How to Choose Between Nelnet Student Loan Consolidation and Refinancing

 February 20, 2020
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If you’re repaying Nelnet student loans, you might be wondering about your options for Nelnet student loan consolidation and refinancing. Both options can simplify repayment, and refinancing your loans has the potential to save you a bunch of cash. Read on to learn the differences between Nelnet student loan consolidation and refinancing so you can decide which strategy, if either, would be most impactful for you.

Nelnet student loan consolidation vs. refinancing: What’s the difference?

One of nine federal student loan servicers, Nelnet doesn’t directly offer consolidation or refinancing options. But you can consolidate your Nelnet-serviced federal loans via a Direct Consolidation Loan with the federal government.

Alternatively, you could elect to refinance your Nelnet student loans into a whole new loan with a private lender. Taking either measure could be wise if you’re looking to simplify your repayment, lower your monthly dues, or avoid a disorganized 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 change servicers through both federal consolidation and refinancing. That said, you don’t have to switch if you consolidate, as you can opt to stick with Nelnet and retain its servicing features.

Consolidating and refinancing also 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, such as Public Service Loan Forgiveness, 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.

Pros and cons of refinancing with a private lender

Like Direct consolidation, refinancing your Nelnet student loans with a private lender lets you combine multiple loans into one. Plus, you can change to a new lender and loan servicer and bid farewell to Nelnet.

Refinancing also has an edge over consolidation if you’re looking to save money — it often allows you to lower your interest rate by several percentage points. In fact, top refinancing companies are offering fixed and variable rates below 3.00% to borrowers with strong credit histories and low debt-to-income (DTI) ratios.

If you can significantly lower your rate, you could save money over the life of your student loans. What’s more, refinancing lets you choose new terms, usually between five and 20 years, and adjust your monthly payments as a result.

But even with all these benefits, there are some downsides to be aware of, too. Refinancing federal student loans turns them private, which would cost you access to federal repayment plans and forgiveness programs.

Plus, it can be tough to qualify for refinancing, since you need to have good credit and sufficient income (or apply with a cosigner who meets this criteria). So before choosing to refinance Nelnet student loans, make sure you understand both the pros and cons.

And most importantly, 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, since private lenders typically won’t check those boxes.

Choosing between Nelnet student loan consolidation and refinancing

You have all sorts of options for how to handle your Nelnet student loan consolidation. Chances are 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 refinancing your Nelnet loans with a private lender. Scoring a lower interest rate 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 choosing 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, be sure to check out how to apply for student loan refinancing.

Rebecca Safier contributed to this article.