convert private loans to federal

Can I Convert Navient/Sallie Mae Private Loans Into a Federal Loan?

Michael Lux Blog, Mailbag, Student Loans 0 Comments

In today’s mailbag we will take a look at Katie’s student debt problem.  Katie co-signed some student loans for her daughter to attend college.  The loans were originally with Sallie Mae, went to Navient, and now Katie is being told that the loans will not qualify for Public Service Loan Forgiveness.  She wants to know what she can do to fix this situation.  If you have a question for the Sherpa, feel free to ask us!

Katie writes:

Dear Loan Sherpa,

I am a co-signer of my daughter’s student loans that we took out about a decade ago (she has a PhD now, at least), and originally they were Sallie Mae.  Then they were sold to Navient, I guess.  We had always assumed they were eligible for forgiveness for working in certain sectors — public loan forgiveness, I guess it is called, but now we are told Navient loans are private and therefore not eligible. Is there anything that can be done to convert them?

Thanks for any advice here!


Before Doing Anything: Verify the Loan Status

The tricky part about this loan question is that loans with Sallie Mae loans or Navient doesn’t really tell us much.  A couple years ago, Sallie Mae split off into two companies.  Some of the loans stayed with Sallie Mae, while others went to Navient.

What makes things complicated is that both these companies have handled federal student loan servicing, as well as private loans.

The only way to know the status of your loans for certain is to visit the Department of Education’s Federal Student Loan Database.  If the loans show up on this database, they are definitely federal loans.  If the loans cannot be found here, they are likely private loans.

Can Private Loans be Converted to Federal Loans?

Getting back to Katie’s main question, the answer is no.  There is no procedure or mechanism in place to change a private loan into a federal student loan.  It has been suggested a couple of times in Congress, but has received very little support.

If your loan is a private loan, it isn’t eligible for programs like Public Service Loan Forgiveness or repayment plans based upon your income.

Fortunately, even if you are stuck with private loans, there are a couple of ways to make your payments go further.

Option 1: Take Your Business Elsewhere

One of the biggest developments in student loans over the past five years has been the growth of the private student loan refinancing market.  There are now many companies that will refinance old high interest loans at a lower interest rate.  The catch is that you have to be a good credit risk for a new lender to take on your debt.  That means a high credit score and sufficient income to comfortably pay all of your bills.

If Katie’s daughter fits the above description, she could refinance without having Katie co-sign.  That means the loans fall off of Katie’s credit report and her daughter potentially gets a lower interest rate and/or lower monthly payments.

If you are considering going this route, be sure to check out our page on student loan refinancing lenders and strategy.

Option 2: See if Navient can help out

If Katie and her daughter are facing payments that are not affordable, they might be able to convince Navient to temporarily lower their interest rate due to their hardship.  This can mean smaller monthly payment and a larger portion of your payment actually reducing the principal balance.  This program is called the Navient Rate Reduction Program.  This program was created to help borrowers who didn’t have the money to keep up with their student loans.

The problem with the program is that it isn’t a borrower right under the student loan contract, which means that Navient can approve or deny you for the program that their sole discretion.

Bottom Line

There is no method in place to turn a private loan into a federal loan.  For borrowers, that means no income-based repayment plans or student loan forgiveness.

The good news is that even if you are stuck with a private loan, there are at least a couple ways to make your monthly payments go a little bit further.

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