Can I transfer my student loan to another lender? It’s a common question among borrowers. Whether you’re unhappy with your loan servicer or want to refinance to lower your rate, transferring loans to another lender is potentially a relatively straightforward process. But it doesn’t always make sense to do so; whether it’s a good idea depends on several factors, including the types of loans you have and your goals.
3 Reasons For Changing Your Lender
There may be several reasons why you may want to switch lenders. Some of the most common causes include:
- You’re unhappy with your lender’s customer service: According to the Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman Report, the CFPB received over 8,400 complaints between September 1, 2021, and August 31, 2022. If you are one of the borrowers unhappy with your loan service, switch to another lender and loan servicer to get more service that is more responsive to your questions or problems.
- You want to lower your loan interest rate: Depending on when you took out your loans — and your credit at the time — you may have loans with high-interest rates. Transferring your loans to another lender allows you to qualify for a lower rate than now.
- You cannot afford your payment: If your monthly payment is higher than you can, transferring your loans through refinancing could allow you to lengthen your loan term and reduce your student loan payment.
Options For Federal Student Loan Borrowers
If you have federal student loans, there are two main ways to transfer your loans to a new lender or loan servicer:
Federal Student Loan Consolidation
Federal student loan consolidation is a process where you combine your existing federal loans into one Direct Consolidation Loan. While your lender will still be the U.S. Department of Education, consolidating your loans may allow you to transfer your loans to a new servicer — the company that handles payments and customer inquiries. By consolidating your loans, you can extend your repayment term; terms can be as long as 30 years, so consolidating could help you lower your payments. But it doesn’t allow you to lower your interest rate, so you’re unlikely to save money.
Private Student Loan Refinance
With student loan refinancing, you work with a private lender to consolidate your loans. Your loans are transferred to the bank or credit union issuing the loan, so your loans are no longer federal. Private student loan refinancing can help you qualify for a lower rate and save money. Still, the tradeoff is that you lose federal student loan benefits like income-driven repayment plans, federal deferment or forbearance, or loan forgiveness programs.
Options For Private Student Loan Borrowers
The primary way to transfer private student loans to another lender is to refinance your debt. However, some borrowers may utilize other options.
Refinancing To Another Provider
You can refinance private student loans or a mix of private and federal loans. By refinancing, you can switch your loans to another provider. And if you have good credit and stable income — or a creditworthy co-signer — you may qualify for a lower rate and different repayment terms, giving you a lower monthly payment.
Transfer The Balance To A Credit Card
One option — that is not recommended — is using a balance transfer to move your student loans to a credit card. Some credit card companies will allow it, but you must call their customer support team to complete the transfer. This strategy might appeal to you if you have a card with a 0% APR promotional offer; you can get several months to pay down your balance without interest. However, there are several significant drawbacks:
- Balance transfer fees: When you transfer a balance, you must pay a balance transfer fee to the credit card company. The cost is typically a percentage of the balance, such as 5% of the amount transferred. If you transferred $10,000 of your student loans, the fee would be $500.
- Lack of protections: Credit cards have different protections or borrower benefits than student loans have. For example, if you return to school, they may not have financial hardship forbearance programs or deferment options.
- High rates: Generally, credit cards have significantly higher rates than student loans. While student loan rates are usually in the single digits, the average credit card rate was 22.16% as of May 2023, the last available data.
Options For Parent PLUS Loans
If you have Parent PLUS Loans, one way to transfer them is to utilize parent loan refinancing. Not only will you get a new lender, but you can also transfer the loans to your child if they meet the lender’s eligibility requirements. Afterward, your child will be solely responsible for the loan’s repayment.
Alternatives To Transferring Your Student Loan
Transferring your loans is only sometimes an option and may give you the desired results. Instead, explore these alternative options:
Speak To Your Lender
Contact your lender or loan servicer immediately if you have any questions or problems. If you contact customer support via phone, keep careful records, noting the date, time and the name of the representative you speak to during the call. Your loan servicer can tell you about potential options that can help you, such as alternative payment plans.
Apply For Public Service Loan Forgiveness
Federal loan borrowers may qualify for student loan forgiveness through the Public Service Loan Forgiveness (PSLF) program. It provides loan forgiveness to borrowers that work for qualifying non-profit organizations or government agencies for at least 10 years while making 120 qualifying payments. If you have federal student loans and plan on applying for PSLF, you must transfer your loans to MOHELA, the official loan servicer for PSLF.
Pay The Loan Off Early
Although this option may not be realistic or accessible for many people, if you have an unexpected windfall — such as an inheritance, earnings from a side job or a large tax refund — using it to pay off your loan will eliminate your debt and help you save a substantial amount of money.
Speak To ELFI About Transferring Your Student Loan
For borrowers managing their student loans, it’s a common question: can I move my student loan to another lender? Getting a new lender or loan servicer through loan consolidation or student loan refinancing is possible. If you choose to refinance, contact ELFI to discuss your options and learn about the benefits of student loan refinancing.
