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College Students and Recent Grads

The Ultimate Guide to Student Loans in 2018

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.

Student loans are loans that you take out to help pay for educational expenses, such as tuition, fees, room, board, equipment and transportation to and from school. This guide covers the ins and outs of federal and private student loans, explains how to apply for student loans, discusses which option may be best for your circumstances and offers several alternatives to borrowing money.

PART I: Understanding student loans

As with other types of debt, you must agree to repay the money, plus interest.

However, student loans can differ from other types of loans. They may have less stringent credit or income requirements for students, and you may be able to delay making payments until after you leave school.

How do student loans work?

You can apply for a student loan from the federal government or from a private lender. The eligibility requirements and application process (discussed in detail later) are different for federal and private student loans, but the overall student loan process can be similar.

After applying and getting approved for a student loan, the lender will often send the money directly to your school. The school applies the money to your account to pay for tuition, fees and other expenses. If there’s money left over, the school will issue you a refund which you can use for additional educational expenses, such as off-campus housing and food. You can also return the excess funds.

With federal loans, you’ll need to reapply for financial aid once every year to remain eligible; the policies of private lenders vary. You may need to reapply each term, apply once for an academic year or apply once and fund multiple years. However, with both federal and private student loans, the loan will generally be split up and disbursed (i.e. sent) to the school at the beginning of each term.

Terms and repayment options

Your repayment term — the amount of time you have to repay the loan — and repayment plans can vary depending on the type of student loan. Many student loans, including federal student loans, let you defer payments while you’re enrolled at least a half-time in an eligible program, as well as during a six-month grace period after you graduate, leave school or drop below a half-time schedule. However, some private lenders require borrowers to make at least interest-only or $25 monthly payments once the loan is disbursed.

Federal student loans automatically enter a 10-year standard repayment plan. However, you can switch to a different plan for free. Other repayment plans may give you more time to repay your loans, which can decrease your monthly payments but lead to paying more interest over the loan’s lifetime.

You may also be eligible for an income-driven plan that bases your monthly payments on your income, family size and where you live. An income-driven plan could even lead to $0 monthly payments, and the remainder of your loan balance might be forgiven after you make monthly payments for 20 to 25 years. There are also federal student loan forgiveness and cancellation programs.

Private loans aren’t eligible for federal repayment, forgiveness or cancellation programs, and often you’ll choose your loan’s term or be assigned a term when you apply. Some lenders have different repayment plans, but with others the only way to change your private loan’s term is to refinance the student loan.

Interest rates

The interest rate on your student loan can impact your overall cost of borrowing and your monthly payment amount. It’s important to understand how a lender determines your interest rate, how interest accrues on your loan and what your options are before agreeing to take out a student loan.

Congress sets the interest rate on federal student loans. All federal student loans have a fixed interest rate, meaning the rate won’t change once the loan is disbursed.

By contrast, private student loans’ interest rates can vary greatly. Lenders may offer different rate ranges, and the rate you receive will depend on your creditworthiness (or the credit of your cosigner). Private lenders also offer fixed- and variable-rate loans. Variable-rate loans are riskier because the interest rate can change in the future, but they can be enticing because they often offer a lower initial interest rate than fixed-rate loans.

Many federal and private student loans begin accruing interest as soon as the loan is disbursed. The interest will continue to accrue while your loans are in deferment or a grace period, and then it will be added to your loan’s principal balance (i.e. capitalized) once you enter repayment. When this happens, more interest may accrue each month, as your interest rate will now apply to a higher principal loan balance.

PART II: Types of student loans

Students loans fall into one of two general categories: federal or private student loans.

Federal student loans

Federal student loans can offer borrowers simplicity and savings compared to private student loans. Although there are differences depending on the type of federal student loan or the degree the borrower is pursuing, federal student loans have uniform eligibility requirements, interest rates, loan terms, benefits and repayment options for every borrower.

Private student loans

On the other hand, private student loans — and their eligibility requirements, interest rates, loan terms, benefits and drawbacks — can vary depending on the lender. Carefully research different companies’ policies and the fine print on their loan agreements before agreeing to take out a loan.

Often, federal student loans are the best first choice for borrowers because of their standard terms and low barrier to entry. Even if you could get a lower rate with a private student loan, federal loans’ flexible repayment options and eligibility for federal repayment plans and forgiveness, cancellation, deferment and forbearance programs can make them a better option. Private lenders may not offer or guarantee similar options.

PART III: Federal student loan options

What is a federal student loan?

A federal student loan is a loan that’s funded by the federal government. There are currently three types of federal student loans available to new borrowers through the William D. Ford Federal Direct Loan (Direct Loan) Program: Direct Subsidized Loans, Direct Unsubsidized Loans and Direct PLUS Loans.

There are also Direct Consolidation Loans, which allow borrowers to combine multiple federal student loans. Previous borrowers may also be repaying other federal student loans that are no longer available to new borrowers.

All three types of federal student loans have the same basic eligibility requirements, including being enrolled at least half-time or accepted into an eligible degree or certificate program. In addition, the application process always starts with the Free Application for Federal Student Aid (FAFSA).

However, these loans are not identical. They may have different annual loan limits, aggregate loan limits and credit requirements. Loan details, such as eligibility for different repayment plans, can also vary depending on the borrower — whether they are an undergraduate, graduate or professional student, or the parent of a student.

The loans may have different interest rates and disbursement fees, a fee that’s subtracted from the amount that’s sent to your school. These fees depend on the loan type, the type of borrower and when the loan is disbursed.

The federal student loan interest rates in this guide are for federal loans disbursed from July 1, 2018 to June 30, 2017. The disbursement fees apply to federal student loans disbursed from Oct. 1, 2017 to Sept. 30, 2018.

Direct Subsidized Loan


Interest rate

Disbursement fee

Annual loan limit

Aggregate loan limit

Credit needed

Direct Subsidized Loans



$3,500 first year
$4,500 second year
$5,500 third and subsequent year



How does it work? Direct Subsidized Loans are only available to undergraduate students, and only if their school determines they have a financial need based on the school’s cost of attendance and their expected family contribution. The Direct Subsidized Loan loan limit increases during your second and third years. However, your offer could decrease if your financial need decreases.

The subsidy part comes into play after your loan is disbursed. Although the loan starts to accrue interest right away, the U.S. Department of Education will pay the interest while you’re in school at least half-time, during your grace period and if you later put the loan into deferment.

Pros and cons. If you plan to take out a federal student loan, the Direct Subsidized Loan’s relatively low disbursement fee and interest rate, and the subsidization, makes it the best option in most cases. Of course, it’s only an option if you qualify — the biggest drawback is that you may not be able to borrow enough to pay for all your educational expenses.

Direct Unsubsidized Loan

Direct Unsubsidized Loans

Interest rate

Disbursement fee

Annual loan limit

Aggregate loan limit

Credit needed

For dependent undergraduate students



$5,500 first year
$6,500 second year
$7,500 third and subsequent years

The annual loan limits include Direct Subsidized Loans.

$31,000, including up to $23,000 in Direct Subsidized Loans.


For independent undergrads and dependent undergrads after a parent gets denied for a PLUS Loan



$9,500 first year
$10,500 second year
$12,500 third and subsequent years

The annual loan limits include Direct Subsidized Loans.

$57,500, including up to $23,000 in Direct Subsidized Loans.


For graduate and professional students




$138,500, including up to $65,500 in Direct Subsidized Loans.


How does it work? Undergraduate and graduate students may be able to borrow money with Direct Unsubsidized Loans, even if they don’t have a demonstrated financial need. The loans also have higher annual and aggregate loan limits than Direct Subsidized Loans, and the limit varies depending on your degree type and dependency status.

However, the loan limits include debt from both Direct Subsidized Loans and Direct Unsubsidized Loans loans. You also might not be offered the maximum amount, as your offer depends on several factors — these can include your school’s cost of attendance, your family’s expected contribution and how much money you’ve received from other sources of financial aid, such as scholarships.

Pros and cons. The higher loan limits and lack of a financial need requirement may make it easier to qualify for a Direct Unsubsidized Loan; for undergraduate students, these loans have the same interest rate and disbursement fee as the subsidized version. However, the biggest drawback may be the lack of the subsidy. Without the subsidy, you could leave school with significantly more debt than you initially borrowed, unless you make interest payments while you’re in school and during the grace period.

For graduate and professional students who aren’t eligible for Direct Subsidized Loans, the Direct Unsubsidized Loans offer a lower interest rate and disbursement fee than grad PLUS loans. However, graduate and professional students may have already established their creditworthiness, and so might be able to save money with a private student loan.

Parent PLUS loan


Interest rate

Disbursement fee

Annual loan limit

Aggregate loan limit

Credit needed

Parent PLUS loan



No limit

No limit

No adverse credit history

How does it work? Parent PLUS loans are Direct PLUS Loans that a parent borrows to help a dependent child pay for school. Parent borrowers must meet many of the same basic eligibility requirements as student borrowers; however, parent PLUS loans also require a credit check. The credit check looks for an adverse credit history in your credit reports, such as a recent bankruptcy or outstanding delinquent debts.

If you don’t pass the credit check, you may still be able to take out a parent PLUS loan if you have a creditworthy endorser (i.e. cosigner) or appeal the decision. Your child may also be able to take out additional Direct Unsubsidized Loans if you’re unable to qualify for a parent PLUS loan.

Loan payments begin immediately after the parent PLUS loan is disbursed, unless parents request a deferment. If you request a deferment, you may not have to make payments as long as your child is enrolled at least half-time and for the six months after they leave school or begin taking a less-than-half-time schedule. However, interest will accrue during the deferral period.

Pros and cons. As with other federal student loans, parent PLUS loan are eligible for different federal repayment plans, and forgiveness and cancellation programs. However, parent PLUS loans are only eligible for one of the four income-driven plans: the income-contingent plan — notably, this is only an option after the parent PLUS loan is consolidated with a Direct Consolidation Loan.

Direct PLUS Loans, including parent PLUS loans, also have the highest interest rate and disbursement fee of the federal student loans. The interest rate and fees may still be lower than what you could receive with a private student loan, but you should compare your options.

Another potential con is that parents can’t transfer the loan to their children, although a child may be able to take over the debt if they can qualify to refinance student loans with a private lender. The debt from the parent PLUS loan could also increase your debt-to-income ratio, which may affect your eligibility for other loans or financial products.

Grad PLUS loan


Interest rate

Disbursement fee

Annual loan limit

Aggregate loan limit

Credit needed

Grad PLUS loan



No limit

No limit

No adverse credit history

How does it work? Graduate and professional students can use grad PLUS loans to pay for educational expenses. They have the same fees, limits and credit-check requirements as parent PLUS loans (both loans are Direct PLUS Loan), but there are a few differences.

Grad PLUS loans are eligible for all four income-driven repayment plans, and unlike parent PLUS loans, grad PLUS loans are automatically placed into deferment until six months after you drop below a half-time schedule, graduate or leave school. However, you can make early payments if you want.

Pros and cons. Grad PLUS loans don’t have pre-set annual or aggregate loan limits; you can also borrow up to your school’s cost of attendance, minus your other financial aid awards. This means you may be able to fund all your educational costs with grad PLUS loans — but that doesn’t mean a grad PLUS loan should necessarily be your first choice.

Direct Unsubsidized Loans will have a lower interest rate and disbursement fee than grad PLUS loans, and they offer the same access to federal repayment plans and programs. You may also want to compare private student loans offers to your grad PLUS loan rates to determine which will save you the most money.

PART IV: Private student loans

What is a private student loan?

A private student loan is an educational loan issued by a non-government lender. As with federal student loans, borrowers must use the money for educational expenses.

Some federal laws apply to both federal and private student loans. For example, lenders aren’t allowed to charge you a fee for paying off your loans early — however, it can be difficult to discharge a federal or private student loan during a bankruptcy.

There are also important differences between federal and private student loans, and several pros and cons, to consider before taking out a private student loan.


  • High loan limits. The federal student loans with the lowest interest rates also have pre-set annual and aggregate loan limits. By contrast, private student lenders may let you borrow up to your school’s cost of attendance.
  • Potentially lower interest rates. Creditworthy borrowers may qualify for a lower interest rate with a private lender than they’d receive with a federal student loan.
  • No funding fee. Federal student loans often have a disbursement fee; private student lenders generally don’t charge a disbursement or origination fee.
  • Variable-rate options. Private lenders may offer variable-rate loans, which generally start with a lower interest rate than fixed-rate loans. However, there’s a risk the rate will increase in the future.
  • Interest rate discounts. Federal and private student loans often offer a 0.25 percent interest rate discount if you sign up for autopay. Private lenders may offer additional discount opportunities.


  • Credit requirements. Your income, credit score and other factors could impact your eligibility, interest rate and maximum loan amount.
  • No access to federal benefits or programs. Private student loans aren’t eligible for federal repayment plans or subsidies. They also aren’t eligible for forgiveness, cancellation, discharge, forbearance or deferment programs.
  • Fewer hardship options. Private lenders might not offer borrowers forbearance or deferment options when borrowers have trouble making payments.
  • Quicker defaults. Private student loans may default sooner than federal student loans if you stop making payments. When a loan defaults, you’ll immediately owe the entire loan balance. Federal student loans also offer ways to get your loan out of default and back onto a repayment plan, but private lenders may not give you similar options.
  • Limitations with loan repayment assistance programs. Some government and private student loan repayment assistance programs won’t help you repay private student loans.
  • Varied discharge policies. Private lenders may not discharge your loan balance if you become permanently and totally disabled or die. As a result, you may leave your estate or cosigner with a loan balance to pay. Federal student loans can be discharged when the borrower, or student in the case of parent PLUS loans, permanently and totally disabled or dies.

Where can you find private student loans?

Banks, credit unions, online lenders, schools and states all offer private student loans to students, and sometimes to students’ parents. Your school’s financial aid office may be able to recommend several options, but you can also look online or speak to friends and family members to get recommendations.

There’s no single best private student lender, and you should compare different lenders’ loan types, loan terms, repayment options, fees, discounts and fine-print restrictions, like if they let you release a cosigner. You could also read others’ reviews and recommendations to determine which private student lenders might be best for your situation.

Once you’ve narrowed down your list, you can then apply for a student loan with several lenders and compare your offers to determine which loan is best.

Who are private student loans best for?

Federal student loans are the best place to start for most borrowers, but there are some students who may want or need to take out private student loans. For example, if you’ve reached your annual or aggregate loan limit with federal student loans and you still need more money for school, you may want to consider a private student loan.

Parents and graduate or professional students who have established their creditworthiness may also want to consider private student loans as an alternative to federal student loans. Their federal loans have a higher interest rate and disbursement fee than undergraduate students’ federal loans, and older applicants may be able to qualify for a lower interest rate with a private lender. However, consider the big picture as there may be other drawbacks, such as lack of access to federal forgiveness programs and repayment plans.

PART V: How to get a student loan

Applying for federal student loans

You must complete and submit a Free Application for Federal Student Aid (FAFSA) every year to apply for, and remain eligible for, federal financial aid.

MagnifyMoney has a detailed guide on filling out the FAFSA. You can also find a PDF guide from the Education Department and free phone support at 1-800-4-FED-AID (1-800-433-3243).

Submitting your FAFSA early can help your financial aid situation, as some schools and states offer financial aid on a first-come, first-served basis based on information in your FAFSA. Even if you don’t plan on taking out loans, the FAFSA is a requirement for some grant and scholarship opportunities.

To begin the FAFSA process online, go to and create your FSA ID. The FSA ID will be your username and password for signing into your account and you’ll also use it to sign loan documents. Dependent students also need a parent to create an FSA ID, which the parent will use to sign the child’s FAFSA.

After you’ve created your FSA ID, you can start the online application at To complete the application, you’ll need:

  • Your Social Security number or alien registration number
  • Income-related forms, including recent W-2s and federal income tax returns
  • Copies of your bank, brokerage, and other financial account statements
  • Documents related to other income
  • If you’re a dependent student or you’re married, you may also need your parents’ or spouse’s Social Security number and income-related forms.

It generally takes under an hour to complete the FAFSA. Returning students will send the form to their school, while first-year students can send their FAFSA to the schools they’re considering.

After submitting your FAFSA, you will get a Student Aid Report (SAR) by mail or email; you should review this document to ensure all your information is correct. The SAR will list your expected family contribution amount, along with your FAFSA information. Schools and state agencies use this data to determine your financial aid eligibility and award amounts, and a mistake could lead to you being offered less aid.

Your school, or the schools you’re considering, will then send you an aid offer that lists the financial aid types and amounts that you can accept. Your aid package may include a combination of grants, scholarships, work-study funds, and/or several types of student loans.

You can choose which aid package offer to accept and how much money to borrow if you’re taking out a loan; the process can vary depending on your school. If you’re accepting a federal student loan offer, you will have to sign a promissory note, or loan contract. Keep in mind that you do not have to accept the full amount of federal loans you’re eligible to borrow — do the math to avoid unnecessary debt.

Applying for private student loans

Private student lenders may have different applications, and the application processes could vary. However, you can find some lenders that have a fairly simple and straightforward online application.

You won’t need to complete the FAFSA to apply for a private student loan, but you may want to gather similar personal and financial documents — you’ll likely need information from these documents during the application process, and you might have to submit copies for verification purposes.

You may also need personal and financial information from a cosigner if you’re adding one to your application; in some instances, the cosigner may be able to log in and submit his or her information directly.

If your application is approved, you might be able to pick from several loan terms with varying interest rates. Or, the lender may make you an offer and you can choose to accept or decline it.

At some point during the application process, the lender could contact your school to verify your eligibility and the school’s cost of attendance, which can determine your maximum loan limit. Alternatively, you could be asked to self-certify these numbers.

Alternatives to student loans

A loan shouldn’t necessarily be your first choice when it comes to financial aid. Scholarships and grants can offer money for school that you don’t need to pay back. Graduate or professional students may be able to get “free” money from fellowships. And you could look into different work opportunities.

If you submitted a FAFSA, you may get a work-study award as part of your financial aid offer. The federal work-study program pays a portion of work-study recipient’s wages, which could make it easier for you to find a job while you’re at school. However, only certain employers are eligible, such as the school, nonprofits and some for-profits if the work you’ll do aligns with your major.

Graduate and professional students may have opportunities to get an assistantship at the school. Depending on the program, you could receive a stipend, tuition waivers or even benefits in exchange for working part-time.

You can also look for work opportunities that aren’t part of a financial aid program. A part-time job while you’re at school, or a full-time job during the summers, might not earn you enough to cover all your educational costs — but every dollar you earn and put towards your education is one less dollar you need to borrow (and pay interest on).

This post was updated July 17, 2018 to reflect changes to federal student loan interest rates.

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.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at

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College Students and Recent Grads, Pay Down My Debt

Sample Goodwill Letter to Remove a Late Student Loan Payment from Your Credit Report

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.

Businessman Holding Document At Desk

If you’ve pulled your credit report recently and discovered that there’s been a late payment reported on your student loans, you might be wondering what you can do to recover. Late payments can damage your credit, especially if you stop paying your loans for an extended period of time.

We’ve already gone over the repercussions of delinquency and default, but now let’s take a look at another method of repairing your credit report — sending a goodwill letter to your creditor.

What is a goodwill letter?

A “goodwill letter” is a simple way to repair your credit report, and it can be used for both federal and private loans. The purpose of a goodwill letter is to restore your credit to good standing by having a lender or servicer erase a lateness on your credit report.

Typically, those who have experienced financial hardship due to unexpected circumstances have the most success with goodwill letters. They allow you to ask if your student loan servicer can empathize with the situation that caused the lateness and erase it from your report.

It can also be used when you think the late payment is an error — for example, if you were in deferment or forbearance during the time of the late payment and weren’t required to make any payments, or if you know you’ve never been late on a payment before.

What makes a convincing goodwill letter?

If you’ve been looking for a goodwill letter that will work well, we have some tips on what you should include in your letter:

1. An appreciative tone

It’s important that the entire tone of your letter comes off as thankful and conscientious. If you were actually late on your payments due to extenuating circumstances, taking an angry tone probably won’t help your case.

2. Take responsibility

You want to be convincing and honest. Take responsibility for the late payment, and explain why it happened. They need to sympathize with you. Saying you just forgot isn’t going to win you any points.

3. A good recent payment history

Besides sympathy, you want to gain their trust that you will continue to make payments. If your lender sees payments being made on time before and after the period of financial hardship, it might be more willing to give you a break. When you have a pattern of late payments, on the other hand, it’s more difficult to convince them that you’re taking this seriously.

4. Proof of any errors and relevant documents

If you’re writing about a mistake that occurred, still be friendly in tone, but back up the errors with documentation. You’ll need proof that what you’re saying is true. Unfortunately, errors are often made on credit reports, and it may have been a clerical error on behalf of your servicer. If you have any written correspondence with them, you’ll want to include it.

5. Simple and to the point

The last thing to keep in mind is to craft a short and simple letter. Get straight to the point while telling your story. The people reviewing your letter don’t want to read an essay, and the easier you make their lives, the better.

Sample goodwill letter No. 1

Below is a sample goodwill letter for student loans to give you an idea of how to structure your own:

To whom It may concern:

Thank you for taking the time out of your day to read this letter. I just pulled my credit report, and discovered that a late payment was reported on [date] for my account [loan account number].

During that time, my mother fell terminally ill, and I was the only one left to care for her. As such, I had to leave my job, and my savings went toward her health care expenses. I fell on very rough times after she passed away, and was unable to make my student loan payments.

I realize I made a mistake in falling behind, but up until that point, my payment history with you had been spotless. When I was able to gain employment once again, I quickly resumed paying my student loans, making them a priority.

I’m not proud of this black mark on my record, but it’s the only one I have, and I would be extremely grateful if you could honor this request to remove the lateness from my credit report. It would help me immensely in securing other lines of credit so that I can further improve my credit score.

If the lateness cannot be removed entirely, I would still be appreciative if you could make a goodwill adjustment.

Thank you.

Sample goodwill letter No. 2

If you’re writing a letter because the lateness on your credit report is inaccurate, then try something similar to this:

To whom it may concern:

Thank you for taking the time to read this letter. I recently pulled my credit report and found that [Loan servicer] reported a late payment regarding my account [loan account number].

I am requesting that this late payment be assessed for accuracy.

I believe this reporting is incorrect because [list the supporting facts you have]. I have included the documentation to prove that [I made payments during this time / that my loans were in forbearance/deferment and didn’t require any payments].

Please investigate this matter, and if it is found to be inaccurate, remove the lateness from my credit report.

Thank you.

Make sure you provide as many personal details as possible — without making the letter too long, of course. You should also include your name, address and phone number at the top of the letter in case your loan servicer needs to reach you immediately.

Where to send your goodwill letter

Now that your letter is written, it’s time to send it. This can be done either by fax or by mail. Most student loan servicers have their contact information on their website, but you can also look on your billing statements to see if they specify a different address.

Additionally, you can try calling the credit bureau where the lateness was reported to see if they can give you the contact information you need.

It’s important to mention that goodwill letters are not a means to immediate success. Unfortunately, it often takes several attempts to correspond with servicers and lenders to get them to acknowledge that they received a letter from you.

Your best bet is to get a personal contact at the company who has the power to erase the late payment from your credit report.

If all else fails, try as many different communication methods as possible. Phone, mail, fax, live chat (if your servicer offers it) and email them. Several people who have tried this report that it’s possible to wear your servicer down with a decent amount of requests.

Addresses and fax numbers to try

Here are some addresses and fax numbers for several of the larger servicers, as listed on their websites. Again, it may also be worth phoning your servicer to get the name of someone there that can help you. If you have federal student loans, you can also check this Federal Student Aid page for more contact information.


Documents related to deferment, forbearance, repayment plans or enrollment status changes:

Attn: Enrollment Processing

P.O. Box 82565

Lincoln, NE 68501-2565

Fax: 877-402-5816

Great Lakes

Great Lakes

P.O. Box 7860

Madison, WI 53707-7860

Fax: 800-375-5288

Sallie Mae

Sallie Mae

P.O. Box 3229

Wilmington DE 19804-0229

Fax: 855-756-0011


For anything other than federal loans, check here

Navient – U.S. Department of Education Loan Servicing

P.O. Box 9635

Wilkes-Barre, PA 18773-9635

Fax: 866-266-0178


P.O. Box 145122

Salt Lake City, UT


Fax: 801-366-8400


For letters and correspondence

FedLoan Servicing

P.O. Box 69184

Harrisburg, PA 17106-9184

Fax: 717-720-1628


For FFELP and private loans, check here

Edfinancial Services

P.O. Box 36008

Knoxville, TN 37930-6008

Fax: 800-887-6130

Documents to include with your goodwill letter

Don’t let your efforts go to waste by forgetting to send documentation with your letter. Here’s a quick checklist of what you should include:

  • The account number for your loan
  • Your name, address, phone number and email
  • Statements showing proof that you paid (if you’re disputing a late payment)
  • Documentation showing that you’ve paid on time at all other points aside from when you experienced financial hardship (if that’s the case)
  • Identifying documentation so your servicer knows you sent the request

Also note that if you’re mailing anything, you should send it by certified mail with a receipt requested. This way you’ll know whether your letter made it to the servicer.

What to expect after submitting your goodwill letter

Once you submit your goodwill letter, you should hear back from your creditor with a decision in a few weeks. If two to three weeks have passed without word, follow up via email or phone call.

As you know, there’s no guarantee that your goodwill letter will work. The decision to remove a negative mark from your credit report is entirely in the hands of your creditor.

If your creditor rejects your petition, you’ll have to accept the ding on your credit report and take other steps to boost your credit. But if they agree to repair your credit, you should see the delinquency removed from your report and your credit score increase as a result.

A higher credit score can make life a lot easier, whether you want to take out a loan, open a credit card or, in some cases, even rent an apartment. For student loan borrowers, a strong credit score also opens the door to student loan refinancing, a savvy strategy that lets you restructure your debt, possibly changing your monthly payment and potentially saving money on interest.

If your credit score rebounds and you want to take proactive steps to conquer your student debt, refinancing could be the answer you’ve been looking for, so long as you no longer need the protections that come with federal loans.

Either way, though, make sure to keep up with student loan payments so you don’t end up with a delinquent account dragging down your newly repaired credit score.


If you’re interested in exploring goodwill letters further — and the results that others have had — check out these websites:

  • They cover disputes, what to do about them and how to go about rectifying them here.
  • If you have loans with a private lender, and your lender had reported you as late when you weren’t, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) to see if they can help you.
  • myFico Forums: The forums on myFico are populated with helpful individuals that might be able to give you contact information for certain servicers. There are some people reporting success with goodwill letters, and they may be willing to share their letters with others upon request.

It’s worth the time to write a goodwill letter

If you’ve discovered that a late payment has been reported on your credit, and it’s because you fell on hard times or is inaccurate, it’s worth trying to get it erased. These dings on your credit are there to stay for seven to 10 years. That’s a long time, especially if you’re young and hoping to buy a house or a car in the near future. It’s a battle worth fighting.

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Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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College Students and Recent Grads

FedLoan Consolidation or Refinancing: Which Is Best for Your Student 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.


If your FedLoan Servicing repayment isn’t going as you had hoped, you might be staring at two seemingly similar options: Both FedLoan consolidation and private loan refinancing would consolidate or group your federal education debt, making for a more straightforward repayment.

But that’s where similarities between consolidation and refinancing end. If you’re unsure about which to go with, read on for the details.

What to know about FedLoan consolidation

Consolidation involves taking out a direct consolidation loan to repay your original federal student loan debt, and it could solve a number of problems.

Most notably, you could make a single monthly payment to one servicer instead of a handful of them (if you have multiple federal loans serviced by various companies). Although that won’t save you any money, it could bring you much appreciated simplicity.

Through federal loan consolidation, you could also expect the following benefits:

  • Choose your new loan servicer, whether that’s FedLoan or a competitor.
  • Become eligible or retain eligibility for Income-Driven Repayment (IDR) plans and Public Service Loan Forgiveness (PSLF).
  • Lower your monthly payment by switching from the 10-year standard repayment plan to an IDR plan.
  • Lock in a fixed interest rate (if any of your older federal loans were tagged with a variable rate).

The benefits aren’t bereft of fine print, however. When you consolidate loans you’ve already started repaying, for example, you reset the clock on any progress toward forgiveness via IDR or PSLF. Also, none of your private loan debt (if you have any) can be combined via a direct consolidation loan.

How to undertake FedLoan consolidation

If the pros outweigh the cons in your case, file your FedLoan consolidation application at According to the website, most applicants are able to complete the necessary forms in less than 30 minutes.

If you elect to keep FedLoan as your servicer, you can track your application progress via your MyFedLoan account. A resolution should arrive within four to six weeks.

FedLoan Servicing

What to know about student loan refinancing

When you consolidate your federal debt, your new loan’s rate will be a weighted average of your previous federal loans’ rates, rounded up to the nearest one-eighth of 1%.

Via student loan refinancing, however, you could reduce the collective interest rate of your federal debt — and (unlike with consolidation) your private student loans, too — potentially cutting it by whole percentage points.

That’s the greatest difference between FedLoan consolidation and private refinancing — and it explains why many creditworthy borrowers save hundreds even thousands of dollars on interest when working with a private lender.

Say you have four federal loans with FedLoan Servicing worth $35,000 accruing interest at an average rate of 7.00%. Now say you have sterling credit and stable income (or a cosigner who does). By refinancing to a rate of 5.00%, you’d save $4,218 on interest over the next decade.

To be eligible for such savings, however, you — and your cosigner, if you have one — must submit to a credit check. Only applicants with strong credit gain access to the lowest rates advertised by competing lenders. This stands in contrast to consolidation, which has no such credit requirements, making it a more accessible option.

If you have the finances to qualify for refinancing, you could enjoy other benefits besides a lower interest rate, including:

  • Leaving the federal student loan system behind and starting fresh with a top-rated private lender of your choice
  • Selecting fixed, variable or hybrid interest rates
  • Lowering your monthly payment in exchange for lengthening your repayment term and paying more interest overall
  • Releasing the cosigner on your undergraduate private student loans

The cons, however, are just as consequential. In exchange for the perks of private refinancing, you’ll lose access to all federal loan protections. This includes mandatory forbearance (should you need to pause your payments), IDR programs and forgiveness programs like PSLF.

Because refinancing is irreversible once you sign your loan agreement, it’s wise to weigh these plusses and minuses in advance.

How to refinance your FedLoan debt

If you elect to refinance, you can initiate the process by shopping around for the  best possible loan terms. You might also delay your search to improve your credit or find a cosigner who can help you qualify for the very lowest rates.

Once you’ve selected a refinancing lender — whether it be a bank, credit union or online-only lender — it would pay off your FedLoan (and any other eligible education debt). Then your lender would issue you the newly refinanced loan as a fresh start on your repayment.

Try crunching some numbers on our student loan refinancing calculator to estimate your savings (or cost), plus your new monthly payment, when comparing lenders’ quotes.

Should you pick FedLoan consolidation or FedLoan refinancing?

If you have poor credit and no cosigner in sight, you might already have your answer. Consolidation won’t save you money, but it will simplify your repayment, and it’s accessible to all federal loan borrowers.

With strong credit, you might also have the option of refinancing on the table. Whether it’s right for you, however, is another story.

As you’ll see, picking between consolidation and refinancing for your FedLoan debt (or any other loans, for that matter) isn’t just about what you’ll get. It’s about what you’re willing to give up.

This chart might help you as you consider which strategy is best for your situation:

What’s your repayment goal?Do you need federal protections?Your better option is probably ...
Switch to a single monthly payment (for your federal loans only)YesConsolidation
Switch to a single monthly payment (for both federal and private loans)NoRefinancing
Reduce your interest rateNoRefinancing
Work with a new loan servicerYesConsolidation
Work with a new lenderNoRefinancing
Choose a variable interest rateNoRefinancing
Lower your monthly paymentYesConsolidation
Lower your monthly paymentNoRefinancing
Make income-based payments and work toward loan forgivenessYesConsolidation

If you’d like to switch loan servicers, have a single monthly payment and reduce your interest rate, refinancing could deliver all three benefits.

But if you’re not willing to yield your government-exclusive loan options (such as IDR and PSLF), then you could settle for two out of three: Consolidation would allow you to work with a new servicer and achieve a simpler repayment, but not lower the rate.

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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