Over 45 million people throughout the United States alone have student loan debt, totaling an impressive $1.45 trillion owed. The majority of this debt is in the form of federal student loans, offered by the Department of Education to borrowers in need.

However, the amount owed in private student loans is growing as students are in more need of financing for their education than in years past. Both federal and private student loans offer a way to pay for education costs when savings, scholarships, and other forms of funding are not available, but they differ in several ways.

Federal student loans are based on the needs of a borrower as detailed in the Free Application for Federal Student Aid (FAFSA). Private loans, on the other hand, are offered by private lenders to students who have a strong financial track record and steady income.

Federal student loans offer several repayment plan options, extended repayment terms, and forgiveness for certain borrowers after a period of time. Private student loans do not offer these benefits, but they may provide a lower interest rate as well as higher total borrowing limits for those who qualify.

Why It Sounds Good to Convert Private Student Loans to Federal

Borrowers with private student loans may wonder if they are able to convert their private student loans to federal student loans in an effort to take advantage of the inherent benefits. Having the ability to select an income-driven repayment plan may offer cash flow relief each month, especially for borrowers just out of school who are earning a low income.

Similarly, the forgiveness programs available to some federal student loan borrowers are attractive in that any balance remaining after 20 or more years is wiped clean. This leaves federal student loan borrowers free of any additional obligation to repay certain loans.

For other borrowers, federal student loans may have a lower, fixed interest rate that reduces the total cost of the loan over time. Federal student loan interest rates are set by the government, not private lenders, which makes them more attractive to some borrowers. While these are all viable reasons for wanting to convert private student loans to federal student debt, this is not an option.

How Could Higher Interest Rates in 2018 Hurt Private Student Loan Borrowers

Here’s Why You Can’t Convert Them

Because federal student loans are made available to borrowers based on need at the time of application (the FAFSA), there is no going back to convert private student loans into federal student loans.

Although you may refinance federal loans using private loans, you may not do the reverse. But there are ways to manage private student loan debt if you’re having trouble with repayment.

Options for Dealing With Private Student Loans

Although there are fewer inherent benefits to private student loans compared to federal, there are several methods to manage loans to ensure they remain affordable. The most common include:

Refinancing With a New Lender

Borrowers may have the option to refinance their private student loan debt with a new lender, but there are some things to keep in mind. First, a new lender requires a new application, which means a new check of credit, income verification, and other eligibility requirements that must be met.

Fortunately, refinancing may offer new benefits, like an interest rate reduction, a discount for establishing automatic payments, or the ability to add a cosigner to an application. However, it is important to read the fine print before refinancing. Look for added fees like origination or application charges, and be sure you understand the difference between variable and fixed interest rate offers.

Work With Your Current Lender

Most private loan lenders do not allow loan modifications after repayment begins, but it is worth contacting the current lender to see if any changes can be made to the private loan. It is just as important in this scenario to look out for fees associated with making changes and for eligibility requirements.


Some private student loan lenders may also offer forbearance to borrowers who are having trouble keeping up with monthly payment obligations. This option is typically saved for those who are experiencing financial hardship, however.

Borrowers should recognize that forbearance does not mean forgiveness of the loan, but instead, involves a reprieve from payment. While in forbearance, interest continues to accumulate which could ultimately cost far more in the long run.