If you are unhappy with your repayment plan, interest rates, or Navient customer service but unable to pay off your loan, student loan consolidation could be the solution to your problems.
Consolidation is a fairly simple process. Old loans get eliminated and replaced with a new loan. Borrowers can consolidate some or all of their loans.
At the end of consolidation, your old loans are paid in full, and you have to pay off a new loan with newer and hopefully much better terms.
If you are looking to consolidate Navient loans, there are two processes you can go through: federal and private consolidation. Federal consolidation happens through the Department of Education. Private consolidation, through a private lender, is usually called student loan refinancing. There are significant differences between the two choices, so you must make an informed decision. Because there is no way to “undo” a consolidation, any mistake you make is permanent.
Federal Direct Consolidation
The major advantage of federal loan consolidation is that you get to keep all of the perks associated with federal loans. These perks include income-driven repayment plans and student loan forgiveness. Another advantage of the federal loan consolidation process is that anybody can do it. There are no credit or income requirements.
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 consolidation is not the best strategy for some borrowers. Combining the wrong federal loans could result in borrowers not being eligible for preferred repayment plans. Anyone considering federal direct consolidation should be sure to understand the pros and cons of the process.
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
If you look at the refinance lenders on the market, you will see a wide selection of lenders, and that interest rates can be just under 2%. By slashing your interest rates, you can lower your monthly payments and get your loan paid off faster.
All loans are eligible for private loan refinancing, even federal. If you are thinking of refinancing your federal loans into a private loan, tread carefully. You can save a bundle by locking in low-interest rates, but you must give up the perks that go with federal loans. There is a lot to think about when it comes to private consolidation of federal loans.
If you want to go this route, you will need to have a good credit score and a decent income. The individual requirements and programs vary from company to company, so it pays to shop around.
If you have a great credit score and a high income, companies like SoFi, Laurel Road, and CommonBond offer rock bottom interest rates. If you can’t lock down the lowest interest rates with those guys, a company like LendKey will match you up with a non-profit credit union and hopefully offer a competitive rate.
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 Navient 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, Navient borrowers will have the same consolidation process as Sallie Mae, MyFedLoan, and others. Additionally, Navient has no ability or authority to stand in the way of the 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, it usually 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.
Consolidating Navient Loans
Just because you can’t pay off your Navient 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, and pay off your loan faster.