By claiming their account, the system will show any and all student loans that are actually part of Federal programs, and the relevant loan details (including which program it is, when it was taken out, and the current loan balance and interest rate)
To determine whether any of the student’s loans are actually Federal, the student can request their (Federal) loan information through the National Student Loan Data System (NSLDS).
To identify and verify all other loans, students should obtain a copy of their credit report (e.g., via the Federal once-per-year free credit report program) to identify all outstanding loans. Any loans that are shown on the credit report, and not listed in NSLDS, will be private loans. (Ideally, the student should also find or obtain a new copy of the actual promissory note for each private loan, to really understand the loan terms and details.)
Once all of this information has been gathered, it’s possible to organize all the details of the student loans, private and Federal, FFEL or Direct, and the terms, to identify whether it may make sense to either consolidate (for Federal loans) or refinance (for private loans). Of course, it’s possible that a student may wish to refinance Federal loans as well e.g., to obtain a better interest rate though that will likely only be desirable for those with substantive incomes, where there is both an opportunity to get favorable private loan terms and the flexible repayment rules of the Federal programs aren’t likely to be relevant. (A high-income high-credit-score borrower https://guaranteedinstallmentloans.com/payday-loans-nh/ will also likely want to refinance private student loans as well, if a favorable rate and payment term is available.)
Many students that have accumulated student loans over the years may not even be aware whether or which loans are actually Federal loans (eligible for Federal consolidation) or private loans (only eligible for private refinancing)
If there are significant Federal student loans either Direct loans eligible for flexible payment plans, or FFEL loans that could be consolidated to become eligible it will be desirable to delve further into whether the student may be eligible for a better repayment plan. The Department of Education provides some repayment estimator tools, and if desirable the student can begin the Federal Direct Consolidation Loan process, or it may be worthwhile to engage a standalone student loan expert as well to help navigate all the choices (there are both experts that work directly with consumers, and also some like Jarvis herself who specialize in partnering with advisors on student loan issues).
But the bottom line is simply this: while debt consolidation may be a standard recommendation in the world of personal finance, when it comes to student loans it’s necessary to be more cautious, because it’s not just about the loan interest rate and repayment period. Federal student loans are potentially eligible for special repayment rules, but only as long as they remain Federal loans (and/or are consolidated with other Federal student loans under the Federal Direct Consolidation Loan program). So be very cautious about refinancing Federal loans into private ones, unless you’re absolutely certain you won’t want or need access to the various flexible repayment programs available for Federal student loans!
Debt consolidation and refinancing strategies are often appealing to consider because most debt itself is otherwise fungible a debt is a debt, interest is interest, and a payment obligation is a payment obligation so if restructuring existing loans into a new one provides an opportunity for some combination of better loan terms (interest rates, repayment periods, etc.), so much the better.
