Can You Refinance Private Student Loans to Federal Loans?

Although both can help you with your education expenses, private and federal student loans are entirely different financial products. Private financial institutions fund the former, including banks, online lenders and credit unions. The U.S. government backs federal loans.

Refinancing your student loans can be a good strategy for debt management. It may allow you to find better rates or shorter loan terms. However, while you can use a private student loan to refinance a federal one, the opposite isn't possible.

That said, several lenders have benefits similar to those offered by federal loans. You can still enjoy some perks with a private loan refinance.

Key Takeaways

You cannot transfer a private student loan to a federal one.

You can consolidate private and federal student loans — which means taking out a new loan from a bank, online lender or credit union.

Refinancing private student loans can be an excellent debt management strategy. It can help you consolidate due dates, and you may get lower rates, shorter repayment terms or the option to have a co-signer.

WHAT WE’RE GEEKING OUT ON:

Private Student Loans vs. Federal Student Loans
Can You Combine Private & Federal Student Loans?
Federal-Like Benefits of Private Student Loans
Should You Refinance Private Student Loans?
Frequently Asked Questions About Private Student Loan Refinancing

Private Student Loans vs. Federal Student Loans

Taking out a loan to help finance a college education is something that many people do, leading to significant debt. On average, the outstanding balance of a federal student loan is $37,787, while private educational loans average $40,780.

Private student loans originate from non-government financial institutions. Eligibility requirements usually include a minimum credit score and enrollment in a degree program, but some lenders have more requirements than others.

In comparison, federal student loans — administered by the U.S. Department of Education — have different requirements. To qualify, you must be a U.S. citizen or qualified noncitizen, show proof of enrollment in a qualified program and submit a FAFSA (Free Application for Federal Student Aid) form.

Private and federal educational loans have similar features, such as charging interest, varying repayment terms and borrowing limits. Federal student loans typically offer lower rates. Private student loans often require you to begin repayments immediately, while federal ones allow a grace period, usually requiring you to start paying after you've graduated.

Private Student Loans Compared to Federal Student Loans

Feature	Private Student Loans	Federal Student Loans
Loan Provider	Private financial institutions, like banks credit unions and online lenders	The U.S. Department of Education
Eligibility Requirements	Varies per lender, but typically includes the following: Credit score and history Income Debt-to-income ratio Enrollment in a qualified degree program	Proof of U.S. citizenship or noncitizen eligibility A valid Social Security Number (except those from Palau, Micronesia or the Marshall Islands) Currently enrolled or at least accepted for enrollment in an eligible program Enrolled at least half-time (for Direct Loan programs) Proof of financial need (for Direct loans) Requires consistent, satisfactory academic performance Proof that you qualify to receive a college or career school education A completed FAFSA form
Loan Amount	Up to 100% of your total cost of attendance (CoA), minus financial aid	Depends on your profile: Dependent First-Year Undergraduates: $5,500 Independent First-Year Undergraduates: $9,500 Dependent Second-Year Undergraduates: $6,500 Independent Second-Year Undergraduates: $10,500 Dependent Third-Year (and beyond) Undergraduates: $7,500 Independent Third-Year (and beyond) Undergraduates: $12,500 Graduates or Professional Students: $20,500 Parents: Up to your child’s cost of attendance, minus financial aid
Grace Period	Some private lenders require you to make payments right away, while others won’t ask you to begin repayments until after you graduate. For example, LendKey has a six-month grace period	Federal student loans offer a guaranteed grace period of six months from when you graduate. You must also begin repayment if your enrollment falls below half-time or if you decide to leave school completely
Interest Rates	Between 6% to 7% interest rates. Lenders may give you the option to choose between fixed or variable rates	Interest rates range between 4.99% to 7.54% depending on the type of loan you have
Repayment Terms	Loan terms may range from five to 15 years	Offers various repayment options, such as: Standard (10 years) Extended (25 years) Income-driven
Benefits	Higher borrowing limits You can choose between fixed and variable rates A good credit score may give you lower interest rates Discounts are available (like signing up for autopay) Allows you to have a co-signer	Lower interest rates All loans have fixed rates, allowing you to predict how much you need to pay each month Flexible repayment options Does not consider your credit score Offers hardship options

Can You Combine Private & Federal Student Loans?

Once you begin making repayments, you may consider refinancing your student loan to make it more manageable. However, depending on the type of student loan you have, there may be restrictions on what you can and can't do.

You likely won't experience challenges if you have multiple private loans and want to refinance or consolidate your debt using another private loan product. If you have a federal student loan, you can also refinance it through a private loan. However, it is crucial to understand that doing this comes with risks, such as losing benefits federal student loans provide.

One question that may come up is whether the opposite is possible — can you refinance a private student loan to a federal one? Unfortunately, the answer is no.

Some private lenders refer to their refinance products as consolidation loans. You might mistake this as part of the Federal Student Loan Consolidation Program, but as its name implies, that program is only for federal student loans, and you cannot include private ones. If you want to consolidate federal and private student loans together, you can do so, but only through a private lender.

Federal-Like Benefits of Private Student Loans

Even if you can't transfer a private student loan to a federal consolidation loan, you can consider refinancing it with a private one. Several lenders offer federal-like benefits.

Here are some perks you can find, even with a private student loan.

Grace Period

A grace period is a time a lender gives you before you are required to begin repayments. For example, Citizens Bank allows you to defer your payments until six months after graduation or when your enrollment falls below half-time.

A grace period before you begin repayments can relieve you of financial stress. It also gives you more time to set aside money for your payments. This way, you'll likely be financially ready by the time the first payment is due.

Forbearance

Like federal student loans, some private lenders allow you to pause payments if you undergo hardship, such as medical emergencies or unemployment. Financial stress and being in debt may affect your mental health, and worrying about loan repayment can fuel the fire.

Forbearance is a way to avoid repayments while you get your finances back on track. You get a reprise from payments without defaulting if you are approved for forbearance.

Interest-Only Payments

Each time you make a payment on your loan, a portion of it goes to your principal balance. One strategy to keep your debt manageable is to make interest-only payments while you're still in school.

With interest-only payments, the full payment amount goes to your interest and can save you hundreds (or even thousands) of dollars in the long run. And, when you graduate, your outstanding loan amount will be lower.

Should You Refinance Private Student Loans?

A private student loan can help you pay for your college education but also leaves you in debt. If you're wondering whether refinancing your private student loan is the right move, here are some points to consider:

You can get better interest rates: If you took out your student loan when interest rates were high, you might be in an ideal position to find lower rates. Refinancing your loan with lower interest allows you to save money in the long term.
You can choose different repayment terms: You can change your loan terms by refinancing. Shortening your loan repayment period may mean you retain the amount of your monthly payment (or even increase it), but it could save you money over time.
You can consolidate multiple loans: Having several student loans from different providers can be stressful to manage. Refinancing can combine your loans, so you'll only need to be mindful of one due date and monthly payment.
You can release your co-signer: Private lenders often consider your credit standing when you apply for a loan, and college students often need a co-signer, especially if they don't have enough credit history. However, once you start working and build your credit, you can release your co-signer through a refinance.
You can switch lenders: A good loan experience includes the quality of service your lender provides. If you're dissatisfied, refinancing is an excellent opportunity to look for a different lender.

HOW TO REFINANCE PRIVATE STUDENT LOANS

Refinancing your private student loan isn't complicated, but you should consider several factors to get the best possible deal. MoneyGeek recommends taking the following steps:

Step 1: Assess your creditworthiness.
Requirements vary between lenders, but most will look at your credit score. A good credit standing typically means getting more competitive interest rates. If you know that your credit is less than ideal, you can take steps to improve your credit score.
Step 2: Look for the best rate.
Comparing offers between lenders is a crucial step in the process. Remember, you're likely to get varying rates and terms, even if you provide the same personal and financial information to every lender.
Step 3: Pick the best offer.
Besides the interest and repayment terms, don't forget to look at other factors before selecting a lender. See what features different providers offer that you may want to get.
Step 4: Complete the loan application form.
Once you decide on your preferred lender, it's time to complete the paperwork. Fill out an application and begin preparing the necessary documents.
Step 5: Start making payments.
When you refinance your private student loan, you'll have a new due date and repayment amount. Keep these in mind to ensure you don't fall behind.

Frequently Asked Questions About Private Student Loan Refinancing

Most borrowers wonder if they can refinance a private student loan to a federal one. MoneyGeek looked at the most commonly asked questions about loan refinancing to help you make a decision.

What are ways to get federal-like student loans with a private student loan?

You can refinance your private student loan through a private lender that offers federal-like benefits. Remember that these may vary between lenders, so it's best to ask them directly about it.

What are the pros and cons of student loan refinancing?

Refinancing your student loan can bring several benefits. For example, it's a great way to get lower interest rates and shorter loan terms. However, if you used to have a federal student loan, you'll lose some advantages, like flexible repayment options and the possibility of student loan forgiveness.

Should you refinance federal student loans?

Refinancing your student loan is a good move in some situations. However, it might not be the best option if you've nearly finished repaying it.

You might also need to hold off refinancing if you're planning to take out another large loan (like a mortgage), as refinancing can affect your credit score, which may cause a lender to deny your other loan application.

Is it a good idea to refinance federal student loans?

You may lose some benefits that federal student loans offer if you refinance your federal student loans if you refinance through a private lender. These federal loan benefits include income-driven repayment plans and student loan forgiveness.

However, you may get better rates and have the chance to consolidate several student loans. Ultimately, you'll have to weigh whether the advantages outweigh the risks.

When should you refinance student loans?

Refinancing a student loan is an excellent debt management strategy in some circumstances. You may want to consider refinancing when:

You're looking for lower interest rates
You want to save money by shortening your loan terms
You don't want to deal with multiple monthly payments and due dates anymore
You want to release your co-signer

If any of these apply to you, refinancing your student loan is a good option.

Who’s eligible for student loan refinancing?

Anyone who's still paying off their student debt can consider refinancing. However, you'll have to understand your lender's specific requirements to determine whether you qualify. These may include a minimum credit score and income and debt-to-income ratio thresholds.

Can you put student loans in someone else’s name?

Yes, you can, and this applies to federal and private student loans.

However, the only way to do this is to refinance your existing student loan to a new one through a private financial institution.

About Christopher Boston

Christopher (Croix) Boston was the Head of Loans content at MoneyGeek, with over five years of experience researching higher education, mortgage and personal loans.

Boston has a bachelor's degree from the Seattle Pacific University. They pride themselves in using their skills and experience to create quality content that helps people save and spend efficiently.

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sources

Citizens Bank. "What is student loan deferment?." Accessed October 16, 2024.
Education Data Initiative. "Average Student Loan Interest Rate in 2022." Accessed October 16, 2024.
Education Data Initiative. "Student Loan Debt Statistics." Accessed October 16, 2024.
Federal Student Aid. "Interest Rates and Fees for Federal Student Loans." Accessed October 16, 2024.
Lendkey. "FAQs of private student loans." Accessed October 16, 2024.

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