Nelnet Student Loan Consolidation or Refinancing: How to Choose
If you are repaying Nelnet student loans, you may be wondering what your options are for Nelnet student loan consolidation and refinancing. Both options can simplify repayment, and refinancing your loans can save you a lot of money. Read on to learn the differences between consolidating and refinancing Nelnet student loans so you can decide which strategy, if any, would be most effective for you.
Nelnet Student Loan Consolidation vs. Refinancing: What’s the Difference?
One of nine federal student loan services, Nelnet does not directly offer consolidation or refinancing options. But you can consolidate your federal loans managed by Nelnet through a direct consolidation loan with the federal government.
Alternatively, you can choose to refinance your Nelnet student loans into a brand new loan with a private lender. Taking either action might be wise if you’re looking to streamline your repayment, lower your monthly dues, or avoid a disorganized agent.
If you’re not happy with Nelnet – it’s one of the most criticized servers – you’ll be happy to find that you can switch servers through federal consolidation and refinancing. That said, you don’t need to change if you consolidate, as you can choose to stay with Nelnet and keep its service features.
Consolidation and refinancing also come with similar eligibility requirements, ranging from having a college degree to tracking your debt repayment.
Let’s explore the pros and cons of each reimbursement strategy.
Pros and Cons of a Federal Direct Consolidation Loan
Federal student loan consolidation won’t directly save you money, but it could put you in a better position to pay off your debt. This is because consolidating your student loans gives you a loan and a monthly payment.
You can also lower your monthly payment by consolidating and switching to a longer repayment term, if you don’t mind your interest accruing.
Having said that, there are some drawbacks to a direct consolidation loan. On the one hand, your interest rate will increase slightly, because it will be an average of your previous rates, rounded to the nearest eighth of a percent.
On the other hand, taking out the new consolidated loan could reset your progress towards a loan forgiveness program, such as the civil service loan forgiveness, if you have been repaying for a while.
But if you are in the early stages of repayment, perhaps even taking advantage of your grace period, you might consider a direct consolidation loan to be a fresh start.
Advantages and disadvantages of refinancing with a private lender
Like direct consolidation, refinancing your Nelnet student loans with a private lender allows you to combine multiple loans into one. Plus, you can switch to a new lender and loan manager and say goodbye to Nelnet.
Refinancing also has an advantage over consolidation if you are looking to save money – it often allows you to reduce your interest rate by several percentage points. In fact, major refinancing companies offer fixed and variable rates below 3.00% to borrowers with strong credit histories and low debt-to-income ratios (DTIs).
If you can significantly reduce your rate, you could save money over the life of your student loans. In addition, refinancing allows you to choose new terms, generally between 5 and 20 years, and adjust your monthly payments accordingly.
But even with all of these advantages, there are also drawbacks to be aware of. Refinancing federal student loans makes them private, which would cost you access to federal repayment plans and forgiveness programs.
Additionally, it can be difficult to qualify for refinance, as you must have good credit and sufficient income (or apply with a co-signer who meets these criteria). So, before choosing to refinance Nelnet student loans, make sure you understand the pros and cons.
And most importantly, make sure you don’t miss out on the opportunity to take a loan forgiveness, change your loan repayment plan, or use government-specific deferral and forbearance options, as private lenders do not. usually do not check these boxes.
Choosing between Nelnet Student Loan Consolidation and Refinancing
You have all kinds of options to manage your Nelnet student loan consolidation. Chances are, one is better for you than the others.
If you are looking for the convenience of a single loan but dislike private lenders, you can apply for a Direct Consolidation Loan. You would be sorry for not wanting to give in to the government’s more extensive repayment protections.
But if you won’t miss out on the benefits of federal loans, consider refinancing your Nelnet loans with a private lender. A lower interest rate could offset any fees you might see as a result of the change, especially if you can find a lender that offers repayment protections.
SoFi, for example, offers help if you lose your job while paying off your debt. You might come across U-fi Student Loan Refinancing while browsing the Nelnet website because the companies are partners. Keep in mind that you don’t have to refinance with U-fi.
Check out these refinance lenders before choosing the right one for you.
Keep in mind that your credit history and DTI ratio are taken into consideration when you apply. If you want more details, be sure to check out How to Apply for a Student Loan Refinance.
Rebecca Safier contributed to this article.