nonetheless, a process is being created. What was once a large consolidated loan can soon become separate student loans.

When the Joint Consolidation Separation process is finalized, it could serve as a blueprint for separating Parent PLUS Loans from other loans in federal direct consolidation loans.

Hope for Borrowers with Parent PLUS Loans Looking to Separate Their Consolidation Loan

There appears to be an understanding with many in the federal government that student loan servicers have sometimes failed borrowers.

To correct these failures, government programs have been created to assist borrowers who may have been negatively impacted. For example, the Limited Waiver on PSLF helped borrowers who might have received inaccurate guidance about the Public Service Loan Forgiveness Program. Likewise, the one-time IDR Count Adjustment allows borrowers who were directed to deferments, forbearances, and balance-based repayment plans when they would have been better off signing up for an income-driven repayment plan.

If the government becomes aware of the severity of the Parent PLUS loan consolidation issue, they might finally take action to help this group of borrowers.

Sherpa Thought: My focus today has been to advocate for a pathway for borrowers to consolidate or separate their consolidation loans.

Another fix for this particular Parent PLUS loan issue would be to make Parent PLUS loans eligible for the SAVE plan. Thus far, the Department of Education has refused to expand SAVE eligibility to Parent PLUS loans.

The Necessity of Borrower Action

Policymakers are often pretty far removed from the day-to-day experiences of borrowers.

Many don’t fully understand student loan policy or how borrowers have been negatively impacted by the servicers contracted by the government to help borrowers.

The key to getting this problem fixed is to shine a spotlight on the issue.

Impacted borrowers can take three steps to make it known that they are unfairly stuck with Parent PLUS loans in a consolidated loan.

I’d encourage borrowers to do all of the following:

• File a Complaint with the CFPB. The Consumer Financial Protection Bureau does a great job of tracking and documenting borrower issues. Past borrower complaints to the CFBP have led to lawsuits against servicers and policy changes. Filing a complaint with the CFPB is an easy process for borrowers.
• File a Complaint with the Department of Education. If you want the Department of Education to fix a problem, they must know it exists. The more people who leave a complaint with the Department of Education, the more severe the problem will appear to be and the more likely it is that the government will take action.
• Call and Email Members of Congress. Student loans have become a politically charged topic, but the Joint Consolidation Separation Act is a good example of how Congress can fix a problem when needed. Here again, the more calls and complaints that elected officials receive, the more likely they will be to act.

If you endure in silence, unnecessarily paying extra each month, things may never change.

The post Consolidation Undo: Seperating Parent PLUS Loans from Consolidated Loans appeared first on The Student Loan Sherpa.

Because of more newsworthy forgiveness proposals and newly created repayment plans, the changes may have slipped under the radar of many borrowers.

Weirdly, there isn’t a simple new rule to explain. Instead, how much forgiveness progress you get credit for after consolidating your loans will depend in part upon when you consolidate your loan.

The IDR Payment Count Update and the Student Loan Forgiveness Clock

The best time for consolidation will be before June 30, 2024. 

The program is called the One-Time IDR Payment Count Adjustment, but it does far more than the very specific name implies.

For our purposes today, one key detail is that borrowers who consolidate using federal direct consolidation won’t lose any progress toward IDR forgiveness. Crucially, they also won’t lose progress towards PSLF either.

Additionally, borrowers also benefit from how the IDR payment count update awards credit. If you have one loan with 50 months worth of forgiveness progress and you combine it with another loan with 70 months of forgiveness credit, the consolidated loan will have 70 months worth of credit.

If you have FFEL or Perkins loans that need to be consolidated, be sure to get it done by the June 30, 2024, deadline. The online application is available through the Department of Education.

Sherpa Tip: If you are interested in enrolling in the new SAVE plan to benefit from lower monthly payments, consolidation is a necessary step for borrowers with FFEL and Perkins loans.

What about the limited waiver? During the Covid-19 payment and interest pause, the limited waiver program allowed borrowers to consolidate without losing progress toward PSLF.

That program has ended, but the IDR Count update helps borrowers accomplish many of the same goals.

How does the June 30, 2024 deadline work?

Even though the consolidation application only takes about 20 minutes to complete, the consolidation process usually takes a month or two to finalize.

Fortunately for borrowers, this deadline is pretty flexible.

As long as you complete your application by the deadline, you can still benefit from the IDR Count Update and the generous terms on forgiveness progress.

It’s also possible that this deadline might get extended, as it has already been extended a couple of times in the past. However, skipping this deadline in the hopes that it gets moved again would be a huge risk.

The Forgiveness Clock After SAVE Goes Live

When the SAVE plan was created, it tweaked a number of federal student loan policies.

Among the changes, borrowers who consolidate their loans won’t lose all of their progress toward loan forgiveness.

Notably, this change is part of the phase II implementation of the plan, meaning the rule won’t be in place until July 1, 2024.

Additionally, the new permanent rule is not as generous as the One-Time IDR Count Update provision. If a borrower has two loans with the same balance and one has 50 months toward IDR forgiveness, and the other has 70, the new combined loan gets credit for 60 months.

For those who wish to do the math on their own loans, the government uses the weighted average of progress.

Stay Up to Date: Student loan rules are constantly changing, and temporary programs create deadlines that can’t be missed. To help manage this issue, I’ve created a monthly newsletter to keep borrowers up to date on the latest changes and upcoming deadlines.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

The post Federal Consolidation and the Student Loan Forgiveness Clock appeared first on The Student Loan Sherpa.

I’ve gone back on forth on whether or not this site should address the consolidation question. The problem is that there isn’t an easy answer. We may look back in a couple of years and say that FFELP borrowers definitely should have consolidated. Likewise, we could look back and realize it would have been a colossal mistake.

Outside of a couple of exceptions we will discuss, there is no easy answer to the FFELP consolidation question.

However, it is a worthwhile topic to explore. I will try to share as much information as possible so that FFELP borrowers can make the best decision based on the limited information available.

The Problem with FFELP Student Loans

Many, though not all, FFELP loans are owned by private or commercial lenders. These loans are federal, but not federally held. The debt is still a federal loan because the federal government guarantees payment, but a private lender gets the profits. The program was discontinued just over a decade ago.

Because of their ambiguous status, FFELP loans qualify for some federal programs but not all. For example, FFELP loans are eligible for the Income-Driven Repayment plan but not the Revised Pay As You Earn plan.

Borrowers with FFELP loans can consolidate their loans into a federal direct loan, through federal direct consolidation. This process creates a new federal direct loan and pays off the existing FFELP loan.

Even under the best circumstances, consolidation comes with significant pros and cons. In the case of FFELP loans right now, consolidation is even more complicated because of the uncertainty of the one-time forgiveness program.

A Note About Federally-Held FFELP Loans: Not all FFELP loans are held by a private lender. If you have an FFELP loan that benefited from the Covid-19 payment and interest freeze, the loan is federally-held.

Federally-held FFELP loans will qualify for the one-time forgiveness program.

FFELP Consolidation and Biden’s One-Time Forgiveness

As of right now, the stated policy of the Department of Education is that commercially-held FFEL loans are not eligible for the one-time forgiveness. Additionally, consolidating into a direct loan does not cure this issue.

However, the Department of Education is actively trying to address this issue. Whether or not they can resolve it is a critical question that remains unanswered.

By consolidating today, borrowers may eventually qualify for the $10,000 or $20,000 of loan cancellation. Likewise, it is possible that consolidating today could mean that borrowers miss out on an eventual fix.

Critically, consolidating now could still be an essential move for some borrowers. Factors outside of one-time forgiveness may drive the decision for many.

Sherpa Thought: I don’t have any inside information on this topic, but if I had to guess, your Biden Forgiveness eligibility won’t change whether or not you consolidate right now.

If the administration fixes the issue, I think all FFELP borrowers will benefit whether or not the consolidated. If they can’t fix the problem, everybody misses out.

FFELP Consolidation Considerations Beyond $10,000 of Loan Cancellation

The most pressing concern of most FFELP borrowers is erasing $10,000 from their balance.

However, there are many other items to consider.

If you have FFELP loans, you need to think about eliminating the entire balance — not just $10,000.

When we think about things in terms of the larger balance, the decision on consolidation can become more apparent.

Potential Reasons to Consolidate Your FFELP Loans

There are a couple of temporary federal programs that could be more valuable than the one-time forgiveness opportunity.

Limited Waiver on PSLF – If you apply to consolidate before October 31, 2022, you can take advantage of the Limited Waiver on PSLF. Under the limited waiver, payments made towards an FFELP loan can count towards Public Service Loan Forgiveness. If you miss this deadline, consolidating restarts the PSLF forgiveness clock. If you have worked for the government or a non-profit, take some time to investigate this program and the rules before you miss out on this opportunity.

IDR Payment Count Update – At some point in 2024, the Department of Education will update the IDR payment counts of borrowers. This update will potentially move many borrowers much closer to IDR forgiveness. Privately-held FFELP borrowers must consolidate their loans before 2024 to take advantage of this opportunity.

Direct Loan Perks – By consolidating into a federal direct loan, borrowers add many new perks to their loans. For example, a federal direct loan is eligible for REPAYE, which comes with an excellent interest subsidy for some borrowers. Likewise, borrowers gain eligibility for PSLF and new programs that might be announced in the future.

If these considerations are more valuable than the one-time forgiveness program, it could make sense to consolidate now.

The Risks of FFELP Consolidation

While there are benefits to consolidating right now, there are some real dangers that borrowers should understand.

Increased Interest Rates – Some borrowers consolidated their student loans into an FFELP Consolidation Loan. One of the perks that commercial lenders could offer was a reduced interest rate. Many of these borrowers have interest rates below 3%. Consolidating into a federal direct loan means the interest rate is reset to the weighted average of the original federal loans’ interest rates.

If you don’t have an FFELP Consolidation Loan, this isn’t a concern. If you do have a premium interest rate, it is a significant risk to weigh.

Poison Pills – If you have privately-held FFELP loans and other federally-held loans, consolidating now could mean the new combined loan misses out on the one-time forgiveness. In this case, the best practice is to apply for the one-time relief immediately, and then later consolidate the remaining debt. (Note: borrowers can also choose to consolidate only certain federal loans.)

Along those same lines, if you have Parent PLUS loans, you should use caution when consolidating your federal debt.

What Does the Potential One-Time Forgiveness Fix Look Like?

Even though the latest news for FFELP borrowers has been awful, I still think they might eventually get the one-time forgiveness.

The abrupt rule change happened in an effort to win a lawsuit attempting to block the entire one-time forgiveness program. It was the legal equivalent of cutting off the hand to save the person.

The Biden Administration could attempt to negotiate a deal with the lenders currently profiting from the FFELP loans. If they strike a deal with these lenders, the specific litigation risk goes away, and borrowers can get their FFELP cancellation.

While we are talking lawsuits, it is also possible that a borrower suit gets filed. The Department of Education provided objectively bad guidance in light of the last-minute deadline. A class-action lawsuit could restore FFELP borrower eligibility.

At this point, Department of Education lawyers are likely exploring every possibility to correct the FFELP issue.

Making a Decision

For many FFELP borrowers, it is a mystery what is behind Door #1 and Door #2.

It is awful that such a critical decision must be made with limited information, but that is the current situation.

The post Should I Consolidate My FFELP Loan Right Now? appeared first on The Student Loan Sherpa.

Before jumping into the details and the strategy, it is essential to remember that refinancing and consolidation are very different processes. Each choice has distinct pros and cons. Additionally, because its nearly impossible to undo a consolidation or refinance, borrowers need to use extreme caution when making any decisions.

However, if your strategy is sound, refinancing and consolidation can make a huge difference in your plan to eliminate your Aidvantage student loans.

A Quick Note from the Sherpa: Although consolidation and refinancing are very different, I chose to include both in this article.

I made this decision because many borrowers, and some student loan companies, often use the terms interchangeably. While there are some similarities, borrowers must understand the differences.

Benefits of Consolidation of Aidvantage Student Loans

Consolidation is a process available to federal student loan borrowers. When you consolidate, your old federal loans are eliminated and replaced with a new federal consolidated loan.

The biggest advantage of consolidation is that it can help your loans gain eligibility for certain repayment plans and forgiveness programs. For example, if you have FFEL student loans, you can consolidate them into a federal direct loan. This consolidation allows borrowers to qualify for repayment plans like REPAYE. Parent PLUS loan borrowers can use consolidation to qualify for Public Service Loan Forgiveness.

Consolidation also helps borrowers who are in default. Consolidation is often the fastest path out of default.

Another advantage to federal direct consolidation is that it helps organize repayment. Instead of sending checks to multiple federal servicers each month, borrowers have one consolidation loan and one servicer.

A final perk of consolidation is that borrowers get to pick their new servicer when they consolidate. This is one of the only times that borrowers get to choose their federal loan servicer.

PSLF Limited Waiver Opportunity: Until October 31, 2022, consolidating comes with a few extra perks.

Borrowers can consolidate their FFEL or Perkins loans and count previous payments towards the ten years required for PSLF.

If you have previously been told that your federal loans or your repayment plan were not eligible for PSLF, be sure to investigate the limited waiver on PSLF.

How to Consolidate Aidvantage Student Loans

Applying for consolidation is relatively simple, and the Department of Education estimates that it takes less than 30 minutes to complete the request form.

While there is a physical form available, the fastest way to consolidate is to apply online at studentaid.gov.

The whole process can take several weeks or even months. However, borrowers are not required to take any action during this time.

When your consolidation application is submitted, the loan servicers work to create the new consolidation loan and pay off the current loans. Once terms have been finalized, borrowers should receive a letter detailing the consolidation. This is also the borrower’s last chance to stop the consolidation from going through and becoming permanent.

Are you consolidating the right loans? In some cases, the best consolidation strategy is only to include certain loans.

If you are unsure about your consolidation plan, check out the complete guide to federal direct consolidation. It includes the pros and cons as well as some common mistakes to avoid.

The Big Difference Between Consolidation and Refinancing

In a student loan consolidation, your old federal loans are paid off and replaced with a new federal loan. Consolidation is only available for federal student loans.

In a student loan refinance, your old loans are paid off and replaced with a new private loan. Borrowers can refinance federal and private loans.

Thus, even though the process is somewhat similar, the results are very different.

The Big Refinance Risk: Refinancing makes it easy to turn a federal loan into a private loan. Unfortuantely, most borrowers are unable to turn private loans into federal loans.

If you refinance federal loans, you give up important federal perks like income-driven repayment and student loan forgiveness.

The Benefits of Refinancing Aidvantage Student Loans

During the federal payment and interest freeze, refinancing probably isn’t worth it because private lenders can’t compete with the 0% interest rate offered by the federal government. Once repayment and interest restart, refinancing may make sense for some borrowers.

The biggest advantage to refinancing student loans is getting a lower interest rate.

Congress sets federal student loan interest rates. Borrowers pay interest based on the federal loan type and when they borrowed the loan. Borrowers with a steady job and solid income receive the same interest rates as borrowers that creditors consider high risk.

If you have a solid credit score and income, refinancing often means lowered interest rates. Spending less on interest means eliminating debt faster.

Lower monthly payments are another perk to refinancing for some borrowers. In some instances, refinancing to a 20-year loan saves money on interest and offers lower monthly payments.

Finally, if you are unhappy with Aidvantage, refinancing means you no longer have to work with them. This is a long list of refinance lenders to choose from.

How to Refinance Aidvantage Student Loans

To refinance your Aidvantage loans, you need to find a willing private lender.

In most cases, shopping around is the best approach. Checking rates with multiple lenders increases your approval odds and helps you find the lowest interest rate possible.

Once your refinance loan is approved, the refinance lender takes care of the heavy lifting. The refi lender will pay off your existing loans and set up your new refinance loan. Lenders and loan servicers like Aidvantage cannot prevent borrowers from refinancing their loans.

For the borrowers looking for the lowest interest rate possible, the following lenders advertise the best interest rates, as of November, 2024:

Rank	Lender	Lowest Rate	Sherpa Review
T-1		4.86%	ELFI Review
T-1		4.86%*	Splash Financial Review
3		5.29%	Laurel Road Review

If you are looking for a lower rate and a lower monthly payment, a 20-year, fixed-rate loan is often the best choice. The following lenders advertise the best rates:

Rank	Lender	Lowest Rate	Sherpa Review
1		6.08%*	Splash Financial Review
2		6.53%	ELFI Review
3		6.55%	Laurel Road Review

The post How to Consolidate or Refinance Aidvantage Student Loans appeared first on The Student Loan Sherpa.