If you are unhappy with your Aidvantage loans, consolidation and refinancing both offer many perks, including a fresh start with a new servicer.
Before jumping into the details and the strategy, it is essential to remember that refinancing and consolidation are very different processes. Each choice has distinct pros and cons. Additionally, because its nearly impossible to undo a consolidation or refinance, borrowers need to use extreme caution when making any decisions.
However, if your strategy is sound, refinancing and consolidation can make a huge difference in your plan to eliminate your Aidvantage student loans.
A Quick Note from the Sherpa: Although consolidation and refinancing are very different, I chose to include both in this article.
I made this decision because many borrowers, and some student loan companies, often use the terms interchangeably. While there are some similarities, borrowers must understand the differences.
Benefits of Consolidation of Aidvantage Student Loans
Consolidation is a process available to federal student loan borrowers. When you consolidate, your old federal loans are eliminated and replaced with a new federal consolidated loan.
The biggest advantage of consolidation is that it can help your loans gain eligibility for certain repayment plans and forgiveness programs. For example, if you have FFEL student loans, you can consolidate them into a federal direct loan. This consolidation allows borrowers to qualify for repayment plans like REPAYE. Parent PLUS loan borrowers can use consolidation to qualify for Public Service Loan Forgiveness.
Consolidation also helps borrowers who are in default. Consolidation is often the fastest path out of default.
Another advantage to federal direct consolidation is that it helps organize repayment. Instead of sending checks to multiple federal servicers each month, borrowers have one consolidation loan and one servicer.
A final perk of consolidation is that borrowers get to pick their new servicer when they consolidate. This is one of the only times that borrowers get to choose their federal loan servicer.
PSLF Limited Waiver Opportunity: Until October 31, 2022, consolidating comes with a few extra perks.
Borrowers can consolidate their FFEL or Perkins loans and count previous payments towards the ten years required for PSLF.
If you have previously been told that your federal loans or your repayment plan were not eligible for PSLF, be sure to investigate the limited waiver on PSLF.
How to Consolidate Aidvantage Student Loans
Applying for consolidation is relatively simple, and the Department of Education estimates that it takes less than 30 minutes to complete the request form.
While there is a physical form available, the fastest way to consolidate is to apply online at studentaid.gov.
The whole process can take several weeks or even months. However, borrowers are not required to take any action during this time.
When your consolidation application is submitted, the loan servicers work to create the new consolidation loan and pay off the current loans. Once terms have been finalized, borrowers should receive a letter detailing the consolidation. This is also the borrower’s last chance to stop the consolidation from going through and becoming permanent.
Are you consolidating the right loans? In some cases, the best consolidation strategy is only to include certain loans.
If you are unsure about your consolidation plan, check out the complete guide to federal direct consolidation. It includes the pros and cons as well as some common mistakes to avoid.
The Big Difference Between Consolidation and Refinancing
In a student loan consolidation, your old federal loans are paid off and replaced with a new federal loan. Consolidation is only available for federal student loans.
In a student loan refinance, your old loans are paid off and replaced with a new private loan. Borrowers can refinance federal and private loans.
Thus, even though the process is somewhat similar, the results are very different.
The Big Refinance Risk: Refinancing makes it easy to turn a federal loan into a private loan. Unfortuantely, most borrowers are unable to turn private loans into federal loans.
If you refinance federal loans, you give up important federal perks like income-driven repayment and student loan forgiveness.
The Benefits of Refinancing Aidvantage Student Loans
During the federal payment and interest freeze, refinancing probably isn’t worth it because private lenders can’t compete with the 0% interest rate offered by the federal government. Once repayment and interest restart, refinancing may make sense for some borrowers.
The biggest advantage to refinancing student loans is getting a lower interest rate.
Congress sets federal student loan interest rates. Borrowers pay interest based on the federal loan type and when they borrowed the loan. Borrowers with a steady job and solid income receive the same interest rates as borrowers that creditors consider high risk.
If you have a solid credit score and income, refinancing often means lowered interest rates. Spending less on interest means eliminating debt faster.
Lower monthly payments are another perk to refinancing for some borrowers. In some instances, refinancing to a 20-year loan saves money on interest and offers lower monthly payments.
Finally, if you are unhappy with Aidvantage, refinancing means you no longer have to work with them. This is a long list of refinance lenders to choose from.
How to Refinance Aidvantage Student Loans
To refinance your Aidvantage loans, you need to find a willing private lender.
In most cases, shopping around is the best approach. Checking rates with multiple lenders increases your approval odds and helps you find the lowest interest rate possible.
Once your refinance loan is approved, the refinance lender takes care of the heavy lifting. The refi lender will pay off your existing loans and set up your new refinance loan. Lenders and loan servicers like Aidvantage cannot prevent borrowers from refinancing their loans.
For the borrowers looking for the lowest interest rate possible, the following lenders advertise the best interest rates, as of April, 2024:
| Rank | Lender | Lowest Rate | Sherpa Review |
|---|---|---|---|
| T-1 |  | 5.28% | ELFI Review |
| T-1 |  | 5.28%* | Splash Financial Review |
| 3 |  | 5.49% | Laurel Road Review |
If you are looking for a lower rate and a lower monthly payment, a 20-year, fixed-rate loan is often the best choice. The following lenders advertise the best rates:
| Rank | Lender | Lowest Rate | Sherpa Review |
|---|---|---|---|
| 1 | | 6.08%* | Splash Financial Review |
| 2 | | 6.64% | ELFI Review |
