How to Choose Between Nelnet Student Loan Consolidation and Refinancing

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If you’re repaying Nelnet student loans and have heard about consolidation and refinancing, you might be wondering what all the fuss is about.

Well, Nelnet student loan consolidation — or refinancing — could save you a ton of grief and a lot of cash. Here’s how to decide which measure will be most impactful for you.

Consolidating or refinancing your Nelnet student loans

One of nine federal student loan servicers, Nelnet’s student loan operation doesn’t actually include the ability to consolidate or refinance your debt.

You could consolidate (or group) your loans via a Direct Consolidation Loan with the federal government. You might also elect to consolidate or refinance them into a whole new loan from a private lender.

Taking either measure could be wise if you’re looking to simplify your repayment, lower your monthly dues, or avoid an unruly servicer.

If you’ve been unhappy with Nelnet — it’s among the most complained-about servicers — you’ll be glad to find that you can choose your consolidating servicer. But if you appreciate Nelnet’s servicing features, you could opt to stick with the company to service your new loan.

Consolidating and refinancing are also going to entail similar eligibility requirements, ranging from holding a college diploma to keeping pace with repayment on your debt.

Let’s explore the pros and cons of each repayment strategy.

Pros and cons of a federal Direct Consolidation Loan

Federal student loan consolidation won’t directly save you money, but it could put you in a better position to repay your debt. That’s because consolidating your student loans gives you one loan and one monthly payment.

You could also lower your monthly payment by consolidating and switching to a longer repayment term — if you don’t mind your interest accruing.

With that said, there are some cons to a Direct Consolidation Loan. For one, your interest rate will climb slightly, as it will be an average of your previous rates, rounded to the nearest one-eighth of a percent.

For another, taking out the newly consolidated loan could reset your progress toward a loan forgiveness program if you’ve been in repayment for a while.

But if you’re early into repayment, perhaps even enjoying your grace period, you might see a Direct Consolidation Loan as a fresh start. You could make your entire education debt eligible for a program such as Public Service Loan Forgiveness (PSLF) and start working toward it.

Pros and cons of consolidation or refinancing with a private lender

When you consolidate your federal loans — Nelnet loans or otherwise — you give something up to get something else. You might agree to reset the clock on your PSLF progress, for example, in exchange for the convenience of one monthly payment to one lender of your choosing.

But if you consolidate your federal loans with a private lender, you’ll lose all your federal protections, such as the option for forgiveness or certain repayment plans. So you’ll have to ask yourself what you could receive in return to balance the equation.

Wells Fargo’s consolidation program, for example, offers 0.25% discounts on your consolidated interest rate if you sign up for autopay and are a returning customer of the bank. You could also select your repayment term.

To save more money during repayment of your Nelnet loans, though, you’ll want to consider the option of student loan refinancing.

Like consolidating, refinancing allows you to group your loans into one new loan. It allows you to lower your interest rate by more than mere percentage points. In fact, top refinancing companies are offering fixed and variable rates below 3.00% to borrowers with strong credit histories and debt-to-income (DTI) ratios.

Still, weigh the cons of refinancing, which are similar to the downsides of consolidating with a private lender. Some private lenders charge fees for many things, including originating, disbursing, and servicing your new loan.

Most importantly, you’ll want to make sure you won’t miss the ability to qualify for loan forgiveness, change your loan repayment plan, or utilize government-specific deferment and forbearance options. Private lenders won’t check those boxes.

Nelnet student loan consolidation vs. refinancing

You have all sorts of options for how to handle your Nelnet student loan consolidation. Chances are that one suits you better than the rest.

If you crave the convenience of one loan but aren’t keen on private lenders, you might apply for a Direct Consolidation Loan. You’d be excused for not wanting to yield the government’s more expansive repayment protections.

But if you won’t miss the federal loan perks, consider consolidating or refinancing your Nelnet loans with a private lender.

Scoring a lower interest could make up for any fees you might see as a result of the switch, especially if you can find a lender that offers some repayment protections. SoFi, for example, offers help if you lose your job while paying off your debt.

You might come across U-fi student loan refinancing while perusing Nelnet’s website since the companies are partners. Keep in mind that you don’t have to refinance with U-fi. Check out these refinancing lenders before finding the right one for you.

Keep in mind that your credit history and DTI ratio are taken into consideration when you apply. If you’d like more details, here’s everything you need to know about applying for student loan refinancing.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.