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The two categories of student loans—each with unique requirements and benefits—are federal and private loans. Federal student loans come from the Department of Education (DoE) and provide eligible parent or student borrowers with government-funded loans for undergraduate school and beyond. They offer standard interest rates for all borrowers, regardless of credit score, and several repayment options.
Private student loans are available through banks, credit unions, and other individual lenders. These loans can fund trade school and professional programs, undergraduate school, and beyond. However, the rates and terms depend on the borrower’s credit score and may not include many protections federal loans offer.
So can you transfer private student loans to federal loans to take advantage of these benefits? No, but we’ve looked into ways you can optimize your private loan repayment and snag certain similar benefits. Here’s a look at the options and perks that may be available.
In this guide:
- Options for borrowers to transfer private student loans to federal loans
- Do any private student loan lenders offer perks similar to federal loans?
- Are there federal benefits you can’t get from private student loan lenders?
Options for borrowers who want to transfer private student loans to federal loans
Federal student loans have limitations that can force student borrowers and their parents to turn to private student loans to fund their education.
Federal borrowing limits may not be enough for your tuition and eligible expenses, for instance, or your household income level may preclude you from taking out certain federal loans. Managing federal loans can be different from managing private loans when it comes time to repay your student loan debt.
Federal borrowers can take advantage of income-driven repayment plans, where the monthly payment is based on your income and family size. You can also request loan forbearance or deferment to pause your payments during financial hardship without defaulting.
However, these benefits aren’t standard if you have private student debt. And you can’t transfer your private loan debt over to a federal loan. But you have options.
- Refinance your private student loan debt with a different lender. By refinancing one or more of your private student loans, you can select a new lender offering better repayment terms or benefits similar to those with federal loans. Some private lenders, for instance, offer loan forbearance features. You can also select your new monthly payment by adjusting your loan terms, creating a repayment plan that better fits your budget.
- Focus your efforts on your private loan debt. If you have federal and private student loans, you can also focus on your private debt to repay it faster. One option is to swap your current repayment plan and reduce your monthly federal loan requirement. You can then focus all your efforts on paying down your private loans as soon as possible, so you’re only left with your federal debt.
You may also want to call your private loan servicers to see the available options. If you’re experiencing financial hardship and need to pause payments, your lender may be willing to work with you to avoid default.
Do any private student loan lenders offer perks similar to federal loans?
While private loans don’t offer many of the standard benefits that come with federal loans—such as income-driven repayment and the ability to adjust your payment plan at any time—several lenders offer similar perks.
The following private lenders’ benefits may resemble those of federal student loans.
|Lender||Benefit||What it does|
|Earnest||Skip-A-Payment||Skip 1 scheduled monthly payment every 12 months after 6 consecutive on-time payments on your loan.|
|Earnest||Loan forbearance||Offers up to 12 months of loan payment forbearance if you’re experiencing an eligible hardship. (Available once you’ve made three consecutive on-time payments and is not guaranteed.)|
|Sallie Mae||Term and Rate Modification||Temporarily reduce your monthly payment by adjusting your loan’s interest rate and repayment term.|
|Sallie Mae||Reduced Payment Plan||Make interest-only payments on your loan(s) for up to 6 months.|
|Sallie Mae||Graduated Repayment Plan||Offers 12 interest-only payments while you transition from school to your career. (Must enroll.)|
|Sallie Mae||Loan forbearance||Temporarily pause your monthly payments during financial hardship.|
|Funding U||Loan forbearance||Options include paused payments in 90-day increments while in the repayment period.|
Are there federal benefits you can’t get from private student loan lenders?
Some private student loan lenders offer features and benefits similar to those on federal loans, but many federal benefits are only available on government student loans.
- Income-driven repayment (IDR) plans: Certain private lenders may allow you to adjust your repayment terms, but none offer a repayment plan tied to your income the way federal student loans do. With IDR plans, your monthly payment is never more than 20% of your discretionary income, based on factors such as family size.
- Loan forgiveness: There are many options to get a portion of your federal student loans forgiven after a specific time. For example, your remaining balance can be forgiven with IDR plans after 20 to 25 years of income-based repayments. With Public Service Loan Forgiveness (PSLF), your loan balance is forgiven after making 120 qualifying payments, as long as you work full-time for a qualifying employer.
- Subsidized interest: Eligible borrowers may qualify for Subsidized student loans, which offer deferred payments until after graduation. The government also pays accrued interest charges while you’re still in school. Unsubsidized federal and private loans may also offer deferment, but the interest charges accrue and are added to your loan balance.
While uncommon, government student loans are also eligible for special forgiveness and loan deferment benefits. Recent examples include the student loan pause in effect since March 2020 due to the COVID-19 pandemic. Also, in 2022, the Biden-Harris administration approved up to $20,000 in one-time federal loan forgiveness, which may be available to eligible borrowers with federal loan debt.
There are significant differences between private student loans and federal student loans, and both have pros and cons. In many cases, you may need a combination of the two to fund your education.
There’s no way to transfer private student loans to federal loans, but you can still optimize your loan repayment process and take advantage of similar private loan benefits.
Author: Stephanie Colestock