When it comes to picking out your federal student loan servicer, unfortunately, you don’t have a say in the matter. The Department of Education has complete control, and it assigns all borrowers to one of nine student loan servicers.
But out of those nine servicers, four receive the overwhelming majority of loans. Often referred to as the “Big Four,” those federal loan servicers are FedLoan Servicing, Great Lakes, Navient, and Nelnet.
As a member of the Big Four, Nelnet could likely be your loan servicer. In fact, the company services nearly 20% of all federal loans. If you’ve just been assigned to Nelnet, you may wonder what to expect.
For example, does Nelnet refinance student loans? Short answer: no. But knowing where Nelnet ranks compared to other federal loan servicers whether it’s worth refinancing your Nelnet student loans to a private lender is worth looking into. Read on to find out.
Is Nelnet a good student loan servicer?
If you’ve been assigned Nelnet as your student loan servicer, you may have actually dodged a bullet. Yes, you’ve been assigned to one of the Big Four. But you can be thankful that you haven’t been assigned to Navient or FedLoan Servicing.
In a summer 2018 survey, Student Loan Planner received 385 responses to its student loan servicer survey. Receiving 3.3 stars out of 5, Nelnet came far ahead of both FedLoan Servicing (2.8 stars) and Navient (2.7 stars).
In May 2019, Student Loan Planner ranked each student loan servicer using complaint data from the Consumer Financial Protection Bureau (CFPB). Once again, Nelnet fared much better than Navient — which received an astounding 45% of all student loan servicing complaints — and FedLoan Servicing.
All that is good news if you have Nelnet as your servicer. But the bad news is that you could still run into issues.
While getting 3.3 stars out of 5 is better than getting 2.8 or 2.7, it’s still not great. And of the respondents to Student Loan Planner’s survey who said they reached out to Nelnet for a problem, only 4 out of 10 said that they were able to get it resolved.
Can I switch from Nelnet to a different federal loan servicer?
If you’ve had issues with Nelnet, you might wonder if you can just switch to a different servicer. Generally, the Department of Education doesn’t allow you to switch federal loan servicers. But there are two ways to escape Nelnet.
Nelnet student loan consolidation
One time that you can pick a new servicer is when you consolidate multiple federal loans into a Direct Consolidation Loan. If you’re considering a Nelnet student loan consolidation, here are a few things to keep in mind:
- You can only combine federal student loans during a Direct Consolidation Loan.
- You can’t get a lower interest rate. Your new rate will be a weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of 1%.
- You will lose credit for any qualifying monthly payments that you’ve already made toward income-driven repayment (IDR) forgiveness or Public Service Loan Forgiveness (PSLF).
With a Direct Consolidation Loan, you’ll be starting a repayment period from scratch and you can extend repayment up to 30 years. This could make your monthly payment lower, but you’ll usually pay more in interest over time.
In most cases, you should only consider a Nelnet student loan consolidation right before or soon after you begin repayment. Otherwise, you should probably stick with Nelnet or opt for a student loan refinance private loan instead.
Does Nelnet refinance student loans?
If you’re a Nelnet borrower, you might wonder if Nelnet refinances student loans. Unfortunately, Nelnet doesn’t refinance student loans as it’s a federal loan servicer. In order to refinance student loans, you need to apply with a private lender.
Refinance Nelnet student loans
Nelnet doesn’t refinance student loans, but you can still use refinancing as a strategy to get away from the loan servicer. You can give Nelnet the boot by refinancing your Nelnet student loans with a private lender. To get the best rates when you refinance Nelnet student loans, you’ll need to have a good credit score and a good debt-to-income ratio.
If you owe less than 1.5 times your income, student loan refinancing could be a good choice. Let’s take a closer look at the benefits and drawbacks that come with refinancing federal student loans.
What to consider before you refinance Nelnet student loans
If you’re thinking about refinancing your Nelnet student loans, these are the pros and cons that you’ll want to be aware of.
Pros of refinancing federal student loans
The biggest pro of refinancing is that you may be able to lower your interest rate. The interest rates on federal student loans range from 2.75% to 5.30% as of January 2021.
There’s nothing that you can do to change those rates as they are fixed rates. Even if you have a great credit score and a healthy income, your interest rate isn’t going to change. That’s why a private lender may be able to offer you a much better rate. Refinancing lenders may offer fixed interest rates or variable interest rates.
For example, let’s say that you have $100,000 worth of Nelnet student loans at an average interest rate of 6.5%. If you have great credit (such as a credit score of 740 or above) and a steady job, you may be able to qualify for a 3.5% interest rate. And that would save you $17,595 over the life of your loans.
If you don’t have a strong credit score, you may be able to refinance your student loans with a cosigner. A cosigner is someone with good credit who is also legally responsible for the loan if monthly payments aren’t made. Because it’s a huge responsibility, you also want to look into cosigner release.
Either way, that’s a big plus in the refinancing column and a lot of savings. Interest cost isn’t the only consideration when you’re comparing federal loans versus private student loans, however. There are several federal loan benefits that you’d be giving up by refinancing. Let’s talk about those now.
Cons of refinancing federal student loans
There are important things to consider before refinancing student loans. Here are the three main drawbacks that you’ll need to weigh before you refinance Nelnet student loans.
Ineligible for IDR plans
One of the biggest benefits that you’ll lose if you refinance Nelnet student loans into private student loans is the ability to make income-based payments.
With IDR plans, your monthly payments scale up and down with your income. And you’ll also be eligible for forgiveness on any balance that’s remaining at the end of your repayment period.
But IDR plans also extend your repayment period to 20 or 25 years. That’s a long time to be stuck with your student loans. Plus, you’ll pay a lot more in interest.
If you can pay back your loans in 10 years or sooner, that’s usually the best financial choice. But if you’re worried that you might have a drop in income in the near future, you may want to stick with an IDR plan. And, in that case, you should not refinance your federal student loans.
Ineligible for PSLF
Do you work for the government or a nonprofit organization? If so, there’s a good chance you qualify to join the Public Service Loan Forgiveness (PSLF) program. PSLF is one of the best federal student loan forgiveness programs available today.
With PSLF, you can receive complete tax-free forgiveness of your remaining balance in just 10 years (120 qualifying payments). If you’re pursuing PSLF, you should definitely not refinance Nelnet student loans. Refinancing your student loans means that your federal loans are paid off — and you are stuck with private student loans.
In a bit of irony, you will be switched away from Nelnet if you join the PSLF program. Unfortunately, you’ll be moving in the wrong direction. If you’re accepted to PSLF, Nelnet will move your loans to FedLoan Servicing, the exclusive loan servicer for the PSLF program.
Ineligible for the federal forbearance and deferment program
Federal student loans come with generous forbearance and deferment allowances. For instance, you can defer monthly payments on your student loans if you go back to school. And you can request forbearance if you encounter financial difficulties like medical expenses or a job loss.
When you refinance Nelnet student loans, you’ll no longer be eligible for these federal benefits. Some of the best student loan refinancing lenders do offer their own forbearance and deferment programs, however. But when you refinance your student loans, perks like that aren’t promised.
Picking the right lender when you refinance Nelnet student loans
If you’ve decided that student loan refinancing is right for you, you’ll want to be careful about which lender you choose as some may have origination fees that can add to the cost of the loan.
To get the most affordable loan and best interest rate, make sure that you shop among multiple lenders and that your credit score is in good shape. Consider fixed rates versus variable rates. But the lower interest rate isn’t the only thing to consider. Here are a few other factors you’ll want to pay attention to.
Some lenders offer terms that are shorter than 10 years. Shorter terms can make your monthly payment higher, but you’ll also get out of student loan debt faster. If you’re looking for ultimate payment flexibility, you may want to consider Earnest, which gives you up to 180 choices.
Parent Plus refinancing
Are some of your Nelnet student loans Parent PLUS Loans? If so, you’ll want to choose a lender that allows refinancing of Parent PLUS Loans. Some lenders even allow parents to transfer the loans to their child’s name during refinancing.
Forbearance and deferment
Worried about losing federal forbearance and deferment benefits? If you pick the right private lender, you may be able to get many of the same benefits anyway.
CommonBond, for instance, allows borrowers to place their loans in deferment when they go back to school. And the company allows up to 24 months of forbearance for financial hardship.
If you’re approved for a student loan refinance with one of Student Loan Planner’s partners, you might be eligible for a $500 to $1275 cash-back bonus. Student Loan Planner has worked hard to negotiate the best deals for its readers with top-tier student loan refinance companies. If you’re going to refinance Nelnet student loans, don’t leave free money on the table.