If you’re not happy with your current repayment plan, interest rates, or the customer service from AidVantage and can’t afford to pay off your loan, consolidating your student loans might be the solution.
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.
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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.
Ok, this is page describes the ramifications of consolidation; not “how to”. Helpful advice though.
That is a fair point.
I’ve added some additional info on the “how to” aspect to make it more helpful.
Thanks for sharing your thoughts!
A lower interest rate is very tempting, however consolidation muddies the water somewhat. Consolidation, particularly undergrad and graduate loans seems to bury all details.