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How long does student loan consolidation or refinancing take?

The biggest variable in both the refinance and consolidation timeline is usually the borrower.

Written By: Michael P. Lux, Esq.


Affiliate Disclosure and Integrity Pledge

Temporary Forgiveness Clock Rule: The Department of Education is conducting a one-time update of IDR payment counts. Borrowers who consolidate their federal loans before April 30, 2024, can avoid restarting their progress toward PSLF and IDR forgiveness.

The process of student loan consolidation can take as little as a couple of weeks to as long as several months.

The total amount of time and the exact number of steps depends upon several factors. The most significant factor affecting the consolidation timeline is whether the consolidation is done through the federal government or a private company.

Before jumping into any specific timelines, it is important to first explain the difference between refinancing and consolidation: When you pay off your existing loans and replace them with a new one, it’s called consolidation if the government is handling it, and refinancing if a private company is doing it.

Federal Direct Consolidation

Consolidating federal loans with the government is a pretty straightforward process. There is only one form to complete, and then it is a waiting game. The tricky part is deciding if federal consolidation is a good idea.

All federal direct consolidation takes place at the Department of Education Website. According to the Department of Education, the application itself only takes about thirty minutes. After that, a long wait begins.

Once the application is complete, the consolidation people will reach out to the borrowers existing federal loan holders to get final payoff numbers. Once they have final payoff numbers, the borrower will receive a letter detailing the new consolidated loan, new interest rate (the weighted average of existing loans), and new loan servicer. At that point, borrowers can either call to cancel or move forward. To move forward, borrowers are not usually required to take any action. From this point, the remaining steps should take no more than a few weeks.

The work happening behind the scenes isn’t particularly complicated, but it does move at the speed of government, so it takes time. For borrowers, the important thing is to make sure that the proper loans are included in the consolidated loan. Borrowers should also be aware that hiccups along the way, such as loan balances temporarily appearing to double, are possible.

The full federal direct consolidation can take 2-3 months.

A Note About Consolidation Deadlines: Many deadlines, such as the upcoming deadline to take advantage of more generous IDR and PSLF math are based on the date you apply, rather than the date the process is complete.

Sherpa Tip for Parent PLUS Borrowers: If you have Parent PLUS loans and are considering taking advantage of the double-consolidation loophole, getting an early start on the process is critical.

Because mailing the application is suggested for double-consolidation, it will add extra time. Additionally, because you need to consolidate multiple times, the longer processing times could cause you to miss the deadline.

Private Student Loan Refinancing

For borrowers consolidating private loans or refinancing federal loans with a private company, the process is much different. The total time for consolidation can vary greatly.

One crucial step is shopping around. With many different student loan refinancing companies in the market, research at the beginning of the process is essential.

The initial application with each lender is not particularly time-consuming, and applying with several different lenders is a good idea because it will help find the best rate. Initial approvals can be instant or happen within a few days. Some may need more detailed income information, so it could take longer.

The next phase has a couple of steps happening at once. The refinance lender will be collecting information from the borrower to verify income and ability to pay. The refinance lender will also be reaching out to exiting loan holders to get final payoff information with the existing loan companies. The amount of time that this takes varies greatly.

Some companies will not reach out to lenders until all the borrower information reaches final approval; others will be working on both tasks at the same time. Getting final payoff information from existing lenders is a huge variable, because some companies make the process very easy, while others put more steps in the way.

Once the old loans are paid off, borrowers begin repayment with the new lender according to the terms of the new agreement.

In total, the process can take as little as a week or two and take as long as a couple of months. However, this passage of time occurs while the lenders are working. The borrower usually invests no more than a couple of hours of their own time.

Processing Times by Lender

Some lenders move faster than others. For borrowers looking to move quickly with a refinance, we contacted many lenders to determine the average processing time by lender.

The general consensus seemed to be that the complete process, from initial application to loan funding, took two to three weeks on average. The three fastest lenders were Earnest, CollegeAve, and LendKey. Earnest claimed that the average loan took under a week and CollegeAve and LendKey both said that the process took two weeks on average.

We should also note that just because the new loan has been funded, the old debt might still appear on a credit report. Borrowers in a rush should prepare for a lag time between loan creation and the new loan appearing on a credit report.

Tips to Speed Up the Process

Of the eight different lenders that were willing to report loan refinancing times, all but one reported between two and three weeks. Thus, we don’t think that the lender selected should have a considerable influence on the time the process takes.

The primary factor in determining the length of the process appears to be the borrower. Most borrowers will need to submit loan payoff statements from their existing lenders. Borrowers may also need to provide income verification documents. Finally, all borrowers will need to sign documents authorizing the loan to be funded. Getting through the refinance quickly doesn’t require a lot of borrower time, but it does require a borrower to respond to lender requests quickly.

Another way to speed up the refinance timeline is to start the process with several different lenders. Though rare, your loan may get stuck in underwriting with a lender. If you apply with several different lenders, you can ensure you are getting the lowest rate possible and avoid unnecessary delays.

The Bottom Line

Student loan consolidation takes a while since old loans must first be paid in full. At that point, a new loan is generated. For borrowers, consolation may be an opportunity to save money. As such, the consolidation wait is a good investment of time.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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