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 consolidation||Refinancing|
|Eligible loans||Federal||Private or federal|
|Lender||Department of Education||Bank, credit union or online lender|
|Purpose||Group 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 benefits||Keep federal loan protections, including income-driven repayment, forbearance/deferment and pathways to loan forgiveness||Reduce your interest rate to save money, shorten or lengthen your repayment term, and switch lenders|
|Key costs||Extending your repayment would allow more interest to accrue over time, and it could reset the progress you’ve made toward certain loan forgiveness programs||Yielding 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.