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Is it Possible to “Undo” a Student Loan Consolidation or Refinance?

Fixing a mistake on a student loan refinance or consolidation is easy if you catch it early. If you are late, you have to get creative to undo the process.

Written By: Michael P. Lux, Esq.

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Generally speaking, once a borrower has consolidated or refinanced their student loans, there is no way to undo the process or fix a mistake.

However, there is some positive news for those borrowers with regrets:

  1. The process of a consolidation or refinance involves several steps before it becomes final.
  2. Although there isn’t an “undo” option, there are methods to correct certain errors.

Today we will discuss the point at which it is impossible to “undo” or reverse a student loan consolidation or refinance. Then we will explore one approach for effectively correcting some of the issues that may arise.

Consolidation and Refinance Steps

Broadly speaking, when a borrower refinances or consolidates their student loans, a new lender pays off an existing loan or loans in full. This action terminates the old debt obligation and replaces it with a new one to the new lender.

Borrowers generally go through this process to secure lower interest rates and monthly payments. Lenders offer these services because they think they can identify borrowers who present a lower risk and are potentially more profitable.

The refinance process typically begins when a borrower explores interest rates offered by various student loan refinance lenders. Just checking these rates does not commit a borrower to anything.

For federal student loan borrowers looking to consolidate, the process begins with completing the federal student loan consolidation application.

Once a lender approves the loan for a new borrower, the borrower must provide details about the old loans to the new lender. Even at this stage, the process can often still be stopped.

What is the difference between student loan consolidation and student loan refinancing?

Student loan consolidation is a specific process for federal student loans conducted exclusively by the Department of Education. Student loan refinancing, on the other hand, occurs when a private lender pays off existing private or federal loans and issues a new private loan their place.

Generally, refinancing and consolidation follow a similar process, but are undertaken for different reasons. However, when it comes to rectifying mistakes made in a refinance or consolidation, the approach to resolving these two errors are quite similar.

The Point of No Return for a Refinance or Consolidation

After the new lender – or the Department of Education, in the case of a consolidation – receives all the necessary loan information, they typically issue a final loan contract to be signed. Signing these final documents triggers the disbursement of payment sent to the old lenders. At this stage, once the payment has been sent, the borrower has truly reached the point of no return.

If borrowers find themselves reconsidering their decision midway through the refinance or consolidation process, the best course of action is to contact the new lender as soon as possible. Most lenders prefer to halt the process if a borrower expresses second thoughts. From the new lender’s perspective, those second thoughts could be a signal that repaying the loans might present difficulties for the new borrower. Lenders tend to avoid borrowers who might struggle to pay back the debt.

Alternatively, borrowers could try contacting their original lenders to request they not accept payment from the new lender. However, this move has a limited chance of success, as most lenders are eager to cash a check that pays off a loan.

The good news is that once borrowers do reach this proverbial point of no return, borrowers still have some options to address many loan-related concerns.

How to “Undo” A Student Loan Refinance

While it is impossible to completely reverse a student loan refinance, many mistakes can be corrected after the fact.

For example, suppose there is a borrower who selected a 10-year variable-rate repayment plan, but later realized that a 20-year fixed-rate plan would have been a better choice for them. By starting the refinance process again, borrowers can seek out new lenders willing to offer a loan with the desired terms. It’s beneficial for borrowers to be aware that there is no limit on the number of times a loan can be refinanced and there are many companies offering refinancing services.

Engaging in this “redo” process allows borrowers to reconsider and change key factors like the length of repayment and their choice of lender.

However, the situation is less favorable for those who have refinanced federal student loans into private ones.

When is the Decision Truly Permanent?

Refinancing federal student loans with a private lender is a decision that cannot be reversed. The perks and benefits that existed for the federal loans are lost because they have been paid off. The new loan, even though it was originally federal, is now a private loan in every way. This means federal student loan forgiveness programs and income-driven repayment plans are no longer available.

The situation is somewhat similar for borrowers who opt for federal direct consolidation. Through this process, the Department of Education pays off the old federal loans and replaces them with a single new consolidation loan. For some, consolidating their federal loans is a necessary step towards more manageable repayments or qualification for certain federal programs. However, for others, it might not be the best choice. Therefore, understanding the full implications of consolidating federal student loans is crucial before proceeding with the process.

The situation is similar for borrowers who opt for federal direct consolidation. Like private lenders, the Department of Education eliminates the old loans and creates a brand new consolidated loan. For some borrowers, this is an essential step towards a more manageable repayment plan. However, for others, it might not be the best choice. Thus, it is critical that borrowers understand the consequences of federal direct consolidation before starting the process.

Sherpa Thought: The current rules, especially for federal consolidated loans, are objectively unfair, especially for borrowers who received inaccurate advice from their loan servicers.

The bit of good news in this situation is that creating a way to unconsolidate federal loans could be on the horizon. However, it will require some advocacy effort from borrowers.

Bottom Line – A Fix is the Best Case Scenario

There is no way to reverse or undo a student loan consolidation or refinance. The good news for some borrowers is that there are several steps in between the initial rate shopping and reaching the point of no return. Furthermore, although there is no guarantee of an approval, a second refinance can provide an opportunity to correct certain mistakes.

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.

33 thoughts on “Is it Possible to “Undo” a Student Loan Consolidation or Refinance?”

  1. Unbeknownst to me I consolidated a small parent plus loan with my loans… now I’m told I’m no longer eligible for several of the low payment options for PSLF. I have a ridiculously large monthly payment now. I’m trying to undo the consolidation but don’t know how likely that is.

    • Undoing a consolidation isn’t really an option once it is finalized. I’ve never heard of it successfully working, but your situation is a good example of why it should become an option.

      I’d encourage you to file a complaint with the CFPB and the Department of Education. I’d also encourage you to reach out to your elected officials.

      You attempted to make your student loans more managable and because you were not given the right information, you made a mistake with no easy fix. Shame on your servicer and the Department of Education for allowing this to happen.

  2. Hi Richard, I’m in a similar situation as Jen. I consolidated my FFEL loans (that were in an IBR plan for about 10 years or more) and two previous DL consolidated packages into one consolidation at the beginning of 2022. I was unaware that by grouping those together, previous payments made on my DL loans would not count toward the PSLF program. Is there a way I can fix my consolidation? It is sickening to think I would lose all that time.

  3. Thank you. I just spoke to my loan provider and they said since I consolidated last year that I did not lose time. I still have to call the federal student aid since my time in Idr is not listed on the website. Big sigh of relief!

  4. Hi Richard, I have been in an income repayment plan for years and years. I would say 15 years or more. In the beginning I was in forbearance because they did not tell me I had other options. I did not know if I consolidated I would lose all of that time. It makes me sick. What can I do? I make so little money my payment is zero and has been zero this whole time.

  5. I submitted my request to consolidate my loans this morning, but found an error on it. I have one “J” code and one “O” code to consolidate, and only the J made it onto the request application. Can I get that error fixed? I called the Federal Student Aid and was told to call Mohela, the one who the app was sent to. Their wait time is 177 minutes and I’ve dropped the call a few times

  6. I applied for a consolidation loan through the fed loan website, and on 9/21 received a letter from Aidvantage that my “application has been processed”. Then I found out that my employers were likely ineligible under the pslf program (quasi public agencies). I called Aidvantage to see if I could cancel the loan. The representative did enter the request, but said it was three days past the 10 day window, and it probably would still be processed. Are there any options in this situation? After trying to cancel I also went ahead and paid off a chunk of my existing loans through the Aidvantage website, and am now wondering if those payments will go through. Thanks for your help.

  7. I consolidated my son’s federal loans many years ago. The payment on my parent plus loan is about $150,000. I made partial payments on them monthly. They were in default before the COVID 19 halt. My one son is in a 10-year forgiveness program, Is there any way to unconsolidate my son’s loan from my parent plus loans so they could be put on his 10-year forgiveness program?

      • Hi. I’m reading your website..I have a question. We had a federal loan which was paid in full. My son, zoom educated year 20 and 21, failed out. He couldn’t take the pressure. Fell apart at Easter time and never returned. Ugh!! He made the decision on his own to withdraw his mental health was more important. Can I fight for money back due to a MH need? My loan was paid in full but asking and out $30k. Expensive! Thank you in advance if you know the answers to this one.

      • I’m not aware of any mechanism to get a refund when your child drops out of college under these circumstances (unless it was so severe that he now qualifies for disability). Your best bet might be to ask the school for a refund.

  8. I consolidated all my federal loans as well as private loans (separately) with Salle Mae (now Navient) in 2004 when I graduated from graduate school. I have since paid off all private loans but still have about $50K remaining in the federal loans. Last year I found out that my loan doesn’t qualify for the Covid loan repayment pause because even though they were federal loans originally, due to the consolidation 18 years ago they are no longer Federal Direct loans. I wish I had known the difference back then. Now I got approved for a better interest rate refinancing with Sofi. Before I sign the contract with Sofi, I just want to make sure that there is absolutely no chance that I could undo my mistake and reverse my remaining loans back to federal direct loans, if there’s still a chance that President Biden may forgive some federal student loans. Thanks!

  9. I consolidated my Federal Stafford loans from CFNC when I graduated 2006. I had no clue what that meant, so none of my loans are federal now and do not qualify for the forgiveness program working in an organization for 10 year, I’ve worked for a qualifying org for 7 years. Is there anything I can do? I have already paid $11,831 in interest alone and a little over $4k to principal on a $31,223K loan. I’ve been on an IBR since 2011. I was hoping I could refinance it into a federal loan, is that possible?

  10. I graduated in 1995 with $26,000 worth of student loan debt. I was in forbearance for a few years because I was making around $18,000/year. I married my husband, who had $10,000 worth of debt, in 1999. We have been paying for 22 years, automatically drafted, at $450 to now $550 / month. We currently owe around $57,000! He is a teacher and I am a public school secretary. We have been told we can get the teacher forgiveness because we consolidated. At this rate, it looks like we will die owing this money. It’s so depressing and overwhelming.

  11. I erroneously consolidated loans I’ve been paying on for 10 years because the PLSF website indicated that I could not get loan forgiveness unless FedLoan was my servicer. I filled out the form and submitted it and never heard from them. I found out before the process was completed about my mistake and asked for the process to stop. In my NEW FedLoan account, there are old letters telling me that consolidating my loans would mean that I would lose credit for my old payments, I never got this letter since I did not have an account with them. They never sent this notice via email or postal mail. After I asked them to stop the process FedLoan quickly processed the consolidation instead of responding to me! Now, after I’ve made 10 years of payments, I have to start over. I’ve written my congressman and complained to the loan servicer but no one has responded. This seems predatory.

  12. Many years ago, my wife and I consolidated our student loans with no up front explanation regarding the possibility of hers being forgiven since she was a teacher in a qualifying school district. After the consolidation and information in hand regarding teacher forgiveness, we were told since we weren’t both teachers and had consolidated, we were not able to take advantage of teacher forgiveness. I hope that information is given up front for others so that this situation that is costing us several thousand dollars is avoided for other uninformed individuals. Anyone else in retirement with student loans?

    • I know this doesn’t help your situation, but the Department of Education no longer does consolidation loans for couples.

      Even though this particular situation was not addressed in the recent temporary expansion of PSLF, it might be worth your time to reach out to your elected representatives. Many of the new fixes were designed to address PSLF issues caused by older loan programs, and the loans consolidated with a spouse would seem to be a good candidate for the next round of adjustments.

      • I consolidated my personal student loans in order to apply for PSLF…I was also advised to consolidate a Direct Plus loan for parents in to it, so I did. Now I’m stuck with a $712/mo payment because the parent plus loans aren’t eligible for most of the income based repayment plans. I have no idea what I’m going to do…I cannot afford that amount when payments start back up. Any advice?

      • How long ago did you do this? If the final payoff for the consolidation hasn’t happened yet, you should call immediately to cancel the consolidation request.

        Did the Parent PLUS loans get combined with all of your personal student loans? Or did they create a separate consolidated loan for your Parent PLUS loan? If it is the second, you should be fine.

        If the Parent PLUS loan did get combined with your student loans, you fall into one of the gaps in the recent PSLF limited waiver. However, there are a few things you could try that might help:
        – write a personal letter to your elected representatives asking for help.
        file a compliant with the Consumer Financial Protection Bureau about your servicer advising you to consolidate your Parent PLUS loans with your Personal loans, as you have seen, you were given terrible advice.

        Finally, as you noted, a direct consolidation loan with a Parent PLUS loan doesn’t qualify for most of the IDR plans. However, you are still eligible for the Income-Contingent Repayment Plan.

  13. What if the student had a disability (grand mal seizures) so disruptive dean of college kicked her out, and when collectors called, she would have had a 75% chance of not being of sound mind to make decision to refinance student loan as private loan? Later, student loan portion dismissed, but private loan still exists. (Yes, real life)

    • Hi Richard,

      That is a really interesting question. It sounds like you are suggesting that the student in question didn’t have capacity to enter into a contract and that it should be void. Capacity in contract law basics can be found here: https://www.nolo.com/legal-encyclopedia/lack-capacity-to-contract-32647.html

      I’m not able to offer much insight on this particular issue as it strikes me as more of a unique contracts issue rather than a typical student loan issue. Additionally, contract laws vary from state to state.

      To get any sort of diminutive answer to your question, you will likely need to speak with a local attorney.


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