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College Students and Recent Grads

Can You Transfer Private Student Loans To Federal Loans?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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You might have heard all the buzz about federal student loans being refinanced at lower interest rates by private lenders. That could leave you wondering whether you can accomplish the opposite and transfer private student loans to federal loans.

This would be a great option, since consolidating private student loans to federal debt would allow you to score government-exclusive protections like special repayment plans and forgiveness options. But unfortunately, transitioning loan types only works in one direction.

Still, there are other alternatives to make your private student loan repayment easier, as we’ll discuss below.

Can you transfer private student loans to federal debt?

Private student loans are borrowed from banks, credit unions and online lenders. They’re awarded based on your (cosigner’s) credit history and include perks like potentially lower rates, more repayment term options and, often, better customer service.

Unfortunately, they’re missing one key feature: There’s no way to consolidate private student loans into federal education debt. Once your debt is private, it stays that way.

On the other hand, it is possible to combine your debt into a single loan. Both federal loan consolidation and private refinancing allow you to do this and pay just one monthly bill. But there are significant differences between the strategies, starting with loan eligibility.

 Direct loan consolidationRefinancing
Eligible loansFederalPrivate or federal
LenderDepartment of EducationBank, credit union or online lender
PurposeGroup federal debt at its average interest rate, rounded to the nearest ⅛ of 1% (fixed rates only)Group education debt at an interest rate awarded based on your creditworthiness (fixed or variable rates)
Key benefitsKeep federal loan protections, including income-driven repayment, forbearance/deferment and pathways to loan forgivenessReduce your interest rate to save money, shorten or lengthen your repayment term, and switch lenders
Key costsExtending your repayment would allow more interest to accrue over time, and it could reset the progress you’ve made toward certain loan forgiveness programsYielding the protections (like income-driven repayment) on any federal loans you elect to refinance

So, no, you can’t transfer private student loans to federal loans. You could either consolidate your federal loans into a direct consolidation loan with the Department of Education, or you could consolidate your federal and private loans via refinancing.

The best alternative to consolidating private student loans to federal debt

If you were hoping to consolidate private student loans to federal, consider the next best option: Finding a private lender whose product mimics what you like about federal loans.

No private lender will match every aspect of a federal loan. You won’t find subsidized loans (where some of the interest is paid for you), student loan forgiveness or the ability to switch repayment plans for free and at a moment’s notice. Those options only come from Uncle Sam.

However, there are plenty of federal loan-like features available at banks, credit unions and online lenders, including:

  • Fixed interest rates: Your rate will stay the same for the life of the loan
  • Six-month grace period: Smaller payments or no payment for six months after you leave school
  • In-school deferment: Smaller payments or no payment while you’re in school, usually at least half time
  • Autopay rate reductions: Often a 0.25% discount on your interest in exchange for setting up automatic payments
  • Economic hardship forbearance: Possible pause on repayment if you suffer a hardship such as losing your job
  • Tax-deductible student loan interest: As with federal loans, you can write off the interest paid on your student loan

You might even find an income-driven option in the private marketplace, setting your payment at a fixed percentage of your disposable income. The Rhode Island Student Loan Authority and industry major SoFi make a form of income-driven repayment available to its borrowers — but only in cases of financial hardship.

What to know about student loan refinancing

Because student loan refinancing allows you to potentially lower your interest rate, the eligibility requirements aren’t forgiving.

Typically, you need good-to-excellent credit and a stable source of income — or a cosigner who enjoys both. It also helps to have made full and prompt payments on your loans.

Even if your application is strong enough to gain approval, it might not qualify you for the low end of lenders’ advertised interest-rate ranges. If you need a credit score of 650 to be eligible at Earnest, for example, you’ll likely need a score 100 or more points higher to access the best of its rate offerings.

A lower interest rate makes all the difference. Say you currently have a 9.00% rate on $20,000 worth of private student loans to be repaid over the next decade. Refinancing that five-figure debt to a 5.00% rate would save you nearly $5,000 in interest over 10 years, according to our student loan refinancing calculator.

Still, a reduced rate isn’t the only factor that should nudge you toward refinancing — especially if you’re privatizing your federal loan debt, too. Refinancing is irreversible and would strip your federal debt of its government-exclusive protections.

On the other hand, note some of the advantages a refinanced loan might have over federal debt, such as:

  • Option to apply with a creditworthy cosigner
  • Ability to choose fixed, variable and hybrid interest rates
  • Access to a wider choice of repayment terms, often between five and 20 years

Consider whether student loan refinancing is right for you

Not being able to transfer private student loans to federal debt shouldn’t feel like the end of the world.

After all, at least you retain the option to transition your debt in the other direction — moving your federal (and private) loans to a bank, credit union or online lender that offers low rates or other attractive terms.

While not suitable for every borrower, student loan refinancing gives you the power to press reset and charge forward on your repayment. To gauge its usefulness for your situation, explore the pros and cons of refinancing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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College Students and Recent Grads

Student Loan Statute of Limitations: Can You Wait It Out?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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If your student loan debt seems like an unsolvable problem, you might be tempted to play hide-and-seek. Maybe your lender will eventually give up and stop looking for you. And isn’t there a student loan “statute of limitations,” after which you don’t need to pay?

Before deciding to wait it out and hope for the best, first consider some facts: Ignoring the problem of your education debt could stall your personal finances for years to come and still not get collections agents off your back. For most people, it isn’t a good solution.

What is the statute of limitations on student loans?

When it comes to student loans, a statute of limitations is the amount of time your lender has to use the court of law to collect your debt.

That said, there are no statutes of limitations placed on federal loans. They were struck down by Congress in 1991.

On top of potentially facing a lawsuit, there are significant consequences if you allow your federal loans to default. Your credit report would suffer, and your wages and tax refunds could be garnished, among other penalties.

On the other hand, banks, credit unions and online lenders must abide by the statutes of limitations on private student loans, as set by each state government. Depending on the state with jurisdiction, a lender might have as little as three years or as long as a decade to bring a suit against you to retrieve your debt.

Although the timing varies from state to state, the rules of play are generally the same:

  • The statute of limitations “clock” starts ticking from when you fail to make a payment.
  • The statute could be reset in some cases, such as if you make a payment.
  • The statute won’t stop a lender from attempting to collect your debt (only its ability to file suit for that debt).

Say you’re on a 10-year repayment term but haven’t made a payment in four years. If your state’s statute of limitations on private student loans is five years, your lender could drag you into a courtroom anytime in the next 12 months.

When can you be sued for your student loan debt amount?

The costs of student loan default are many, and they only increase when lawyers get involved. If you want to avoid potential attorney’s fees and other court costs, you might be wondering about when exactly you could be sued for your debt.

If you go 270+ days without making a payment on a federal loan, your servicer (or its collection agency) could sue you for the debt — plain and simple.

However, it would take some guesswork to determine when — or even if — the servicer or agency would actually file suit. For example, it’s unlikely you would find yourself in court if you’ve only recently defaulted on a relatively small amount of debt. There are simply too many defaulters for the government to sue all of them.

From a legal standpoint, private lenders have a little less leeway. They could sue at any moment after you default (as outlined in your loan agreement) and before your state’s statute of limitations on private student loans takes effect.

Which brings us to the definition of time-barred debt. Time-barred debt is legalese for financial obligations that can’t be haggled over in a courtroom once the statute of limitations has expired.

Also, just because you can’t legally be sued for your time-barred debt doesn’t mean a lender won’t try. If you find yourself being served papers, you might need to prove to the presiding judge that your debt is time-barred (or paid off). You can accomplish that by providing the court with proof of your last payment date. That makes holding onto your loan paperwork a smart practice.

How to handle your private student loan debt

If you’ve gotten this far, you may think you could survive a few more years, at least until your state’s statute of limitations on private student loans expires.

Before ignoring your debt, though, let’s cover a few more considerations:

Dealing with collections agents

Whether you have a federal or private loan, you might learn that it’s been transferred to a collections agency. That’s one fact of dealing with zombie debt: It can come back to haunt you, as collections agents tend to reach out routinely.

On the plus side, collections agents are required to be truthful if you ask about the status of your debt. It’s important to understand your other rights, as reserved by the Fair Debt Collection Practices Act.

Harming your credit report

If you don’t make payments for a number of years on your student loans, your credit score will fall off a cliff. Additionally, your credit report will show your late payment history, which comprises 35% of your FICO Score.

What’s more, the default (or defaults) will stay on your credit report for seven years. That could prevent you from borrowing in the future, whether to continue your education or to buy a home.

Unless you’re willing to stall your personal finances for almost a decade, think twice about running from your creditors.

Considering alternatives to handle your distressed debt

Fortunately, there are several alternatives to manage your federal loans:

  • Seek loan forgiveness: Survey federal programs that offer cancellation or repayment assistance to see if you’re eligible.
  • Deferment and forbearance: Pause your monthly payments because of a hardship or other eligible life event.
  • Income-driven repayment (IDR)Reduce your monthly payments by switching to an IDR plan that caps them at a percentage of your income.
  • Consolidation and refinancing: Group your debt via a direct consolidation loan with the government, or combine them and possibly lower your interest rate by refinancing your student loans with a private lender. If you go with the second option, just be sure you won’t miss out on federal loan protections that will be irreversibly lost via refinancing.

But for outstanding private loans, your options to reduce or pause payments might be limited, depending on your lender. Open up the lines of communication to learn about what your bank, credit union or online company can do to support you.

If you have strong credit and stable finances (or a cosigner who does), you could consolidate your debt via student loan refinancing, just as with federal loans. This would allow you to choose a new loan term and, as noted above, maybe save money with a lower interest rate as well.

For more dire situations — perhaps to discharge or decrease your debt via bankruptcy — you could consider various forms of debt relief. And if you need legal support, you might start by using the American Bar Association’s resources or contacting your state attorney general’s office.

Reconsider testing the statute of limitations on student loans

Waiting it out might seem like a novel approach to your student loans. For federal loans, however, it’s rarely wise. There are no statutes of limitations, so your debt won’t simply disappear, no matter how much you ignore it.

And while there is a time limit on private lenders’ ability to sue over your debt, testing that limit could cause long-term harm to your credit and leave your finances in limbo. In this case, ignorance doesn’t sound so blissful.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
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Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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College Students and Recent Grads

College Choice Day: What You Can Learn From Star Athletes’ Signing Day

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Think of National Signing Day as akin to National College Decision Day, but for the country’s top amateur athletes. Like you, these teens pick a home for the next four years, even signing and sending over a letter of commitment — the only difference is that they’re choosing both a college and a team.

Even if you don’t dribble, tackle or score with the best of them, you could learn by following their example. These seven takeaways from student-athletes’ experience might help you select the right school come May 1.

1. Contact the school to ensure a good fit

Five-star recruits who excel on the field don’t even need to dial: Head coaches from schools all over the country will be ringing regularly.

But many of these prep athletes don’t just take the first offer they get. They might have phone calls with assistant coaches, members of the athletic department and others to ensure that the school offers them what they want out of their athletic and academic experience.

In your case, speaking with the admissions and financial aid offices is one thing, but it wouldn’t hurt to contact the people you’ll be interacting with at the school. For instance, you might reach out to department heads, faculty and professors who would take part in your education in your preferred (or just potential) major.

2. Take ‘recruiting’ visits

The very best young athletes play host to recruiters in their living room. Afterward, they might narrow their college choice list to a handful of contending programs, book their travel and take guided tours of the campus athletic facilities.

To save money and time, you might start by using eCampusTours to make virtual visits. Identify your contending schools and map out your visit. (Unless you’re hoping to be an intramural sports star in college, it’s worth visiting spots other than the campus gymnasium.)

You might not receive as much hand-holding as a heralded basketball recruit, so be prepared to do some exploring on and off campus. Confirm that these are places you could imagine yourself studying and living until your degree is complete.

3. Interact with schools over social media

Incoming freshman football players might follow their prospective teams on Twitter or like them on Facebook to track win-loss records, to see how head coaches handle defeat or to understand the locker room culture.

You could gain a similarly valuable perspective on your favorite universities (or schools within the universities) by at least checking in on students’ social media posts. Learning about campus culture and events, for example, would help you get an idea of whether you’d fit into a given school’s social scene.

4. Get a scholarship if you can

Many incoming college athletes receive full-ride scholarship offers without having to ask for them. It’s not unheard of for some sports’ coaches to make these offers when the student-athlete is still in the eighth grade.

Many other prep athletes, particularly those playing sports that don’t draw national attention, receive only partial scholarships. Like you, they must find other ways to fill the gap in their cost of attendance and living expenses.

As you search for scholarships, ask yourself what value you’d bring to campus, even if it’s not a championship trophy. Then present that case, whether it’s centered on your grades or life experience, to financial aid offices at the schools you’re interested in.

You might not score the full-ride given to football players (or even the partial aid afforded to competitors in lesser-known sports), but you could receive a smaller scholarship that lessens your reliance on federal and private student loans.

5. Research alumni career paths to the ‘pros’

High school athletes who are good enough to play in college might even be good enough to play professionally too. A talented point guard looking for the right women’s basketball program, for example, might award extra points to schools that have graduated guards into the WNBA.

Adopt the same mindset for your job prospects — after all, choosing a college is not unlike choosing a career path.

Say you want to study computer science, but you’re unsure if a particular university pumps out the kind of candidates that startups and tech giants fight over. Put in a little research, whether by talking to a school’s alumni relations office or searching a website like LinkedIn. Then you’ll know whether a campus has served as a springboard to the kind of positions you might one day seek.

6. Commit, but keep your options open

High-profile recruits often verbally accept one school’s scholarship offer, only to turn around and sign with another on National Signing Day. Decommitting and choosing a college elsewhere is inevitable for some teenagers deciding where they want to play college ball.

No one is expecting you to have it figured out immediately either. So there’s no harm in having your heart set on one school at the beginning of your college choice process, but then deciding that a rival school is a better fit. Keep an open mind to ensure you land in the right place.

7. Face the camera and announce your college choice

Of the six college sports that offer full-ride scholarships, football and basketball seem to attract the most attention. Their top-notch recruits have been known to go on TV, start a live stream or otherwise record the moment they announce their school choice.

You might see these college choice announcements as over the top, or even brash, but there’s also something genuine about them. The student-athletes are practically giddy about where they’ll be going to school.

Even if you’re not a fan of the pomp and circumstance of National Signing Day, make sure you enjoy the spotlight you’ll be under on College Decision Day. After all the work you’ve put in (including steps one through six, above), it’s your time to shine. Revel in it.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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