If you have student loans with Nelnet and want to consolidate them, the process can seem a bit overwhelming. This is especially true if you are new to consolidation and unsure of your options.
Nelnet borrowers have two main options for consolidation. Borrowers can consolidate their loans with a private lender or they can consolidate federal loans with the federal government. Both options have significant pros and cons.
Unfortunately, the Nelnet site does a poor job of explaining the many consolidation choices and reasons to consider each route. Today we will look at these options for private loans and for federal loans.
Federal Loan Management with Nelnet
Nelnet is one of the biggest federal loan servicers. If you are unsure if your Nelnet loans are federal loans, you can always visit the National Student Loan Database. There you will find the federal government’s database that shows who services your federal loans. If you see your Nelnet loans on the list, you can be certain they are federal.
There are two approaches to consolidating your federal student loans. Approach one is to consolidate your federal loans with the federal government. Approach two is to consolidate your federal loans with a private company. Picking the wrong approach can be a huge mistake, so it is critical you understand your choices.
Consolidating Federal Loans with the Federal Government
Consolidating your federal loans into a federal direct consolidation loan has a couple of advantages. If you are a borrower of certain loans, such as graduate PLUS loans, consolidation can actually turn ineligible loans into loans that are eligible for programs like Public Service Student Loan Forgiveness. If you think this applies to you, have a conversation with your loan servicer as soon as possible.
A smaller advantage of federal direct consolidation is that it puts all of your loans in one place. This prevents you having to deal with multiple federal loan servicers. That being said, consolidation can restart certain loan forgiveness clocks, so it is very important to understand the implications of federal consolidation before making the decision.
One thing to note about federal consolidation is that it doesn’t change your interest rates. When the loans are combined, they generate the weighted average of your interest rates so that your interest payments over the life of the loan are essentially the same.
If you want lower interest rates…
Consolidating Federal Loans with a Private Lender
Going this route is the only way to get lower interest rates on your federal student loans. That being said, this option is definitely not for everyone. By consolidating with a private lender you give up the perks that come with a federal loan. These include income based repayment plans and public service student loan forgiveness. If you think that there is any chance that you will need these government perks, it is probably best to keep your loans with the federal government.
However, if you don’t think you will ever need the federal programs, now is a great time to be consolidating student loans on the private market. We have found companies that will consolidate at interest rates just over 2%. Some of them even offer a $150 bonus to new customers.
This is also one area in which we take issue with Nelnet’s site. On Nelnet’s private loan consolidation option, they only list one company, U-Fi. It makes it seem as if U-Fi is the only option for Nelnet borrowers. The reasoning behind their approach is pretty obvious… Nelnet services all U-Fi loans, so they have a financial incentive to get you to consolidate with U-Fi. While U-Fi is definitely a viable option for many borrowers, their rates and terms are not competitive with some of the lenders at the top of our student loan consolidation rankings.
Options for Private Student Loans
The Federal Government – If you are thinking about going this route, you are very clever. Turning a private loan into a loan with federal perks would be great, unfortunately it cannot be done. If you have a private loan, there is no way to convert it into a federal loan.
Private Lenders – This route is the easiest call. If you have a strong credit score and income, odds are pretty good that you will be able to lower you interest rate though refinancing. This is because you are much less of a credit risk now that you have a degree and job. Interest rates on private loans for borrowers who don’t have a degree or full-time work are usually pretty high, but it isn’t always a sure thing. Common refinance lenders include: SoFi, Laurel Road, and College Ave.
There are many options for consolidation of Nelnet student loans. The most important thing is to evaluate all of the potential choices and to pick the one that works best for your personal situation. There really isn’t a one size fits all approach to loan consolidation.