How Are Private Student Loans Disbursed
Although federal student loans tend to have the best interest rates and benefits, they dont always cover the full cost of college. If thats the case, you might decide to borrow from a private lender, such as a bank, online lender or credit union.
When it comes to disbursement of private student loans, each lender sets its own policy.
Some lenders transfer the loan directly to your bank account shortly after your application is approved. In this case, its your responsibility to send the funds to your schools financial aid office to pay your tuition bill. Youre in charge of handling the money, paying tuition and using any leftover funds toward living expenses .
|College Ave Student Loans recommended timetable new borrowers|
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On the other hand, your lender might act similarly to the federal government and disburse the loan directly to your school. When you borrow a school-certified private student loan, the lender typically sends your funds to your school rather than your own bank account, after first getting confirmation of your enrollment status, anticipated graduation date and cost of attendance.
As with federal student loan disbursement, you should receive any remaining money after your loan has been applied to tuition and fees.
Student Loan Consolidation Vs Refinancing
Student loan consolidation is different from student loan refinancing, but many people use the terms interchangeably.
Student Loan Consolidation: This is a free program to combine your Federal student loans into a new Federal student loan.
Student Loan Refinancing: This involves getting a private loan to replace some of your existing student loans.
You can consolidate Federal loans, but you cannot consolidate private loans.
You can refinance both Federal and private student loans – but it doesn’t usually make sense to refinance Federal loans.
How To Get Approved For Consolidating Your Student Loans
Students who have graduated, left school or dropped below half-time enrollment are eligible to consolidate their federal student loans. There are no credit requirements for federal student loan consolidation. However, there are several other requirements that limit who can apply for a direct consolidation loan:
- The loans you want to consolidate must already be in repayment or in the grace period, which lasts six months after you graduate, leave school or drop below half-time enrollmentdepending on the type of loan.
- In general, if you already consolidated a loan, you cant consolidate it again without also consolidating another eligible loan.
- The loans you want to consolidate cannot be in default unless you make three consecutive monthly payments on the loan prior to consolidation or agree to repay your new direct consolidation loan under one of several income-related repayment plans.
- Likewise, consolidating a defaulted loan thats being collected through wage garnishmentor in accordance with a court orderisnt permitted unless the garnishment order is lifted or the judgment vacated.
In contrast, private student loan refinancing has approval requirements similar to traditional loans. To qualify, lenders typically require a credit score in the upper 600s, a debt-to-income ratio under 50% and a demonstrated ability to repay the loan.
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You Have Options If You Were Denied Pslf
If your application for PSLF was denied, you may be able to receive loan forgiveness under the Temporary Expanded Public Service Loan Forgiveness opportunity.
As part of this opportunity, the Department of Education reconsiders your eligibility using an expanded list of qualifying repayment plans.
This TEPSLF opportunity is temporary, has limited funding, and will be provided on a first come, first served basis. Once all funds are used, the TEPSLF opportunity will end.
Visit StudentAid.gov for detailed information on how to be reconsidered for loan forgiveness.
Limited PSLF waiver: The U.S. Department of Education in October 2021 announced a temporary period through October 31, 2022, during which borrowers may receive credit for payments that previously did not qualify for PSLF or TEPSLF.
Get additional information on Studentaid.gov >
Closing Soon And Need To Clear Caivrs
In most cases, your best options to clear CAIVRS before closing are student loan settlement and loan consolidation. You can try to do either of those things yourself, but you could risk losing your home by not fully understanding the process.
If you want to clear CAIVRS immediately, get my guide: Clear CAIVRS Before Closing. As a student loan lawyer, Iâve helped dozens of people in this exact situation.
Need personalized help? Schedule a free 10-minute call with me today. Weâll go over the right strategy for you and any alternatives that may be available to you so you can get your home.
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Is Consolidation Right For You
Before you consolidate, consider the following pros and cons:
- One servicer, one statement, one payment
- Lower monthly payments
Do you have one of these eligible loan types?
- Direct Subsidized and Unsubsidized Loans
- FFELP Subsidized and Unsubsidized Loans
- FFELP PLUS Loans
- Perkins and Federal Nursing Loans
- Health Education Assistance Loans
- Supplemental Loans for Students
Other factors to be aware of:
If it looks like consolidation will work for you, its easy to apply:
- Online: Complete your application at StudentAid.gov
- Mail: A paper application can also be printed, completed, and mailed
Note: Just remember, you must continue making payments after submitting your application until you receive notice from your servicer that underlying loans have been paid off. You have the option to select the servicer of your choice
Potential Advantages To Consolidation
It is important to weigh the pros and cons of consolidation before you submit an application to consolidate. Here are some of the potential advantages to consolidation:
- One servicer, one bill, one payment
- Managing your federal education loan debt with one servicer and one monthly payment may be more convenient than with multiple servicers.
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Which Loans Are Eligible For Private Consolidation
You can refinance both the total amount of your federal and private student loans. This includes all types of federal loans, including Direct Loans, Stafford Loans, and PLUS Loans.
Its important to note that when you refinance, you can decide which loans you want to refinance and which, if any, youre happy to keep those student loan repayment terms. Some people may want to refinance all of their loans, and others may want to refinance only some of them.
Again, keep in mind that when you refinance federal loans and private loans into a new private loan, you will no longer be eligible to use the governments income-based repayment programs.
To decide, you should look at the terms for each of your current loansand whether refinancing can help you do better. You can get an estimated rate from Earnest in just two minutes, without affecting your credit score.
Signing Your Mpntime: Before Classes Start But You May Not Get Funds Until About 30 Days After Classes Start
Next, you will be required to sign a Master Promissory Note . The note covers continuous enrollment for up to 10 years. Once signed, the federal student loan funds are disbursed. You might receive these within a 10-day window prior to classes starting.
A first-time or first-year borrower might not have the funds until 30 days later. In this case, any credit balance left over after the fees paid to the college prior to the start of class will be refunded to the student within about two weeks. Overall, the time frame for fund disbursement can take more than a few weeks.
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When Will Your Student Loans Be Disbursed
In most cases, youll receive your loans at least 10 days before classes start. If youre a first-time borrower, you could have a waiting period of 30 days after your first enrollment period.
Typically, student loans are disbursed in two payments a year once per semester. To confirm this is the case at your school, reach out to your colleges financial aid office for more information.
Depending on whom you borrowed from, your lender might send the money to your schools financial aid office, where it will be applied to tuition and fees. If theres a difference left over, the school will then return that money to you to use on books, food or other living expenses.
That said, the process might be different, depending on whether you borrowed federal student loans from the Department of Education or private student loans from a bank or credit union.
What These Companies Are Charging You For
I want to make clear that these companies aren’t necessarily fraudulent. Rather, they are charging you for a service that you really don’t need to pay for. They use marketing tactics to make you think that you have to pay for their services to get student loan consolidation, but you don’t.
If you read on these companies’ websites, they will be doing the following for you:
- Determine the best student loan consolidation programs for you
- File all the paperwork
- Working with you if you’re in default
- Answer your questions
When you sign up with them, one of the first forms you fill out will be a Power of Attorney form. This gives the company legal rights to act on your behalf with your student loan companies. That’s scary that you’re letting these people act on your behalf! Just do it yourself.
The trouble is, you don’t need to be paying someone for this! You can fill out the paperwork yourself. As for the best student loan consolidation program? You have one option for Federal student loans just one.
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Can I Get A Conventional Loan With Defaulted Student Loans
You can get a conventional loan with defaulted student loans. Conventional loans are not backed by a federal agency, so they donât require a CAIVRS report. But first, theyâll need to assess if you are a credit risk.
Before approving you for a conventional mortgage with a federal or private student loan in default, your lender will likely require:
- a good
- a down payment
- a letter showing how youâre addressing the defaulted student loan
Note: Since Freddie Mac or Fannie Mae backs many conventional loans, youâll want to check their student loan guidelines. Your student loans could negatively affect your DTI ratio.
Can I Get A Deferment Or Forbearance
Yes! Borrowers who obtain a federal consolidation loan retain all of the benefits of a federal student loan, including:
- Deferment of the loan payments while the borrower is enrolled in school on at least a half-time basis. This includes borrowers who graduated but are returning to school for further education.
- Economic hardship deferment for up to 36 months.
- Forbearance for up to 36 months.
- Full or partial loan forgiveness through various federal loan forgiveness programs, such as public service loan forgiveness and teacher loan forgiveness.
To obtain a deferment or forbearance, contact the servicer after the loan has been consolidated to request a deferment or forbearance form.
Did you know that consolidation may reset the clock on deferments and forbearances? Its true! Borrowers who have already reached the time limit on their forbearances and deferments may reset the clock to zero by consolidating. A consolidation is a new loan, eligible for the same deferments and forbearances as the original federal student loans.
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Pros And Cons Of Private Student Loan Consolidation
After an explanation of the pros and cons of federal student loan consolidation, it might be better to cover up all the pros and cons of a private one. So what are the advantages of it? Well, the possibility of getting less interest rate, having cosigner can help you get lower interest rate and as well as federal student loan consolidation, you can operate your loans as a monthly period. What about the cons of it? You will need to be eligible for that because there are restrictive requirements as well. As it is mentioned above, you will leave your federal consolidation benefits. Finally, if you are willing to change your monthly payment, you need to loan refinancing again.
Should You Pay For Help With Your Student Loan Debt
Now, don’t get me wrong – I know that dealing with your student loans can take time and be confusing. You don’t have to pay anyone for help – but I also know that I can’t be your mom.
I’ve been doing this a long time, and regardless of how easy I say it is – there’s still a good 30% of you that don’t want to deal with this and would rather pay a third party company to help. That’s fine.
There’s a cool app called Chipper that can help you manage your student loan repayment, see if it makes sense to consolidate, and even help you find loan forgiveness. It’s free to start. Check out Chipper here > >
If you’re not quite sure where to start or what to do, consider hiring a CFA to help you with your student loans. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt. Check out The Student Loan Planner here.
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Pros And Cons Of Consolidation
With a few exceptions, you only get one chance to consolidate your government loans. You should consider the pros and cons of consolidation before starting the process. Among other potential down sides, you may lose important rights by consolidating. If you still want to consolidate, you dont have to include all of your eligible loans. The Department gives this example: If you have both Direct Loans and other types of federal student loans, and you have been making payments toward public service loan forgiveness on your Direct Loans, you should not consolidate your Direct Loans along with your other loans. Leaving out your Direct Loans will preserve the benefits on those loans.
Do You Have To Consolidate Loans For Pslf
PSLF consolidation is only a requirement if it makes your federal loans eligible for an income-driven repayment plan. This has been the case for federal family education loans and Perkins loans.
So while you might not have to consolidate loans for PSLF, it could still be beneficial.
A federal direct consolidation loan combines your federal student loans into one. Youll have just one interest rate , with one loan servicer and one monthly payment. After all, managing several different loans and due dates can be stressful.
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Should You Go Through With Pslf Consolidation
Consolidating your loans can be a smart option, even if youre pursuing PSLF. Consider it in the following situations:
- Youre still in your grace period or early on in repayment. If you havent made payments yet or have just started, you can consolidate your loans without losing too many qualifying payments for PSLF. You can simplify your debt while still making progress toward loan forgiveness.
- You want access to IDR plans. Some federal loans are ineligible for IDR plans. To get around this rule, you can group your loans into a direct consolidation loan and then apply for an IDR plan. This could reduce your monthly bill, and itll leave you with just one payment to manage. Do so immediately after leaving school to make sure you start on the path to forgiveness as early as possible.
- You need a lower monthly payment. When you take out a direct consolidation loan, you can choose a new repayment period. You can opt for a loan with a term as long as 30 years, which can dramatically reduce your payments and make your loans more manageable. But if a lower payment is your priority, choosing an income-driven plan might make more sense, since youll be eligible for forgiveness on the remaining balance after 20 or 25 years.
Other potential reasons to consolidate could include ditching a variable rate on an older federal student loan or rehabilitating loans out of default.
How To Find Out If Your Student Loan Money Is On Its Way
In most cases, your student loan disbursement is sent straight to your college. After subtracting the costs of tuition and fees, youll get the remaining money to use at your discretion.
But student loan disbursement involves a lot of moving parts, and your experience might be different than someone elses. If youre not sure what to expect, reach out to your schools financial aid office to point you in the right direction.
And if you borrowed private student loans, contact the bank or credit union for information on its policies. By staying up to date on your student loan disbursement schedule, you can prepare your finances before the start of the semester.
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Can You Consolidate Navient Student Loans
Student loan borrowers can consolidate federal student loans that Navient acts as the student loan servicer for.
You cannot, however, include private student loans into your new Direct Consolidation Loan.
Only federal student loans are eligible for the consolidation loan program.
To get a lower monthly payment or remove a cosigner for your private student loans with Navient, look into refinancing.
âClick here to learn How to Remove a Cosigner From a Student Loan?