Can You Transfer Private Student Loans to Federal Student Loans?

There are two main types of student loans available to pay for college.

Federal student loans are funded by the U.S. Federal government; they are available to students at relatively low interest rates regardless of credit history. Federal loans come with protections and benefits, so they are often the preferred choice if you need to take out student loans.

The other option is a private student loan. These are loans offered by private lenders, such as banks and other entities. Borrowers are held to typical credit application standards, so they are typically known for higher rates compared to federal loans.

As mentioned, it’s preferable to take out federal student loans to pay for college over a private option. However, some students are stuck with no options left and end up taking out private student loans.

What if you’re stuck with private loans and hurting for federal benefits? Is it possible to transfer private student loans to federal student loans? The quick answer: no, you can’t.

Benefits of Federal Student Loans vs. Private Student Loans

Federal student loans come with certain benefits that private student loans lack.

First, federal student loans are eligible for loan forgiveness through a variety of public service employment programs. Private lenders do not offer student loan forgiveness to borrowers.

Second, federal student loans have unique repayment options that aren’t available for private student loans. For example, federal loans can be deferred for six months after graduation which isn’t offered by many private lenders (there are exceptions).

Federal loans also allow borrowers to choose between a standard ten-year repayment plan, a graduated repayment plan, and income-driven repayment plans. The latter two plans are usually result in lower monthly payments which aren’t available among many private lenders (save for a few exceptions).

Third, students usually get better interest rates on federal loans than they do on private student loans. Lenders offer private student loans at an interest rate based on the credit history and risk of the borrower. Since the U.S. government guarantees federal student loans, borrowers can enjoy relatively low, fixed rates.

>> Read More: Differences Between Federal and Private Student Loans

Challenges of Converting Private Student Loans to Federal Student Loans

Now that you know all about federal student loan benefits, it’s time to answer the main question. In short, private student loans cannot be converted to federal loans.

Why? There are currently no options for converting a private loan to the federal sector.

In the student loan space, there are several options to refinance or consolidate student loans in general, but none of them involve transferring private student loans to federal loans.

The federal government offers a federal consolidation loan program that allows borrowers to combine their student loans into one payment. But only federal student loans are eligible for this program.

Additionally, you are able to get a refinance loan in the private sector which allows you to consolidate student loans. While both federal and private student loans are eligible, this move transitions your debt to the private sector, away from any federal benefits.

Private Lenders That Offer Federal Student Loan-Like Features

Even though you cannot transfer private student loans to federal student loans, there are some private lenders who offer benefits that are similar to those of federal student loans. Here are a few benefits as well as the lenders that offer them:

Financial Hardship Options

If borrowers are having trouble finding work or are facing financial hardship, some private lenders allow borrowers to make only interest payments on their loans for up to two years. LendKey offers this benefit.

Defer Payments While in School

Many private student loans require that students make interest payments on their loans while they are still attending school full time. Lenders such as Citizens Bank, LendKey, and College Ave, however, give students the option of deferring their payments until at least six months after they are no longer full-time college students. SoFi also allows borrowers to defer their student loan payments if they attend graduate school.

Flexible Repayment Options

One of the most desirable benefits of federal student loans is the option to select different repayment plans. Students who borrow from College Ave have the option to choose a graduated repayment plan in which they pay only interest for up to two years after they finish college. After two years, full interest and principal payments begin.