According to a recent CNBC article, 24% of millennials expect to receive forgiveness for their outstanding student loan debt balances. It’s a good thing, then, that the Consumer Financial Protection Bureau estimates that 25 percent of American workers could be eligible for student loan repayment forgiveness programs.
Here’s more good news: there are many ways of taking action to get a student loan forgiven. You can seek out programs that are career-based, meaning they provide aid for those in certain professions. Or you can look into plans based on your income level. Most of these are sponsored by the Federal government in one way or another (though some colleges do assist a select few of the students they graduate).
Those suffering the burden of student loans may qualify for one (or more) of the nine types of forgiveness programs listed below.
Public Service Student Loan Forgiveness
There are many programs available to help mitigate Federal student loan burdens — especially if you’re working in a public service position.
Specifically, employees of the government, non-profit organizations, and other public workers may qualify for the Public Service Loan Forgiveness (PSLF) program. You need to be employed full-time by a public service organization. You also are required to make 120 payments on your loans before being eligible for forgiveness.
Note that as long as you’re employed by an eligible public service organization, you’re covered. In other words, you probably qualify as a teacher — and you may also qualify if you work in a public school as an administrative staff member.
Another way to get Federal student loans forgiven is to see if you qualify for an income-based program.
According to Sophia Bera, CFP and founder of Gen Y Planning, there are three income-driven programs:
Pay As You Earn Repayment Plan (PAYE Plan) – This plan is the newest option for those with student loan debt. It’s designed to help recent students entering the job market for the first time during the recession years, and provides an alternative to the Income-Based Repayment Plan and lower payments. The remaining balances will be forgiven after 20 years of qualifying payments and an interest subsidy. PAYE is only available for federal Direct Loans. Eligibility is often a result of student loans that are higher than a person’s annual discretionary income or makes up a significant portion of his or her annual income. So, $10,000 in student loans with a $60,000 annual salary would like make an individual ineligible for the plan. In addition, individuals are only eligible for the PAYE plan if:
He or she is new borrower as of Oct. 1, 2007,
Received a disbursement of a Direct Loan on or after Oct. 1, 2011.
Income-Based Repayment Plan (IBR Plan) – This is the original plan that was designed to help those who held student loan debt that equaled more than their annual income, or a “significant portion” of annual income. Eligibility includes demonstrating a partial financial hardship. Loans will be forgiven after 25 years of qualifying payments, five years longer than the PAYE plan. Like the PAYE plan, this IBR also offers an interest subsidy.
Keep in mind: for both IBR and PAYE, your payments are based on your adjust gross income (AGI). If you file joint taxes with a spouse, then your AGI will include your spouse’s income and impact your payments.
Income-Contingent Repayment Plan (ICR Plan) – This plan intends to help those who purposely chose low-income jobs but graduated with high levels of student loan debt. It provides another option for those who can’t qualify for either the Pay As You Earn Plan or the IBR Plan and is open to anyone with eligible federal student loans. Like with the IBR, the monthly payments are based on income and family size, however, the payments will likely be higher than those with IBR or PAYE. The ICR plan also forgives an outstanding balance after 25 years of qualifying payments. The debt discharged is treated as taxable income, so borrowers need to be prepared to pay taxes to the IRS.
While each of these programs has various stipulations, requirements, and limits, they all have one thing in common: they’re designed to help those with low incomes and excessive amounts of student loan debt.
They’re also a little different from the public service programs. While those in public service positions can have student loan debt forgiven after 10 years, these programs forgive loans after 20 or 25 years.
However, like the public service loan forgiveness program, these income-driven programs do require you to pay every payment on time – or you’ll be disqualified from the program. You also may need to pay taxes on the portion of your loans that are forgiven.
Use this calculator to see exactly what will happen with your payments and how much of your student loans may be forgiven.
Student Loan Forgiveness Programs for Professionals
Many student loan forgiveness programs are based on the career you choose after graduation. For those with professional degrees – think doctors, lawyers, and teachers – you have several options when it comes to shedding that student loan debt without paying it out-of-pocket and in full.
Doctors can look into the NIH Loan Repayment Program. This can help repay 25% of a doctor’s student loan balance per year with a $35,000 maximum. That’s limited to doctors conducting research and who meet certain eligibility requirements.
Lawyers can look into Equal Justice Works. This provides a list of law schools that offer loan repayment assistance programs. Afam Onyema graduated from Harvard University and Stanford Law School, and was able to decline corporate law job offers in order to establish a charitable organization thanks to repayment programs.
“I can afford to do this work only because of Stanford Law School’s uniquely generous Loan Repayment Assistance Program (LRAP),” explains Onyema. “The school is systematically paying off and forgiving 85% of my $150,000+ debt.”
Teachers can qualify for PSFL programs, they might also want to look into Teacher Loan Forgiveness. To get into this program, you need to teach at specifically designated elementary and secondary schools for five consecutive years to be eligible.
If you began teaching after 2004, you’re eligible for up to $5,000 in loan forgiveness if you were a “highly qualified” teacher, and you can receive up to $17,500 if you’re a “highly qualified” math or science teacher in a secondary school, or special education teacher.
Don’t qualify for any of the above? Don’t despair yet. You have a few more options:
Volunteer programs: These qualify under public service student loan forgiveness: Options include working with AmeriCorps and serving 12 months or volunteering as part of their VISTA program, or joining the Peace Corps.
Enrolling in the military: Some branches of the US military offer student loan forgiveness programs. Stafford and Perkins loans are eligible (among others), and the Army and Navy will “repay the maximum allowed by law for non-prior service active duty enlistments.”
The Army will pay up to $20,000 for Reserve enlistments, and that includes the Army National Guard. If you’re interested in joining the Air Force, that branch can repay up to $10,000 for non-prior service, active duty enlistments.
Both the Air Force and the Navy require a minimum of four years of service. With the Army, the minimum service is three years, and the Army and Navy Reserves and Army and National Guard require six years.
The Pitfalls Associated with Getting a Student Loan Forgiven
If you’re having trouble making your student loan payments on time and in full, it’s worth your time to do some homework and research your options. Getting a student loan forgiven isn’t always the best answer or the only solution, and you need to proceed with caution.
Let’s be clear. “Forgiveness” doesn’t mean you sit back and let someone else take care of 100% of your loan. Nor does it mean getting to completely walk away from the financial responsibilities of borrowing that money in the first place.
You’ll first need to make sure you meet all the qualifications listed out in the fine print. As we’ve seen, that can mean fitting into very specific circumstances and stipulations. And short of drastic action like declaring bankruptcy – which is not the ideal solution – you may not qualify for any of the programs on student loan forgiveness out there.
In fact, even declaring bankruptcy doesn’t always work. According to Leslie Tayne, Esq. of Tayne Law Group, P.C., “Student loans are rarely dischargeable in bankruptcy and getting a student loan forgiven is a very particular process.”
“For Federal student loans, there is a way to get your loan forgiven,” she explains. “The public service forgiveness program may forgive the balance of your loans after 10 years working in a qualified public service job.
“Once your forgiveness is approved, you will not be required to make any more payments on the loan; however it is important to note that you may be subject to a 1099 by the IRS and thus have to pay taxes on the amount forgiven.” As Tayne notes, that could have an even worse affect on your finances.
Bera provided this example: “If you had $100,000 in Federal student loans and [use a forgiveness program], after 25 years of on-time payments the balance on your student loans might be $50,000. If the government forgives this amount, you’ll have to pay the tax on $50,000 of income in addition to your normal salary or wages for that year.”
If someone only makes $40,000 annually and suddenly his or her income increases to $90,000 in a given tax year, they’ll likely owe thousands of dollars to the government.
All this isn’t said to discourage you, but to make sure you’re in tune with the realities of the situation. If you have student loans and want to look into getting involved with a student loan forgiveness program, start by familiarizing yourself with what’s available to you and your situation. Once you’ve done a bit of research you can contact your loan provider to start taking action.
Just a few weeks into their college education, many students receive funds totaling hundreds or possibly thousands of dollars — the “extra” money from the student’s financial aid package. Usually, the money comes with little to no information on how students should spend it, or how to return any funds they may not immediately need.What many students may not realize immediately is, the majority of the time, taking any extra money not truly needed to pay for educational expenses results in them owing even more student loan money and making payments over a longer period of time after graduation.
Simply learning about the money and creating a budget could prevent many students from adding to the average $34,144 student loan balance they are already expected to pay back.
Your refund is the amount of money left over after all of your scholarships, grants, and federal and private student loans are applied toward tuition, fees and other direct educational expenses for the semester. The refund could come as a lump-sum direct deposit to your bank account, as cash or as a check.
The school legally has to disburse any leftover Federal Student Aid money you are awarded. “[Schools] cannot hold onto that credit balance unless the student gives written consent,” says Karen McCarthy, Director of Policy Analysis at National Association of Student Financial Aid Administrators (NASFAA). In the case of a PLUS loan, the parent must give consent for the school to hold the credit balance.
Most refunds most likely come from leftover federal student loans, but recipients of some grants may receive a refund for unused funds as well.
In fall 2009, Brooklyn, N.Y., resident Crystal Chery, was just beginning an associate’s degree program at Kingsborough Community College. She qualified for the Pell Grant, which covered $5,350 of her tuition and expenses for the school year. After tuition and fees totaling $1,550 were paid, Chery received a credit for about $1,125 to her bank account each semester.
While there is no official record of exactly how many college students end up with a positive balance on their account after all of their financial aid package is applied, each semester possibly thousands of U.S. college students in the United States find themselves in a similar position as Chery did her freshman year.
The total amount of financial aid that a student is able to receive is up to the institution’s calculated cost of attendance, which is a big part of the math that goes into calculating a student’s financial aid award. Sometimes colleges pad their total cost of attendance estimates to include things that aren’t directly paid to the school, like books, housing, transportation or child care. The idea is that the student will use any leftover funds for other things they need in order to go to school.
“Kids going to a $4,000 community college can walk away with about $5,000 of refunded money,” says college aid expert Joe Orsolini, especially if they find ways to save on expenses like housing. In Chery’s case, she lived at home, which meant she didn’t need any funds for housing.
If you received a refund from a mix of loans, scholarships and grants, carefully examine your refund to understand where it came from and if you’ll have to pay back that money.
Grant and Scholarship refunds
Grants and scholarships — truly “free money” — are usually applied to your institutional bills first. There may be restrictions on how you can use money from these sources, as rules vary widely by state, institution and scholarship program regarding how students are allowed to spend the funds they receive.
Usually the amount of “free money” a student gets is smaller compared to loans they receive and is depleted by direct institutional bills, so most students don’t get that money refunded to them. However, it’s possible for some students who received a large amount of scholarships to be refunded “free” money.
Chery isn’t required to repay the leftover Pell grant money she received for her education, as she doesn’t fall under any special circumstances like students who may have withdrawn early from their program, or dropped to part-time enrollment during the payment period. In addition, the school was legally required to issue her a refund credit for the excess federal funds.
If you receive a refund from unused federal student loan money, you’re free to keep it, but remember you’re still borrowing that money. You will need to pay any federal loan money refunded to you, with interest, starting six to nine months after you graduate.
Generally speaking, you should return any unused loan money that you don’t need right away to avoid taking out more in loans than you really need. But if you need to keep it, make sure you spend the money wisely.
Whatever you do, “don’t go buy a car or go on spring break with [your student loan refund],” says Orsolini. If you’re spending federal loan money, a $10 pizza today at 6.5% APR will cost close to $20 to pay off in 20 years.
Do that math for thousands of dollars in student loans. Make your best effort to limit any flexible, frivolous or impulsive spending to money you don’t have to pay back with interest.
How you handle your student loan refund may also depend on what kind of loan it is — unsubsidized or subsidized.
Subsidized student loans
Interest won’t begin to accrue on subsidized student loan money until six months after you have graduated. So, if you keep your refund, you don’t have to worry about racking up interest charges on the debt you owe while you’re in school.
For that reason Orsolini argues students shouldn’t give back any “extra” subsidized loan money until they are in their last semester of college.
“Until you know for sure that you’ve made it to the finish line, hang on to that money because you never know what is going to happen,” says Orsolini. He recommends placing excess financial aid funds into a 529 college savings account, where it can grow, and you can use the money if you plan to attend graduate school.
If students don’t want to open a 529 account, Orsolini recommends they stash unused subsidized loan money in an emergency savings fund, to help maintain as much flexibility as possible in paying for college.
Orsolini says this method provides a financial safety net for students, as you never know what can happen to your income. If you choose to do this, you should pay back any unused subsidized loan money the month before your graduation to avoid paying interest.
Warning: Orsolini’s method takes a lot of self-restraint.
Unsubsidized student loans
Students shouldn’t pocket any unsubsidized student loan money, as interest will begin to accrue immediately, and keeping the money won’t be worth it.
“Even if you put it in a savings account for a few months, it’s going to accrue more interest as a loan than it would in the savings account,” says Ashley Norwood, Consumer and Regulatory Adviser at American Student Assistance (ASA), a nonprofit student loan advocacy group that helps students finance and repay their student loans.
Avoid keeping unneeded unsubsidized loan money at all costs if you can.
If you find yourself keeping the loan because you need to live off of it, Betsy Mayotte, Director of Consumer Outreach and Compliance at ASA, suggests you do your best to reduce your cost of attendance.
You could make up some or all of the maximum $2,000 a student can receive in unsubsidized loans by getting a part-time job or a work-study job, for example. If cost of living is too high at the school you’re attending, look at a cheaper school or consider moving home if the school is close enough
Should You Spend Your Refund — or Return It?
Unless you have restrictions on how you can use it, what you decide to do with your refund money as a college student is really up to you.
“The assumption is that the student is using that credit balance to pay for those [indirectly billed] expenses,” says McCarthy.
But students don’t always do that.
“When I was in college, I remember all of my friends getting True Religions and all of this stuff [with their refund money] … I did not,” says Chery. “I was focused on other things.”
Chery used her fall semester “refund” to buy equipment to launch a DJ career, starting with a $1,350 MacBook, which she used to create her own mixes and to use at gigs she booked while in school. With the following semester’s refund, Chery purchased a Canon 60D DSLR camera for another $1,200 because she wanted to “dabble in photography and promote [her business].”
Chery says the investment paid off. After booking larger, professional gigs and gaining some experience, she was able to present work that helped her land an internship with Hollywood, Calif.-based media company, REVOLT TV, where she got to work with big-name music artists like Sean “Diddy” Combs and Damon Dash.
“When I started making these investments, I didn’t know that they were going to alter my career like that,” says Chery, who now hosts and books events with hundreds or thousands in attendance throughout the northeast United States.
After you’ve allocated funds to different areas of your budget, you need to figure out what to do with any extra funds. If the money is “free,” meaning you don’t have to pay it back later, you can keep it, but you may need to look into what you are allowed to spend it on, says McCarthy, as there may be restrictions on how you can use scholarship or grant money.
If you think you have enough money for your needs, the experts at ASA and NASFAA agree students should immediately send back any money they don’t think they need, since students can always ask for that disbursement again later on.
Giving money back or canceling a federal student loan won’t affect how much financial aid you are offered the following semester and if you need the money later on in the current semester, Mayotte tells Magnify Money.
“Let’s say you refused all of the loans. You can go back to the financial aid office and ask for part or all of that loan money up to 180 days after the last day of classes,” adds Mayotte.
As long as you were eligible to receive the student loan funds during that pay period, you can receive a federal loan for a prior or the current payment period without penalty if you ask for it within the 180-day period.
For example, you can technically still receive loan money you denied during the fall semester if you request a late disbursement for that money during your spring semester as long as it’s within 180 days after the end of the payment period.
Ask Yourself These 3 Questions Before Spending (Or Returning) Your Refund
Have you paid for all of your non-negotiable expenses for the semester?
Certain non-negotiable expenses (read: tuition and fees) are usually billed at the beginning of the semester, but the school won’t send you a bill for everything you can’t succeed without, like technology for classes, a working laptop, or sheets for your dorm bed. Here are a few possible spending categories you may or may not include in your budget:
Living expenses not billed by the institution
Books and other educational supplies you’re going to need over the course of the whole term
Transportation (gas, on- and off-campus parking)
Child care, if you need this so that you can attend school
Miscellaneous personal expenses
Do you need the money to cover other college-related expenses?
There are a host of hidden college costs college-bound families fail to consider for one reason or another, and they can dry an unsuspecting student’s checking account. They are all the little things families don’t think about during move-in, like organization membership fees and paying for food outside of a prepaid student meal plan. If you can’t cover those things with part-time income during the school year, tally up an estimate and keep what loan money you need.
Do you have an emergency fund?
You should have every reason to have savings, especially if you’re paying for school on your own. You won’t get many opportunities to stash away $1,000 in cash working for minimum wage as a barista in school. Pocketing some of the money now will help you steer clear of rainy days and expensive borrowing options in the future when those hidden costs creep up on you. Set one up ASAP.
How to return your refund to the Department of Education
The rule is simple: Return the loan within 120 days of disbursement, and it will be like you never took it out in the first place.
The rule is found in the text of the Master Promissory Note, which all FSA borrowers are required to sign promising to pay the loans back before they can receive any federal aid funds. The following information is found under “Canceling Your Loan”:
You may return all or part of your loan to us. Within 120 days of the date your school disbursed your loan money (by crediting the loan money to your account at the school, by paying it directly to you, or both), you may cancel all or part of your loan by returning all or part of the loan money to us. Contact your servicer for guidance on how and where to return your loan money.
You do not have to pay interest or the loan fee on the part of your loan that is cancelled or returned within the timeframes described above. We will adjust your loan amount to eliminate any interest and loan fee that applies to the amount of the loan that is cancelled or returned.
If you make the 120-day deadline, you’re in the clear. You won’t be required to pay loan fees or any interest already accrued on unsubsidized loans in that time. Sometimes, your university can send it back on your behalf, so your first point of contact should be the financial aid office at your institution. Check with them to see if they can send the unused federal student loan funds back on your behalf, or if you will need to send the money back to your loan servicer on your own.
After the deadline, you’ll need to simply make a loan payment back to your loan servicer. You can begin to pay your loans back while still in college. If you do, you won’t pay any interest on subsidized student loan money (it doesn’t begin to accrue until six months after you graduate), but you will pay any loan fees charged to your account.
When will I get my financial aid refund?
If you’re expecting a refund, you aren’t likely to see that money until after the add/drop period for classes — the grace period during which you can change your choices without penalty — ends. That can be about three to four weeks into the semester, although some schools may disburse funds earlier. According to the Department of Education, schools must pay a credit balance directly to a student or parent no more than 14 days after the first day of class or when the balance occurred if it occurred after the first day of class.
Until then, you’ll have to cover your costs out of pocket.
“Students who are expecting refunds are very anxious for them,” says Norwood.
Norwood adds the anxiety may be because many students who see a refund check are lower income — they may see the money because they qualified for more aid. They may depend on the funds from the refund to pay for important costs related to their education such as rent for off-campus housing or educational supplies for classes.
If you missed something on your financial checklist — like signing the Master Promissory Note or completing Loan Entrance Counseling — over the summer, you may see funds even later than four weeks. Overall, if you’re hoping to use refund money to cover your rent or other school expenses, you may need to come up with the cash by other means.
“If [students] don’t budget well for the whole year, it’ll be the same thing in January,” says Mayotte.
There is a silver lining for you if you received Federal Student Aid (FSA). As of July 1, 2016, Title IV schools are required to provide a way for FSA recipients to purchase books and supplies required for the semester by the seventh day of the semester if:
The school was able to disburse FSA funds 10 days before the semester began, or
The student would have a credit balance after all FSA funds are applied.
The school doesn’t have to write you a check outright for books. Institutions can award the funds in school credit or bookstore credit, too, but must grant you the amount you are expected to spend on educational supplies according to the institution’s calculated cost of attendance by the end of the first week of classes.
CommonBond was founded by three Wharton MBAs who felt the sting of student loans after they graduated. The founders decided to provide a better solution for graduates, as they thought the student loan system was broken and in need of reform. As a result, they strive to make the refinance (and borrowing) process as simple and straightforward for graduates as possible.
CommonBond* began by servicing students from just one school, and has rapidly expanded. Today, CommonBond loans are available to graduates of over 2,000 schools nationwide. Although the company traditionally offered loan refinancing to undergraduate and graduate students, CommonBond recently started offering loans for current students as well (both undergraduates and graduates).
As you might be able to tell by the name, CommonBond thinks of its community as family. There is a network of alumni and professionals within the community that want to help borrowers. This alone sets it apart from other lenders, as members often meet for events.
While these are all great things, we know you’re more interested in how CommonBond might be able to help you make your student loans more affordable. Let’s take a look at what terms and rates they offer, eligibility requirements, and how they compare against other lenders.
Refinance Terms Offered
CommonBond offers low variable and fixed rate loans. Variable rates range from 2.81% – 6.74% APR, and fixed rates range from 3.35% – 7.12% APR.
Note that these rates take a 0.25% auto pay discount into consideration.
There is no maximum loan amount. CommonBond will lend what you can afford to repay. CommonBond offers fixed and variable rates with terms of 5, 7, 10, 15, and 20 years.
The hybrid loan is only offered on a 10 year term – the first 5 years will have a fixed rate, and the 5 years after that will have a variable rate.
To pull an example from that, if you borrow $10,000 at a fixed 4.74% APR on a 10 year term, your monthly payment will be $104.80. The total amount you will pay over the 10 year period will be $12,575.90.
The Pros and Cons
CommonBond is available to graduates of 2,000 universities. While that is a very long list, not all colleges and universities are included.
One pro to consider is the hybrid loan option available. It might seem a little confusing at first – why would someone want a variable rate down the road?
If you’re confident you’ll be able to make extra payments on your loan and pay it off before the 5 years are up, you might be better off going with the hybrid option (if you can get a better interest rate on it).
This is because you’ll end up paying less over the life of the loan with a lower interest rate. If you were offered a 10 year loan with a fixed rate of 6.49% APR, and a hybrid loan with a beginning rate of 5.64%, the hybrid option would be the better deal if you’re intent on paying it off quickly.
What You Need to Qualify
CommonBond doesn’t list many eligibility requirements on its website, aside from the following:
You must be a U.S. citizen or permanent resident
You must have graduated
CommonBond doesn’t specify a minimum credit score needed, but based on the requirements of other lenders, we recommend having a score of 660+, though you should be aiming for 700+. The good news is CommonBond lets you apply with a cosigner in case your credit isn’t good enough.
Documents and Information Needed to Apply
CommonBond’s application process is very simple – it says it takes as little as 2 minutes to complete. Initially, you’ll be asked for basic information such as your name, address, and school.
Once you complete this part, CommonBond will perform a soft credit pull to estimate your rates and terms.
If you want to move forward with the rates and terms offered, you’ll be required to submit documentation and a hard credit inquiry will be conducted. CommonBond lists the following as required:
Pay stubs or tax returns (proof of employment)
Diploma or transcript (proof of graduation)
Student loan bank statement
ID, utility bills, lease agreement (proof of residency)
CommonBond also notes it can take up to 5 business days to verify documents submitted, so the loan doesn’t happen instantaneously.
Once your documents are approved, you electronically sign for the loan, and CommonBond will begin the process of paying off your previous lenders. It notes this can take up to two weeks from the time the loan is accepted.
Who Benefits the Most from Refinancing Student Loans with CommonBond?
Borrowers who are looking to refinance a large amount of student loan debt will benefit the most from refinancing with them.
Lastly, you could check out LendKey. It offers student loan refinancing through credit unions and community banks, but only offers variable rates in most states and fixed rates in a select few. The maximum amount to refinance with an undergraduate degree is $125,000, and the maximum amount to refinance with a graduate degree is $175,000.
All three of these options provide forbearance in case of economic hardship and offer similar loan options (5, 10, 15 year terms).
As CommonBond initially conducts a soft pull on your credit, you’re free to continue to shop around for the best rates if you’re not happy with the rates it can provide. As the lender states on its website, if you apply for loans within a 30 day period, your credit won’t be affected as much.
Since CommonBond does have strict underwriting criteria, you should continue to shop around and don’t be discouraged if you are not approved. The market continues to get more competitive, and a number of good options are out there.
*We’ll receive a referral fee if you click on offers with this symbol. This does not impact our rankings or recommendations. You can learn more about how our site is financed here.
Getting a credit card while you’re in college might seem dangerous or confusing. But if you are able to use a student credit card responsibly, you do not need to be afraid, and you can set yourself up for financial success after you leave school.
Fortunately, learning how to choose and use the right student credit card is relatively simple. Make sure you avoid annual fees and go with a bank or credit union you can trust. When you get the card, make sure you use it responsibly and pay the balance in full and on time every month. If you do these things consistently over time, you can leave school with an excellent credit score. And if you want to rent an apartment or buy a car, having a good credit score is very important.
Good Grades Reward program: Did you study extra hard this year? If you’ve gotten a 3.0 GPA or higher for an entire school year, Discover will reward you with an extra $20 cash back. You can get this reward for up to five years in a row as long as you’re still a current student when you apply.
Free FICO score: Just like how you have grades for your classes, your FICO score is your “grade” for your credit. Credit cards have a huge effect on your FICO score. You can watch how your new credit card affects your score over time with a free FICO score update on your monthly statement.
5% cash back categories: You can earn up to 5% cash back on specific categories that change each quarter, on up to $1,500 in purchases every quarter that you activate. Past categories have included things like Amazon purchases, restaurants, and ground transportation. Even if you don’t buy something in the bonus category, you’ll still earn 1% cash back on all other purchases.
Cash back match at end of your first year: In addition to rotating 5% cash back categories, new cardmembers will also get an intro bonus. When your first card anniversary comes around, Discover will automatically match your cash back rewards you earned during your first year.
Remember to sign up for bonus categories: Even though this card comes with a great cash back rewards program, it comes with a catch: you’ll need to manually activate the bonus categories each quarter. You can do this by calling Discover or logging in to your account online. If you forget, you’ll still earn 1% cash back if you make any purchases in the qualifying categories.
Gift certificates only available at certain levels: You can redeem your rewards for many things such as Amazon purchases, a statement credit, or a donation to a charity, to name a few. But, if you’d like to get a gift card instead, you’ll need a cash back balance of at least $20 saved up in your account.
The Discover it for Students card offers great perks for college students, such as a rewards program for good grades and a free FICO score so you can learn about your credit firsthand. Its cash back rewards program is our favorite. No other card for students (that we could find) offers the opportunity to earn up to 5% cash back. And with no annual fee, this is our top pick.
Good Grades Reward program: We salute Discover for rewarding good behavior. Rather than creating a bonus offer that encourages college students to spend more money, Discover is rewarding good grades. For every school year (September-August) that you maintain at least a 3.0 GPA, Discover will credit an extra $20 to your account to use how you like.
Free FICO score: The whole reason to get a credit card as a student is to boost your credit score. So, actually being able to see your credit score is a huge help, especially as you can watch it climb over time with good credit management.
Earn 2% cash back on gas and restaurants: Discover provides an added benefit to students who frequently drive and dine out. You’ll earn 2% cash back on all gas and restaurant purchases up to $1,000 per quarter. Everything else earns 1% cash back. Plus, there’s no rewards categories to sign up for like with the regular Discover it card for students — it all happens automatically.
Cash back match at end of your first year: Discover will actually match the amount of cash back you earn at the end of your first year as a new cardmember. That will be a great bonus at the end of the year.
Gift cards only available at certain levels: You can redeem your rewards in the form of a gift card; however, you’ll need a cash balance of at least $20 in your account to do so. If you don’t have that much, don’t worry. You can redeem any amount in the form of a statement credit, a bank transfer, as Amazon credit, etc.
Limited overseas acceptance: Discover is a great card for your spending in the U.S. If you travel overseas, acceptance is a lot more difficult. In Europe, you would be relying on the Diner’s Club network, which has limited coverage.
If you're a commuter and frequently dine out, the Discover it Chrome for students card is a good option with 2% cash back on gas and restaurant purchases. A $20 bonus for getting good grades and cash back match at the end of your first year make this card good for earning rewards and building credit at the same time.
1.25% cash back if you pay on time: Each purchase you make earns a flat-rate 1% cash back. There’s no bonuses or categories to track: a simple 1% on everything. And then you get 0.25% on top if you make the payment on time. This makes it handy for people who want as simple a card as possible. And it rewards great behavior.
Higher credit lines after on-time payments: If you’re approved for this card, you’ll receive a credit line of at least $300. If you make five on-time payments in a row, you can call Capital One and ask them to increase your credit line.
No foreign transaction fee: This is a great card to take overseas, because you won’t have to pay any foreign transaction fees. Most cards charge an average 3% foreign transaction fee, but Journey allows you to use your card abroad without being charged extra fees.
High 20.99% variable APR: This card carries an interest rate that’s almost twice as high as some other student credit cards, such as the Wells Fargo Cash Back College Card with a rate as low as 11.90% APR. It’s just one more incentive to pay off your bill in full each month.
We really like this card because it actively rewards you for developing good credit-management behavior by offering a small cash back bonus for on-time payments. In addition, the cash back program is straightforward with no confusing categories to remember or opt into, making this card a good option for students who want a simple, flat-rate card.
Interest rates as low as 11.90% APR: Depending on your credit, your interest rate could be between 11.90% and 21.90% APR, but their is no gurantee you'll receive the lower rate. This is a lower APR range than most student cards, and can help if you aren't able to pay your balance in full one month.
3% cash back rewards for the first six months: Normally you’ll earn 1% cash back on all purchases. For the first six months, though, you’ll earn 3% cash back on any purchases you make for gas, groceries, or drugstores.
Access to credit education: Wells Fargo provides you with all sorts of tools and information to learn about things like credit, budgeting, and expense tracking. While this is a nice feature, it’s not exclusive to Wells Fargo. You can get this information from free tools such as Mint, or even reading books and blogs. But it is pretty handy having it right at your fingertips when logged in to your account.
Need to be a Wells Fargo member to apply online: You can go into any one of the 6,000+ branches and apply for the card. You can also apply online, but you’ll need to be an existing Wells Fargo customer. However, anyone can open a checking account online with a minimum deposit of $25.
High bars for some cash back redemption options: There are a lot of redemption options available through Wells Fargo’s own online cash back rewards mall. However, if you’d just like straight cash, you have a few options. You can request a direct deposit into your Wells Fargo checking account, savings account, or Wells Fargo credit card (if applicable) in $25 increments, or request a paper check in $20 increments. That can take a long time to accumulate if you’re not spending much with your card.
The Wells Fargo Cash Back College Card is a relatively simple card with a great intro bonus of 3% cash back for the first six months. In addition, the low APR is handy for those who think they’ll be carrying a balance on their credit card from month to month at some point in the future. This is generally something we recommend against, but if you can’t avoid it, the Wells Fargo Cash Back College Card is your best bet.
$20 reward for good credit card usage: If you can maintain your account in an “exceptional way” for your first year, you’ll get a bonus $20 reward on your card’s anniversary. All you have to do is not have any late payments, don’t charge over your card’s limit, and use your card for at least six out of twelve months.
Up to $500 random winner each quarter: It’s like playing the lottery, except you don’t have to buy a lottery ticket. Each quarter Altra will choose one student cardholder at random and pay back all of their purchases from the previous month, anywhere between $50 to $500.
Earn rewards: For the first 60 days after you open your account, you’ll earn 2 points per dollar spent. After that you’ll earn 1 point per dollar spent. You can redeem these points for cash back, merchandise through their online rewards mall, or travel.
Redeem points for a lower interest rate: If you’ll need a car in the future, this might be a good credit card to get. You can trade in 5,000 points for a 0.25% reduction, or 10,000 points for a 0.50% reduction on an auto loan through Altra Federal Credit Union. That could end up saving you a ton of cash in the long run.
1% foreign transaction fee: This is definitely one card to leave at home if you’ll be traveling or studying abroad. Most credit cards charge a 3% foreign transaction fee, so this is on the low side. Still, it’s not too hard to find a student credit card with no foreign transaction fee, such as the Discover it for Students or the Capital One Journey Student Rewards card.
Must join Altra Federal Credit Union: Luckily, anyone can join, but it might take a bit of legwork on your part compared to a bank. If you don’t meet certain membership eligibility criteria, you can join the Altra Foundation for $5. Then you’ll need to open a savings account with a minimum $5 deposit that must remain in the account while you have your card open.
If you're a student who doesn't mind working with a credit union, Altra provides a card that has several rewards benefits. This card is a good option if you may be taking out an auto loan in the next few years, since you'll benefit from a reduced interest rate by trading in your rewards points. In addition to earning rewards, using this card responsibly can help you build credit.
This credit card offers a snazzy rewards program: rather than accumulate points, you’ll get a cash rebate instead. All you have to do is make a purchase. At the end of the month, you’ll get a rebate of 3% of gas, grocery, and restaurant purchases, and 1% of all other purchases deposited back into your Golden 1 savings account at the end of the month. You can join Golden 1 by joining the Financial Fitness Association for $8 per year and keeping at least $5 in a savings account.
The most important thing to consider when looking for a student credit card is that it charges no annual fee. You should never have to pay to build your credit score. Fortunately, most student cards don’t charge you an annual fee, but it’s still something to watch out for.
The second most important thing you should keep an eye out for are tools that help you learn about credit or even promote good credit-building habits. For example, some student credit cards will give you a free monthly FICO score update. You can use this freebie to see in real time how your credit score changes as you build credit history by keeping the card open, or paying down your credit card balance, for example.
The last thing you should be considering when picking out a student credit card is the rewards program. I know, I know, it seems counterintuitive. But stick with me — I’ll show you why in the next question.
Why shouldn’t I be concerned about maximizing my rewards while in college?
Rewards cards are nice to have. But if you’re a college student, here’s the truth: you probably won’t spend enough to earn meaningful rewards.
Why? With a good rewards program, you can earn points or cash back. A small percentage of your monthly spending can add up quickly. However, given the tight budget that most college students live on, it will probably take a while to earn meaningful rewards. For example, if you earn 1.25% cash back and spend $300 a month on your card, you would earn $45 of cash back during the year.
College students are very good at making good use of $45. And our favorite card offers a great cash back rewards program. Just don’t expect to earn a lot of cash back, given the tight budget of a college student.
Why should I get a credit card as a college student?
There are a lot of great reasons why you should get a credit card, as long as you can commit to using it responsibly.
The single biggest reason why you should get a credit card as a college student is because you can start establishing a credit history now. When you graduate from college, you will need a good credit score to get an apartment. And your future employer will likely check your credit report. Building a good credit history while still in college will help prepare you for life after graduation.
Getting a credit card while in college can also train you to develop good credit habits now. But you need to be honest with yourself. If you find that you can’t avoid the temptation of maxing out your credit card, you might want to switch to a debit card or cash.
Finally, getting a credit card now can be the motivation you need to start learning about credit. These skills aren’t hard to learn, and they could save you thousands or even hundreds of thousands of dollars later in life (when you want a mortgage, for example).
What is the CARD Act and why should I care about it?
Many years ago, credit card companies would market on college campuses. You could get a free beer mug or t-shirt in exchange for a credit card application. And you would be able to qualify for a credit card without having any income. The Credit Card Accountability Responsibility and Disclosure (CARD) Act was signed into law in May 2009 to change a number of practices.
How did the CARD Act change student credit cards?
The CARD Act made a lot of changes in how credit card issuers do business with students. One of the biggest changes was requiring students to be able to demonstrate an ability to pay. If you are under 21 and do not have sufficient income (a campus job, for example), you would need to get a co-signer.
In addition, colleges must now limit the amount of credit card marketing on campus. The days of free t-shirts and pizzas in exchange for credit card applications are gone. But that doesn’t mean it is impossible for a college student to get a credit card. Some highly reputable banks and credit unions still offer student cards. And building a good credit score while still in college is still highly recommended.
How can I protect myself from racking up debt?
When used properly, credit cards are a very convenient method of repayment. However, when not used properly, you can end up deep in credit card debt. It is important to establish a healthy relationship to credit now, with your first credit card.
You should try to ensure that you pay off your credit card bill in full and on time every month. Ideally, you should set up an automatic monthly payment. And to keep yourself on track, take advantage of alerts offered by most credit card companies. You can even get daily text messages reminding you of your balance.
How can I automate my credit card usage?
If all of this sounds confusing, don’t worry. There’s actually a way you can automate your payments so you never even have to bother with the hassle of using a credit card. All it takes is a few minutes of upfront work.
First, you’ll need at least one recurring monthly bill of the same amount, such as Netflix or Spotify. Log in to your account and set up an automatic payment each month using your credit card. Make a note of how much your monthly bill costs.
Next, log in to your bank account. Set up a second automatic payment to go to your credit card each month for the same amount as the bill. If your bank doesn’t offer the option to set up automatic payments, you may also be able to set up your credit card to automatically withdraw the amount of the bill from your bank.
Because you know this bill will be for the same amount each month (barring any price increases), you can literally just leave this running in the background each month on autopilot. You don’t even have to carry your credit card in your wallet if you don’t want to. Then, when you graduate, you’ll automatically have an improved credit score!
What happens to my student credit card when I graduate?
Congratulations! You’ve made it to the finish line. But what about your student credit card? You will have a few options once you graduate.
First, you can simply keep it. You will want to keep the credit card open, because it helps you build a long credit history. However, you might want to call your credit card company and ask if you can migrate to a standard (non-student) credit card.
But if you have been using your credit card properly, you will have an excellent credit score when you graduate – and you will be able to get any credit card that you want.
Are you tired of paying a high interest rate on your student loan debt? You may be looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn. We have created the most complete list of lenders currently willing to refinance student loan debt.
You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score. You can see the full list of lenders below, but we recommend you start here, and check rates from the top 4 national lenders offering the lowest interest rates. These 4 lenders also allow you to check your rate without impacting your score (using a soft credit pull), and offer the best rates of 2017:
A comparison tool which lets you see student loan terms all at once, with no need to give up personal information.
But before you refinance, read on to see if you are ready to refinance your student loans.
Can I Get Approved?
Loan approval rules vary by lender. However, all of the lenders will want:
Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loans and all of your other expenses.
Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.
This is particularly important if you have Federal loans.
Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.
If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance.
But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.
Is it worth it?
Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.
If you are able to reduce the interest rate by re-financing, then you should consider the transaction. However, make sure you include the following in any decision:
Is there an origination fee?
Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.
Is the interest rate fixed or variable?
Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.
This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance to a better option (because all rates will be going up).
We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.
Places to Consider a Refinance
If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.
You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a single shopping period (which can be between 14-30 days, depending upon the version of FICO). So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.
Here are more details on the 5 lenders offering the lowest interest rates:
1. SoFi: Variable Rates from 2.815% and Fixed Rates from 3.35% (with AutoPay)*
SoFi (read our full SoFi review) was one of the first lenders to start offering student loan refinancing products. More MagnifyMoney readers have chosen SoFi than any other lender. Although SoFi initially targeted a very select group of universities (it started with Stanford), now almost anyone can apply, including if you graduated from a trade school. The only requirement is that you graduated from a Title IV school. You need to have a degree, a good job and good income in order to qualify. SoFi wants to be more than just a lender. If you lose your job, SoFi will help you find a new one. If you need a mortgage for a first home, they are there to help. And, surprisingly, they also want to get you a date. SoFi is famous for hosting parties for customers across the country, and creating a dating app to match borrowers with each other.
2. Earnest: Variable Rates from 2.65% and Fixed Rates from 3.20% (with AutoPay)
Earnest (read our full Earnest review) offers fixed interest rates starting at 3.20% and variable rates starting at 2.65%. Unlike any of the other lenders, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.
3. CommonBond: Variable Rates from 2.81% and Fixed Rates from 3.35% (with AutoPay)
CommonBond (read our full CommonBond review) started out lending exclusively to graduate students. They initially targeted doctors with more than $100,000 of debt. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university (graduate and undergraduate). In addition (and we think this is pretty cool), CommonBond will fund the education of someone in need in an emerging market for every loan that closes. So not only will you save money, but someone in need will get access to an education.
4. LendKey: Variable Rates from 2.67% and Fixed Rates from 3.25% (with AutoPay)
LendKey (read our full LendKey review) works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. If you like the idea of working with a credit union or community bank, LendKey could be a great option. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders.
In addition to the Top 4 (ranked by interest rate), there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders. This list is ordered alphabetically:
Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 4.25% APR. You can borrow up to $100,000 for up to 25 years.
Citizens Bank: Variable interest rates range from 2.77% APR – 8.62% APR and fixed rates range from 4.74% – 8.24%. You can borrow for up to 20 years. Citizens also offers discounts up to 0.50% (0.25% if you have another account and 0.25% if you have automated monthly payments).
College Avenue: If you have a medical degree, you can borrow up to $250,000. Otherwise, you can borrow up to $150,000. Fixed rates range from 4.65% – 7.50% APR. Variable rates range from 4.01% – 7.01% APR.
Credit Union Student Choice: If you like credit unions and community banks, we recommend that you start with LendKey. However, if you can’t find a good loan from a LendKey partner, this tool could be helpful. Just check to see if you or an immediate family member belong to one of their featured credit union and you can apply to refinance your loan.
Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
Education Success Loans: This company has a unique pricing structure: your interest rate is fixed and then becomes variable thereafter. You can fix the rate at 4.99% APR for the first year, and it is then becomes variable. The longest you can fix the rate is 10 years at 7.99%, and it is then variable thereafter. Given this pricing, you would probably get a better deal elsewhere.
EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 3.94% – 7.54% (fixed) and 3.16% – 6.76% APR (variable).
First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 2.35% – 3.95% APR. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
IHelp: This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.65% to 8.84% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 3.42% and fixed rates start at 4.00%.
Purefy: Only fixed interest rates are available, with rates ranging from 3.95% – 6.75% APR. You can borrow up to $150,000 for up to 15 years. Just answer a few questions on their site, and you can get an indication of the rate.
RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.
UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $60,000 and rates start as low as 2.76% (variable) and 4.04% APR (fixed).
Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 4.49% and fixed rates starting at 6.24%. You would likely get much lower interest rates from some of the new Silicon Valley lenders or the credit unions.
You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance. You can also email us with any questions at email@example.com.
According to CollegeBoard, the cost of tuition, fees, and room and board has gone up about 162 percent at private nonprofit four-year colleges since 1971 when adjusted for inflation. Public schools have seen an increase of 142 percent in in-state tuition, fees, and room and board over the same time period.
College is an expensive endeavor, yet we know that those who hold bachelor’s degrees make an average of $1 million more over the course of their lives than those who do not. Higher education is still worth investing in, even if prices have increased astronomically.
Today we’ll look at how to evaluate the costs of college and how to get your education funded.
When you first look at the cost of tuition and fees, room and board, and meal plans, most colleges appear oppressively expensive. Appearances are sometimes deceiving. The first number most people find is the advertised sticker price, and it isn’t what you end up shelling out for your education.
The number you actually end up paying — the net price — is usually lower for most students. Net price is how much the school charges minus the amount of financial aid you are awarded.
Net price vs. sticker price
If you already know how much financial aid you will be receiving, you can subtract that number from your school’s sticker price. The difference will be your net price.
The numbers they produce will be estimates only, and are not guaranteed.
Some calculators base all calculations on in-state tuition. If you’re an out-of-state student, be mindful that your costs may be higher unless explicitly stated otherwise.
Some calculators base their numbers on financial aid opportunities available to first-year students. There is usually more funding for freshmen, so you can expect the subsequent three years to be more expensive.
Nonprofit vs. for-profit schools
Nonprofit schools tend to cost a good deal less than for-profit institutions. And, when you look at the net price of for-profit schools, they can cost even more than private nonprofit schools.
This is because for-profit schools offer less institutional aid — or financial aid through the college itself. Instead, they rely heavily on federal financial aid for the funding of their students’ education.
As a result, students who attend for-profit schools generally wind up with far more student loan debt after graduation. With 59 percent of students enrolled in a certificate or associate’s degree program, average student borrowing per year was at $6,179 for the 2011-12 school year compared to an average of just $953 at comparable public, nonprofit two-year institutions, according to a recent analysis by the Brookings Institution.
Because of this, the bulk of their advertising efforts are focused on low-income students who qualify for maximum federal financial aid. These students should be careful to weigh net prices at nonprofit institutions before agreeing to attend a for-profit school based on the sticker price.
Nonprofit institutions will offer more scholarships and grants, reducing the number of loans — and therefore debt — they have to take on.
Public vs. private school tuition
The sticker price on a public college is undoubtedly lower than that of private institutions. However, many private schools have large endowments providing substantial student aid at the institutional level. This aid is often extended to middle-income families even if they don’t qualify for a large amount of aid through federal programs.
For example, Cornell University offers significant grants to students from families with under $60,000 in annual income as long as their assets are under $100,000. In an example generated by the university, a traditional student from a household with $51,000 in annual income can qualify for over $64,000 in institutional grants — even when they hold personal assets of $3,000.
In this example, the student’s net price is a whopping $3,450 for one year at an Ivy League university.
What college expenses should I be prepared for?
Part II: How to Pay for College
There are several different ways to find money for college expenses. If you stay on top of financial aid application deadlines and have a high GPA and high test scores, you can easily shave tens of thousands of dollars off your cost of attendance.
In this section, we’ll cover the most common sources of college funding.
The Free Application for Federal Student Aid (FAFSA) is the single most important document you will likely fill out as a college student.
Because without the FAFSA, you won’t be able to access the majority of the best financial aid options we are going to cover in this guide. Those include:
Federal student loans
Direct PLUS Loans for parents
Not only will the FAFSA tell you how much aid you are eligible for through the federal government, but it is also a required step to getting institutional financial aid from your college or university.
How to fill out the FAFSA
It’s important to note that you do not have to pay to file the FAFSA. It is entirely free.
Go to https://fafsa.gov/ to create a Federal Student Aid account and start your application.
Important: You must fill out a FAFSA every year that you attend college.
The Expected Family Contribution (EFC) is how much the federal government determines you or your parents should be able to contribute to your education costs. This number is then used to figure out how much aid the government is willing to extend to you.
For example, to qualify for a full Pell Grant in the 2017-18 school year, your family’s expected family contribution can’t be higher than $5,328.
It should be noted that students interested in FSEOG Grants and Perkins Loans should apply as soon as possible, as these funds are doled out on a first-come, first-served basis and actually do run out.
Student Loans: Explained
The final form of aid distributed by the federal government is student loans. You will know which federal student loans you qualify for after you fill out your FAFSA.
Because student loans will have to be repaid with interest, they should only be pursued after you have exhausted all grant, scholarship and work-study options.
Types of federal student loans
As an undergraduate student, there are a variety of federal student loans you may be offered.
Important: You should be absolutely sure that you have maxed out your federal student loan eligibility before turning to private loans. Federal student debt often has better rates than private loans and a range of flexible repayment options.
Private student loans
If federal student loans aren’t enough, you can turn to private student loans as a last resort for college financing. These loans from banks, credit unions and online marketplace lenders do not have the same generous repayment programs, though some may have deferment options in some situations, such as unemployment.
Private loans come with variable or fixed interest rates. At this moment in time, interest rates are low. If you take out a variable interest rate loan, the rate is likely to go up over the course of your loan. Fixed interest rates start higher, but remain stable throughout the course of your repayment.
Should I get a co-signer?
If you haven’t yet established credit, you will likely need a co-signer in order to qualify for private student loans. If you’re a nontraditional student and have a less-than-stellar credit history, you’ll likely also benefit from having a co-signer.
If you have a good credit score, you can skip the co-signer. But if you do need some help, look for loan options with a co-signer release. This lets the co-signer off the hook after a certain period of time — generally once your payment history has allowed you to establish a better credit history yourself.
How much should I borrow?
You don’t want to borrow more than you can reasonably afford to pay back. Certain professions that require extensive education, like doctors and lawyers, will have considerably more student loan debt than other professions.
However, some professions, such as teaching, may require a master’s degree in some regions. Four years of undergrad plus grad school isn’t cheap, but a teacher’s entry salary typically doesn’t make up for all of your education expenses.
In these situations, talk to professionals in the field you want to enter to find a reasonable expectation for entry salary and potential salary growth over the course of a career. While using online sources to find this information is great, it’s not going to replace the regional knowledge of a professional working in the field.
You can then plug that number into CollegeBoard’s Student Loan Calculator, along with how much money you intend to borrow. It will analyze and tell you if your monthly payments will exceed 10 to 15 percent of your monthly income — which is generally considered to be the absolute maximum you should allot to student loan payments.
If you take out federal student loans, you may be able to borrow more as most loan options allow you to pay based on your income level. Just be careful not to bury yourself in debt — you don’t want to be paying student loans into your seventies.
You won’t find scholarships on the FAFSA, but they’re a great alternative to student loans. When you are awarded a scholarship, you receive free money for school that you never have to pay back.
Merit-based vs. need-based scholarships
While the majority of grants are need-based, the majority of scholarships are merit-based. There may be maximum income levels or priority given to those in dire financial straits, but for most scholarships, you’re going to have to do a little bit of work beyond filling out an application.
Most scholarships will require you to maintain a certain GPA, though standards vary wildly. Almost all scholarships will require some type of essay. Traditionally, this is done in written format, but in 2017 some scholarship essays can be done via multimedia such as video.
If your family’s income doesn’t help you establish a strong financial need, don’t lose hope. There are plenty of scholarships out there that have no financial requirements and are completely based on your essay — on rare occasion, they won’t even ask about grades.
Recurring vs. one-time scholarships
Most scholarships only last one semester or one school year. However, there are some you can apply for that will cover your entire tenure as an undergrad. Keep in mind that these options are likely to require you to maintain a certain GPA throughout your studies.
How do I find scholarships?
The first place you can look is your financial aid office. Many schools have endowments not just for grants but for scholarships as well.
After you have exhausted scholarship options at your school, look in places such as:
Professional organizations in the field you want to enter
Professional organizations or unions your parents may belong to
National student organizations related to your major
Potential future employers — especially if they’re a larger company
Within the community you grew up in
Organizations based on your ethnicity or heritage
Organizations related to any extracurricular activities or hobbies
You can look for scholarships on major search engines, like Fastweb, CollegeBoard and Scholarships.com, but you’ll find a ton of competition. If you can look for scholarships focused on what makes you unique, you’re likely to find a dramatically smaller applicant pool, boosting your chances of winning an award.
How soon should I start applying?
Start applying for scholarships as soon as possible. It is possible to fund your education this way in its entirety, though you will have to fill out a lot of applications and write a lot of essays. The sooner you get started, the better.
Each scholarship has a window, which is typically opened annually or once a semester, in which you can file an application. While high school sophomores will be able to apply for some scholarships, opportunities really start opening up in your junior year.
Grants are money you never have to pay back unless you drop out of school or in some other way violate the terms of agreement. In undergraduate studies, they are typically need-based.
In order to qualify for federal grant programs, you must fill out the FAFSA and meet eligibility requirements. There are four types of federal grants:
Federal Pell Grants are distributed based on income-eligibility only. They can be granted to full-time, three-quarter-time, half-time or less-than-half-time students.
For the 2017-18 school year, the maximum Pell Grant awards are:
$5,920 for full-time students
$4,440 for three-quarter-time students
$2,960 for half-time students
$1,480 for less-than-half-time students
These awards are distributed in two parts over two semesters.
During the summer of 2017, Summer Pell Grants were awarded for the first time since 2011. These grants gave you an additional 50 percent of the full award to spend on summer studies — particularly helpful to community college students whose course of study typically runs through the summer.
The 2017 expansion was part of a budget deal passed by Congress in May affecting only one school year. Whether Summer Pell Grants will be available for the 2018-19 school year or any other future years still remains up in the air. Legislation for the permanent reinstatement of Summer Pell Grants was introduced in the Senate in April, but received no vote.
Federal Supplemental Educational Opportunity Grants
The maximum award is between $100 and $4,000, depending on your personal financial situation.
Iraq and Afghanistan Service Grants
If you lost a parent while they were serving in the military in Iraq or Afghanistan post-9/11, you may be able to get a full Pell Grant regardless of your family income through the Iraq and Afghanistan Service Grant.
In order to qualify, you must:
Meet all Pell Grant requirements save EFC requirements.
Have lost your parent before the age of 24 — or while you were enrolled in college at least part time at the time of your parent or guardian’s death.
Over the next couple of years, the maximum award for this grant will be reduced thanks to budget sequestration. If your grant is distributed prior to Oct. 1, 2017, you will receive a maximum award of $5,511.52.
If your grant is distributed between Oct. 1, 2017, and Oct. 1, 2018, you will receive a maximum award of $5,529.28.
If you are planning on becoming a teacher, you may be interested in a Teacher Education Assistance for College and Higher Education (TEACH) Grant. In order to qualify, you must be enrolled in a TEACH-eligible program. Not all schools participate, and the ones that do determine which of their programs qualify for TEACH Grants, so be sure to sit down with your financial aid counselor to determine your potential eligibility.
When you accept a TEACH Grant, you are agreeing to serve four out of your first eight years in the workforce in a high-need specialization in a low-income area. You can also meet this obligation by teaching at a Bureau of Indian Education school.
Your college or university may also issue need-based grants. While your EFC is not likely to be measured in the same way, a FAFSA application is still required in order to be considered.
Some colleges, though typically not Ivy League schools, will offer merit-based grants, as well. Your grades will be a factor here.
Work-study programs are another form of aid that will not be accessible unless you complete your FAFSA.
Many schools participate in federally backed work-study programs for students with a financial need. You are assigned a set amount of hours dependent on your financial need. You may find yourself working for the school, in a community service role, or in a field relevant to your course of study.
Work-study programs pay at least minimum wage and pay at least once per month. You can choose to receive a monthly paycheck or have your pay directly counted against any money you may owe the school.
Your eligibility for work-study will be determined by your FAFSA application.
529 college savings plans
529 accounts are tax-advantaged accounts to help you save for future college expenses. Contributions go in after you’ve paid taxes on your income. That money is invested and grows tax-free — as long as you spend the money on qualified educational expenses.
Types of 529 accounts
Not all 529 accounts are created equal. They are issued by state, and each state has specific rules on how their 529 accounts can be used. However, many states will let you purchase their 529 accounts even if you are not a state resident.
There are two basic kinds of 529 accounts.
College Savings Plans
The College Savings Plan structure allows your money to grow in traditional investments as made available by your state. You can use this money to pay for school at almost any U.S. institution — and even some schools abroad.
When you take money out, it will be based on the real dollar value your investments have grown to. For example, if you have $20,000 in your account, you would be able to take $20,000 out. If school cost $25,000, you would still have to find $5,000 to fund the additional tuition and fees not covered by your 529.
Utah’s 529 plan is a College Savings Plan, and commonly cited as one of the best in the nation.
Prepaid Tuition Plans
Prepaid Tuition Plans allow you to save for tomorrow’s college at today’s rates. There may be different tiers of saving for different types of schools.
One thing to be careful of with Prepaid Tuition Plans is that if you save at the state school level, and your child ends up not wanting to attend a state school when they graduate from high school, you could run into some funding problems. Pennsylvania allows you to change your investment tier at any time, but this is a potential point of friction you should consider at the outset of your 529 decision.
You will also notice that price per credit is quite high for Ivy League schools. As discussed earlier with the example of Cornell, Ivy League schools tend to have extensive grants. If you’re making a median income, saving in this manner may reduce your child’s future institutional aid, costing you more money than you would have had to pay without the dramatic savings.
What can I use my 529 account for?
You can only use the money in your 529 account for qualified educational expenses. If you use the money for anything else, you will have to pay taxes on the withdrawal.
Qualified educational expenses include:
Tuition and fees*
Room and board — though you must be enrolled at least half-time to claim this expense
Technology required for school — including internet access
Required equipment and materials as dictated by your professor
*Some Prepaid Tuition Plans cover tuition and fees only.
How to make a 529 withdrawal
Most programs allow you to make a withdrawal online or via postal mail. Your 529 account issuer will not keep records of how that money was spent. Producing documentation to show that the money was spent on educational expenses falls squarely on your shoulders.
If you have a high enough income level, your child may not qualify for need-based financial aid. Saving in a 529 plan is a generous investment in their future given that they won’t have as many funding opportunities available to them.
Because you are investing, your money is likely to grow — and grow federally tax-free at that. This means you won’t have to save as much in a College Savings Plan in order to meet your goals.
Cons of 529 accounts:
The amount you have saved could reduce institutional aid — especially if you open the account in your child’s name. Open the account in your name and list your child as a beneficiary instead.
When saving in a Prepaid Tuition Plan, do your best to ensure you’re saving at a level your child will actually be able to use. If they don’t end up going to school in state, you could hit a bump in the road if you’ve been saving at state school tuition levels.
Because you are investing, there’s no guarantee of growth. You could conceivably lose money in a 529 account.
Through a combination of federal and private loans, there’s really no set limit on how much you can borrow. You should figure out how much you want to borrow, though, after realistically examining your potential future earnings.
To figure out if your college degree is worth the cost, you need to figure out the net price of your education and your expected salary. A good tool to figure this out is College Reality Check.
Funded by the Bill & Melinda Gates Foundation, College Reality Check helps you estimate the net price of your school based on a number of different factors. Then it shows you how much you can expect to make upon graduation.
Technically, you’re only allowed to spend federal student loans on educational expenses. These can include:
Tuition and fees.
Room and board
Books, supplies and equipment
Transportation while at school
Dependent child care expenses
No one will be monitoring your bank account. However, if you end up having the money to go on shopping sprees after you’ve paid for all of the above expenses, you’re probably borrowing too much. Consider returning the money rather than paying interest on it after you graduate.
Check your loan agreement with non-federal lenders for specific restrictions on private student loans.
Most of the time, no, you do not. However, some colleges and universities require their traditional freshmen to live on campus. Even these stipulations can sometimes be worked around if you are commuting from your parents’ home.
If at all possible, yes. Make an effort to make at least interest-only payments. This will keep interest from accruing while you’re in school and deferment, which costs you more money in the long run.
The only time it doesn’t matter as much is when you have Direct Subsidized Loans — which will not accrue interest while you’re in school. Even then, making principal payments early isn’t a bad thing if you can swing it.
If you miss one payment on your federal student loans, you will have to make it up before 90 days — otherwise you get reported to the credit bureaus.
If you miss several payments on your Direct Loans and don’t make payments for 270 days, you will be in default, which puts you at risk of not only being reported to the credit bureaus but also losing all benefits of federal student loans like income-driven repayment options. You could also end up in court.
Consequences for Perkins Loans and private student loans depend on the agreement you sign prior to disbursement, but they can report you to the credit bureaus as soon as you are 30 days late with a payment.
Getting accepted to medical school is a major accomplishment, but graduating from medical school can be life-changing for your finances. According to The College Payoff, a collaborative study conducted by the Georgetown University Center on Education and the Workforce, individuals with a doctoral-level degree enjoyed median lifetime earnings of $3,252,000 in 2009 dollars. This figure compares favorably to degrees that require a smaller commitment of time and resources, showing that pursuing a medical degree can pay off.
Now on to the bad news. While earning more money over a lifetime is advantageous, there’s a notable downside to going to medical school. While doctoral-level degrees can pay off with a lifetime of higher wages, the costs of pursuing this degree can be astronomical.
As the Association of American Medical Colleges notes, the average indebted 2016 medical school graduate left college with a median medical school debt of $190,000. No matter how you cut it, that’s a lot of money to borrow and spend.
Medical school debt in the U.S.
The Association of American Medical Colleges shares statistics on average medical school debt. As of 2016, indebted medical school graduates left school with a median debt loan of $190,000. At public schools, the median debt load worked out to $180,000. Private medical schools, on the other hand, reported a slightly higher level of debt with a median debt load of $200,000.
The high levels of debt many medical school graduates endure are caused by myriad factors, including the rising costs of tuition. While average medical school tuition hasn’t been tracked since 2009, the price tag of a medical education was $29,890 that year.
In addition to the price of tuition, medical students need to pay for countless other expenses, some of which only apply to those in the medical field:
Room and board
Rent and utilities
Travel and transportation
Instruments and supplies
Relocation for residency
Lifetime earnings for a doctor
While the costs of medical school are high, doctors’ higher salaries can take the sting out of the long-term costs. In 2016, for example, family and general practitioners earned an annual mean wage of $200,810, while physicians and surgeons earned $210,170, on average. Several medical specialties earned even more.
The following table highlights profitable medical careers alongside careers that require only a bachelor’s degree:
If you’re trying to decide between degree programs with varying costs and educational outcomes, it’s important to consider the ROI, or return on investment, for your education. While there’s no hard and fast rule to help you decide, figuring out your post-education monthly payment for medical school debt and comparing it to your potential salary can help.
During a month with four weeks of paydays, a doctoral graduate would bring in $6,656 before taxes and $4,659.20 after taxes, considering a 30% tax rate. While a $2,103.39 payment represents nearly half of this person’s income, it’s only for 10 years. Further, the percentage of income will only decrease as their income grows. And if they choose a higher paying medical specialty, the difference could be even greater.
Also keep in mind that doctors don’t have to choose 10-year, standard repayment as there are plenty of other options available, including repayment plans that span up to 25 years. If the graduate with the same level of debt as above chose to repay their loan over 25 years at the same interest rate, for example, they would pay only $1,224.17 per month.
Part II: Paying for Medical School
Federal student loans are usually the first source of funding medical students turn to as they seek to finance their education. Several different types of federal student loans are available, and each has their own benefits, drawbacks and practical limitations. Federal student loans tend to be a good option for medical students since they offer relatively low, fixed interest rates and help students qualify for federal perks like income-driven repayment, student loan forgiveness programs, deferment and forbearance.
Private student loans are commonly used once medical students max out the amount of federal money they can borrow for school. These loans are offered through private lenders, which means their rates and repayment terms are not fixed by the government. As a result, they can vary greatly but may be lower than rates offered through government programs.
Pros of private student loans:
Interest rates may be lower than federal student loans
Loan limits can be high enough to cover the entire cost of medical school
Loan disbursement may be faster
You can shop around among lenders to find the best deal
Cons of private student loans:
You need good or excellent credit to qualify on your own
Without good credit, you may need a co-signer
Interest rates can be fixed or variable
Private loans do not offer federal student loan forgiveness, income-driven repayment, or federally sponsored deferment or forbearance
You may need to make payments or pay interest while still in school
When to consider private student loans:
You’ve maxed out on federal student loan amounts
Private loans offer a better interest rate
You don’t plan to take advantage of government programs when it comes to repaying your loans
Variable rates available
from 2.93% to 9.25% APR;
fixed rates available from
4.7% to 10.89% APR
Borrow up to 100% of the
cost of attendance
Good or excellent credit
required without a
*Rates current as of Aug. 21, 2017.
Grants for medical students
Grants for medical school students are offered through the government, research facilities, corporations and institutions of higher education. Students can seek out information on available grants by asking their school’s financial aid office, searching the internet, or checking government resources that cover the medical field.
Here are some popular grants available to medical students:
This Medical Scientist Training Program grant was created to assist students pursuing degrees in clinical and biomedical research. This program is offered at over 47 universities that help facilitate the grant.
Award amount: Amounts vary
Qualifications: Available to qualified M.D.-Ph.D. dual-degree students with a GPA of 3.0 or higher
Deadline to apply in 2017: Depends on the participating institution
The Ford Foundation Fellowship Program seeks to increase diversity and offers grants to medical students pursuing a Ph.D. with the goal of participating in medical research or teaching. Other Ph.D. students are considered as well.
Award amount: $20,000 to $45,000, depending on the specific program
Qualifications: Medical students in pursuit of a Ph.D. can apply
Deadline to apply in 2017: Applications open in December 2017
This program, which is offered through the American Medical Women’s Association, is available to medical students and residents working in clinics around the world.
Award amount: Up to $1,000 in transportation assistance costs
Qualifications: Students must work in an off-campus clinic where the medically neglected will benefit, be an AMWA member in at least their second year of school, and must spend four weeks to one year serving the medically underserved
Deadline to apply in 2017: Applications are accepted Jan. 5, April 5, July 5 and Oct. 5
Scholarships for medical students
Scholarships are available to medical students from all walks of life and all backgrounds, although requirements vary based on the program. Medical students can seek out merit-based scholarships, institution-based scholarships and various other scholarships offered through research facilities and corporations.
Here are a handful of popular scholarship options for medical students:
This grant, offered through the American Medical Association, doles out scholarships to medical students who meet certain criteria. The goal of this program is to reduce the debt burden on medical school students across the country.
Award amount: $10,000
Qualifications: Must be a medical student who is nominated by their school dean and approaching their last year of medical school
Deadline to apply in 2017: Nomination applications are available every fall
This scholarship is available to all medical students with financial need regardless of their gender, race or ethnicity. Applicants are judged on financial need, achievements, essays and community service records.
Award amount: $2,000 to $5,000
Qualifications: Must be a medical student who can demonstrate financial need and complete the application process
Deadline to apply in 2017: Applications for 2018 will open at the end of 2017
The Harvey Fellows Program was created for Christian students pursuing higher education in important fields such as medicine.
Award amount: $16,000
Qualifications: Must be a student who identifies as Christian and attends service regularly
Deadline to apply in 2017: Application deadline is Nov. 1 of each year
Part III: Medical School Loan Repayment Programs
Income-driven repayment (for federal student loan debt)
Income-driven repayment programs allow medical students to pay only a percentage of their income toward their federal student loans for 20 to 25 years no matter how much they owe. These programs can be advantageous since they let medical students with large debt loads pay a smaller percentage of their income every month than they would with standard, 10-year repayment. Several different income-driven repayment programs are available, each with their own rules and benefits. The following table highlights each program and how it works:
Pay As You Earn
10% of your
but never more than your
payment on 10-year
Your payment must be
less than what you would
pay under standard,
Revised Pay As You
Plan (REPAYE Plan)
10% of your
20 years for
and 25 years “if any
loans you’re repaying
under the plan were
received for graduate
or professional study”
Any borrower with
eligible federal student loans
10% of your
if your loan originated
after July 1, 2014,
but never more than
the 10-year Standard
generally 15% of your
if you’re not a new
borrower on or after
July 1, 2014; either way,
you’ll never pay more
than the payment on a
20 years if you’re a
borrower on or after
July 1, 2014; 25 years
To qualify, your
payment under this plan
must be less than what you
would pay under standard,
20% of your
discretionary income or
what you would pay over
the course of a fixed
12-year repayment plan
Any borrower with
eligible federal student loans
can qualify for the ICR Plan
Pros of income-driven repayment:
Pay a smaller amount of your income for up to 25 years
Have your student loan balance forgiven once you complete the program
Pay off your debts slowly and at your own pace
Cons of income-driven repayment:
You may have to pay income taxes on forgiven loan amounts
You may not qualify if you earn too much
Who is eligible?
These programs are available to graduates who have federal student loans and meet income requirements.
There are numerous loan forgiveness programs available to doctors, each with their own criteria for applicants. Commonly, these programs offer loan forgiveness in exchange for service in a specific field or for a certain type of employer.
Since loan forgiveness programs vary in their details and requirements, you’ll need to read terms and conditions of applicable programs to determine if you qualify.
Is this option right for you?
If you are willing to relocate or know that a loan forgiveness program is already available in your area, then loan forgiveness programs offer a great way to earn a living while having part of your debt forgiven. For this option to be right for you, however, you have to be willing to meet special program requirements such as working in an urban, rural or underserved community.
National Health Service Corps Loan Repayment Program
This program offers loan repayment assistance for individuals entering qualified health care careers in medical or dental fields. Licensed health care providers may earn up to $50,000 of tax-free loan forgiveness for a two-year commitment to NHSC-approved employment in a high-need area.
Who is eligible?
Medical graduates who agree to work in an NHSC-approved career for at least two years may qualify for this assistance.
How to apply
Contact the National Health Service Corps or visit the NHSC website for tips on the application process.
Is this option right for you?
If you’re willing to work in an area of high need after you graduate, this program may work well at the beginning of your medical career.
U.S. military loan repayment programs
United States Army
Army Student Loan Assistance offers up to $45,000 per year in loan assistance, along with a monthly stipend of up to $2,000. This assistance is available to U.S. residents working to complete an accredited residency.
The U.S. Army also offers up to $120,000 to pay down medical school debt in exchange for three years of service.
Lastly, the U.S. Army offers a Health Care Professionals Loan Repayment Program that provides up to $250,000 for repayment of “education loans for physicians in certain specialties who are serving in an Army Reserve Troop Program Units, AMEDD Professional Management Command, or the Individual Mobilization Program.”
How to apply
For additional information, contact your local Army recruiter, call 1-800-USA-Army, or visit Healthcare.GoArmy.com.
United States Navy
The Navy Student Loan Repayment Program offers up to $65,000 in repayment assistance, depending on your loan amount and year in school. Eligible applicants serve in the U.S. Navy and have federal student loans.
Lastly, the Navy Financial Assistance Program offers up to $275,000 in loan repayment assistance plus a monthly stipend to medical residents who agree to serve in the U.S. Navy. Physician sign-up bonuses may also be available.
The Air Force Health Professions Scholarship Program offers up to $45,000 per year plus a monthly stipend up to $2,000 for medical students who join the U.S. Air Force and serve their country as a medical professional. Once you complete your residency, you’ll have a one-year obligation for each year you participate in the program plus one extra year.
The SHARP Program offers new doctors
up to $35,000 in loan repayment
assistance per year.
Doctors must agree to work at least two
years in a high-need shortage area.
The Arizona State Loan Repayment
Program offers up to $65,000 per year in
repayment assistance for doctors for two
years, with lower repayment amounts
offered in subsequent years. You must
work in outpatient care to qualify.
The doctor must be a U.S. citizen who
agrees to work in a state-approved high
This program requires a three-year
commitment in a health care shortage
Part IV: Paying Down Your Medical School Debt
While the very idea of medical school debt could have you feeling overwhelmed, it’s important to understand the many options available when it comes to paying off your loans sooner rather than later. In addition to paying off your loans faster, some strategies can help you save money on interest or secure a more manageable monthly payment.
Here are some tips that can help as you pay down medical school debt:
#1: Refinance your student loans to a lower rate.
Refinancing your student loans to a new loan product with a lower interest rate and better terms can help you save money and possibly even lower your monthly payment. With a lower interest rate, you’ll save money on interest each month, which could help you save money and pay off your loans faster, provided you keep making the same monthly payment.
Keep in mind, however, that there are notable disadvantages that come with refinancing federal loans with a private lender. When you refinance federal loans with a private lender, you lose out on special protections afforded to federal loan borrowers like deferment and forbearance. You also disqualify yourself from federally sponsored income-driven repayment and loan forgiveness programs.
Recommended lenders for refinancing your medical school loans
While graduating from medical school can be a momentous occasion, you can put yourself in a better financial position by living a modest “student” lifestyle as long as you can. Ways to save money include, but aren’t limited to, finding a roommate to share living expenses, skipping pricey dinners out, living without cable television, driving your older car as long as you can, and preventing lifestyle inflation as you start earning more.
#3: Pay all of your monthly payments on time.
Federal Direct Loans and some private lenders offer interest rate discounts after you complete a specific number of on-time monthly payments. Check with your lender to see if they offer this option. If not, you should still make on-time monthly payments to avoid late fees and keep your loans in good standing.
#4: Pay extra toward the principal of your loans.
If you don’t want to go through the trouble of refinancing, you can still pay off your loans faster by paying more than the minimum payment on your student loans each month. Throwing extra money at the principal of your loans reduces the amount of interest you owe with each passing month, helping you save money while paying off your loans faster.
#5: Pay interest while in school.
Some medical student loans let interest accrue while you’re still in school. If you have the financial means to make interest-only payments while you’re still in school, doing so can help you prevent your student loan balance from ballooning before you graduate.
Tuition at medical schools is not fixed, meaning it can pay to shop around before you choose an institution. Private schools tend to be more expensive than public schools as well, meaning you can usually save money if you decide on a public education for your medical degree.
The amount you can save depends on your current interest rate and your new loan rate and its terms. To find out how much you could potentially save by refinancing, enter your old loan and new loan information in a student loan calculator.
You can lower the payment on your student loans in a few different ways. First, you can refinance your student loans into a new loan product with a lower interest rate or longer repayment timeline. Second, you can choose an extended repayment plan or even income-driven repayment.
Federal student loans come with important federal benefits and protections such as deferment and forbearance. They also leave you eligible for income-driven repayment plans and federal loan forgiveness.
As you shop for student loans for medical school, remember that the terms of your loan can make a big difference in how much you’ll pay over time. Compare loans based on the interest rate, any applicable fees, and the monthly payment amount you’ll need to make. You can also check student loan providers’ profiles with the Better Business Bureau and read student loan reviews for even more insight.
According to Swarthmore College, medical schools are interested in students with excellent academic ability, strong interpersonal skills, leadership skills, and demonstrated compassion and care for others.
Some college-bound students in Oregon won’t receive money for college the state promised them for this upcoming school year. In 2016, Oregon became one of the first states to offer to cover students’ community college tuition, setting a $40 million budget for the Oregon Promise Program. However, state funding missed that mark by about $8 million this year.
The funding shortfall and a high turnout of applicants has forced Oregon state legislators to change the program’s eligibility requirements and disqualify students from the highest-earning households.
The Oregon legislature has given authority to the Higher Education Coordinating Commission (HECC) to establish cost controls for the Oregon Promise Program. HECC made a new rule that caps grant eligibility at students whose families are able to contribute $18,000 or more toward the student’s post-secondary education, according to the expected family contribution (EFC) calculation students receive after submitting the Free Application for Federal Student Aid (FAFSA) or Oregon Student Aid Application (ORSAA).
As a result, the state will only be able to award grants to about 80% of eligible new applicants for the fall 2017 semester. More than 15,000 students have applied for the grant for the upcoming 2017-18 school year, starting in September, HECC tells MagnifyMoney. So far, about 8,300 have been told they are eligible for Oregon Promise grants. However, notification of eligibility does not mean a student will receive an award — HECC won’t have an official number of recipients until students enroll in community colleges.
In its first year, the program awarded a total of $4.4 million to about 6,800 students, or 5.4% of fall 2016 community college students. Between November 2015 and March 2016, more than 19,000 people applied, and of that group, 10,459 met GPA, residency, and FAFSA requirements. Among them, 1,091 enrolled in public universities, therefore they didn’t receive a grant, and 6,745 enrolled in community college and received grants.
If you’re one of 6,745 students who enrolled in the program last year, you’re safe. Last year’s participants won’t be affected by the new income criteria and will continue to receive the grant, according to HECC.
The commission says the new limit could change again. Moving forward, the HECC will check the program’s funding annually and may adjust or eliminate the EFC limit, depending on how much funding is available.
What the Oregon Promise covers
The grant covers the gap between what a student receives in scholarships and grants, like the federal Pell grant, and what they need to cover tuition at Oregon community colleges. Legislators set a $1,000 annual award minimum, so even students who have tuition fully covered with federal grant money or scholarships still receive funds. Applicants must be a recent Oregon high school graduate or GED recipient, have high school cumulative GPA of 2.5 or higher, be an Oregon resident for at least a year before attending college, and not have attempted or completed more than 90 college credits.
Students left without the money they need for school may be forced to turn to other borrowing options like taking out a federal student loan or personal loan to attend school this year.
Other states with similar programs
Oregon isn’t the only state that offers free tuition to its community college students. The trend, started by the Obama Administration in 2015, gained even more popularity during the 2016 election season, prompting states like New York, Tennessee and Rhode Island and cities like San Francisco to test drive free college programs. Here’s a rundown of some of these programs:
New York’s Excelsior Scholarship Program allows students to attend a State University of New York or City University of New York college tuition-free. Beginning in fall 2017, New York state residents from households earning $100,000 or less are eligible to receive up to $5,500 per school year for college.
In Tennessee, any state residents who have yet to earn their associate’s or bachelor’s degree can attend community or technical college for free. Starting in 2018, the Tennessee Promise Program will offer scholarships that cover the gap in of tuition and mandatory fees after what’s covered by a student’s Pell grant, the HOPE scholarship, or the Tennessee Student Assistance Award.
Residents — regardless of income — can earn their associate degree for free at the Community College of Rhode Island beginning in fall 2017. The Rhode Island Promise program (seeing a trend here?) applies to 2017 high school graduates or those 19 years old or younger who received their GED in 2017.
Louisiana’s TOPS, or Taylor Opportunity Program for Students, is a collection of scholarships that pays tuition and some fees for Louisiana residents attending any of the state’s community colleges or public four-year colleges or universities, as long as the student graduated from high school with at least a 2.5 GPA.
San Francisco became the first U.S. city to offer a free college tuition program by introducing its Free City program in 2017. Beginning fall 2017, city residents who have lived in the state of California for a year or longer as of the first day of school are eligible to receive free tuition for the City College of San Francisco. Some lower-income residents are also eligible to receive stipends up to $250 per semester to help cover things like books and other college related expenses.
Graduate school funding is a bit trickier than undergrad funding. Your options for loans and grants become more limited, and while work-study opportunities may be attainable and provide great experience, they often eat up a lot of time but offer low compensation.You do have options, though — whether you’re a grad student or a parent. This guide will take you through them all in detail.
As a grad student, you have three federal student loan options: Direct Unsubsidized Loans, Direct PLUS Loans, and Perkins Loans. Each financing option looks different, and you may need a combination of these loans to fully fund your education.
Federal loan options and programs
In order to qualify for any federal student aid, you must meet certain requirements. You must:
Have a high school diploma, home-school high school education, GED, or other certification of equivalency.
Be a U.S. citizen, national, or permanent resident.
Have a Social Security number. This requirement is waived if you are from the Marshall Islands, Palau, or Micronesia.
Register with the Selective Service if you’re a male age 18-25. If you do not do so during this time frame, it can impact your ability to access federal financial aid later in life.
Be enrolled or accepted into a school with the aim of obtaining a degree, certificate, or other recognized educational credential.
Maintain good grades. Standards for this requirement vary from school to school.
Certify that you aren’t currently in default on any federal student loans, that you owe money back on a grant, and that you will only use the money for educational endeavors. This certification happens on the FAFSA application.
If you meet all of these requirements, you now have to look at specific qualifications for each type of student loan.
Direct Unsubsidized Loans
In order to qualify for a Direct Unsubsidized Loan, you must be attending a participating educational institution at least half-time. You must also be enrolled at least half-time in a program that will lead to a degree or certificate. There is no need to demonstrate financial need in order to qualify for a Direct Unsubsidized Loan.
Direct PLUS Loans
Direct PLUS Loans have very specific credit standards. In order to qualify, you must meet the following requirements:
Must be pursuing a degree or certificate at the graduate or professional level and going to school at least half-time — or be the parent of a student who is doing so.
Cannot have a debt that is currently 90 days delinquent with a balance of over $2,085.
Cannot have an item worth over $2,085 sent to collections or written off in the two years prior to your application.
Cannot have any of the following appear on your credit report in the past five years: default determination, bankruptcy, foreclosure, tax lien, repossession, wage garnishment, or a write-off of other student loan debt.
These standards apply to both student and parent borrowers. If you cannot meet them, you can still borrow money by finding a co-signer who does meet these standards.
You may also be able to qualify if you can prove the blip on your credit report was caused by extenuating circumstances. In order to qualify in this way, you’ll need to complete credit counseling to the satisfaction of the PLUS program.
Perkins Loans are reserved for those with exceptional financial need. You prove this need by filling out the FAFSA as you normally would.
If you are eligible based on need, you need to get in touch with your financial aid office because your school is the actual lender. Not all schools participate, and not every school has sufficient funding for this program to offer the full $8,000 grad students may be eligible for. It’s important to fill out the FAFSA early and to approach your school about these loans as soon as you get your results.
Pros & cons of federal student loans
There are times when taking out federal loans will be advantageous to you as a grad student and times when other options may make more sense. Let’s drill down into the pros and cons.
Aside from Perkins Loans, federal student loans give you access to a number of repayment options, including options that allow you to adjust monthly payments based on your current income.
Depending on the private lender, credit requirements are typically more lax than they will be in the private sector.
Interest rates on Perkins Loans are competitive — if your school participates and if your financial situation is considered dire enough to qualify.
The fact that there are origination fees on Direct Unsubsidized Loans and Direct PLUS Loans is a major negative as it will cost you money to borrow the money in the first place.
Interest rates on Direct PLUS Loans are not competitive if you have a good credit history. You may be able to save money by moving to the private sector in specific circumstances.
Direct Unsubsidized Loans and Direct PLUS Loans require at least half-time enrollment. If you are pursuing a graduate-level degree while working a day job, this may present a problem depending on how many credits you are able to take on at once.
Federal grant and programs for grad school
While loans are money you will have to pay back, grants and work-study programs are sources of funding that you won’t have to repay. It’s essentially free money. At the graduate level, you have a few federal options.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant is a program that pays for part of your education as long as you promise to use your degree in a high-need, low-income area for four of the eight years following the completion of your education. You can also teach at a Bureau of Indian Education school during this time period to qualify.
If your grant was disbursed today, the maximum grant amount you could qualify for would be $3,724. If it isn’t disbursed until after October 1, 2017, the maximum amount awarded jumps to a potential $3,736.
Your school will have to participate in the TEACH program, and your school will have specified which programs qualify for the grant. Get in touch with your financial aid office to find out if your program is eligible.
While you’re there, make sure you are eligible by checking your school’s academic requirements for qualification.
If you do not teach in a high-need field in a low-income or Bureau of Indian Education school for four of the first eight years after your graduation, your grant will turn into a Direct Unsubsidized Loan, which will have to be repaid.
It is extremely rare for a grad student to qualify for a Pell Grant. In fact, for eligibility purposes, you’re not allowed to be pursuing a graduate degree.
The only time Pell Grants are available after undergrad work is when you are pursuing a postbaccalaureate teaching certificate. Even then, your certificate program must meet the following requirements:
It does not lead to a degree.
It is a prerequisite in your state in order to work as a primary or secondary school teacher.
It comes from a school that does not offer a bachelor’s degree in education.
It must be a postbaccalaureate program.
For your part as a student, you must meet the following requirement as well, if you’re going to qualify:
Enrolled at least half-time.
Pursuing your initial teacher certification/licensure within your state.
If a financial need is demonstrated when you fill out the FAFSA, you may be offered a work-study position. If your school participates, you’ll be given an hourly or salaried job where you are paid at least monthly. Your financial need will determine the number of hours you receive.
The kind of job you are assigned will depend largely on your school. You may find yourself in one of these fields:
Positions at your school
Fields relevant to your course of study
If you end up with a position on campus, you’ll likely be working for the school. If you are working off-campus, you’re more likely to be assigned to a position serving the public good or working in a position relevant to your future career.
You’ll make at least minimum wage, though as a grad student you may have some desirable skills that could land you a position with a pay boost.
Your school is obligated to issue you a paycheck at least once per month. The money will come directly to you unless you set up ACH payments, or you are applying your earnings toward tuition, fees, or room and board.
Grants are a form of financial aid that you don’t have to pay back under most circumstances. However, if you don’t hold up your end of the educational bargain, you may have to return money that was paid to your school, or money you received as a refund check from your school.
You could end up owing money back for your federal grant if:
You don’t meet TEACH program guidelines as outlined above.
You drop out of school partway through the semester.
You reduce the amount of credits you are taking after the grant has been issued.
If you are disappointed by your FAFSA options, you should know that there are other ways to find funding for your graduate-level education. Be sure to review theses resources prior to taking out loans.
Federal grants at the graduate level are admittedly thin. If you’re looking for other ways to pay for school that don’t involve student loans, here are some additional federal agencies outside the Department of Education. They may be able to help.
In exchange for all of this money, you will be obligated to serve either on active duty or in the reserves after you have completed your education. Because you have a college education, you will enter the military as an officer.
Post-9/11 GI Bill
If you served in the military for at least 36 consecutive months after September 10, 2001, or were honorably discharged due to disability after serving 30 consecutive days after the same date, the Post-9/11 GI Bill may cover your tuition and fees.
If a smaller portion of your service happened after September 10, 2001, you may be eligible for prorated benefits.
All in-state tuition and fees will be paid at public schools, and up to $22,805.34 will be paid at private schools. This number changes annually.
If you still have a gap between how much the school charges and how much the Department of Veterans Affairs (VA) will pay under the latest version of the GI Bill, check to see if your school has opted in to the Yellow Ribbon Program. Schools that do so reduce the tuition of veterans to meet the maximum VA payout, leaving you with a bill of zero dollars.
Yellow Ribbon schools may also provide funding equivalent to a Basic Allowance for Housing in addition to a stipend for books.
AmeriCorps is a volunteer opportunity with some perks for college students. When you volunteer, you earn money for school through the Segal AmeriCorps Education Award. The amount of money you earn depends on how time-intensive your service is.
For example, currently if you volunteer in an approved position for more than 1,700 hours over a 12-month period, you would qualify for an education credit worth $5,920 for the 2017-18 school year. You can only earn up to two full-time education credits. You can find further examples of how much you can earn on the Segal Award Eligibility page.
As a member of AmeriCorps, you may find yourself in one of the following positions or one like them:
Relief efforts after a natural disaster
Tutoring K-12 students
Building affordable housing
Working with local nonprofits and community groups
If you have served as an AmeriCorps member after October 1, 2009, at the age of 55+, you may have accrued educational benefits that you can pass on to your child, stepchild, or grandchildren. You can learn more program specifics here.
Other sources of federal grants for grad school
Higher education agencies in your state
Another great place to look for funding is the agency that handles higher education in your state. These state-level organizations typically offer grants. You’ll likely be prompted to visit your state’s website at the end of your FAFSA application, but if you want to learn more about available programs now, you can find yours here.
Your school’s financial aid office
Your school likely has endowments and partner employers — both of whom are likely to offer scholarship and/or grant opportunities. To find out what may be available at your school, schedule an appointment with the financial aid office.
Industry and professional organizations
Many industry and professional organizations offer some type of scholarship program for those studying in the field. Applying for these scholarships won’t just help you pay for school if you’re awarded — if you win one, it will look phenomenal on your future resume.
Some of these organizations will require membership prior to application. While membership fees can be expensive in some organizations, many provide student-level memberships at a steep discount.
Private loan options for grad school: A last resort?
Private student loans are issued directly by lending institutions without the backing of the U.S. Department of Education. You can look to banks, credit unions, or online marketplace lenders to access these loans.
Pros & cons
If you have a good credit history, you may be able to obtain a loan with lower rates than those currently offered via federal programs.
You may be able to access more capital than you would with federal loans, depending on your credit history and the type of federal loan.
You can shop around for different options. Some lenders don’t charge origination fees, and some are even willing to work with you in cases of hardship.
You will not have access to advantaged repayment programs like PAYE, REPAYE, IBR, ICR, and PSLF, which are all covered in sections below.
If you do not have a good credit score, interest rates may be higher than federal loans, or you may not be able to get a private loan at all, depending on the severity of content in your credit report.
You have to shop around for different options. Some lenders will not work with you in cases of hardship, and factors like variable versus fixed interest rates may throw you for a loop if you’re not careful.
Questions to ask before you borrow private loans for grad school
Before you take out any student loans, you’ll want to get answers to these questions.
Variable interest rates start out lower. They may even stay lower for a set amount of time. But after that, they adjust to the market. You may get lucky and have rates go down, but rates are already so low at the moment that you’re almost sure to see them go up instead.
Fixed rates start out higher than variable rates but stay stable throughout the course of your loan term.
Shorter loan terms sometimes mean higher monthly payments, but you’ll usually end up paying less in the long term because of the way interest accrues over time.
If you can’t afford the monthly payments, though, you could end up paying late fees or damaging your credit. Longer loan terms may mean paying more interest by the time you’re through, but they also have the potential to lower your monthly payments.
Some lenders provide payment plans that allow you to defer payments until after graduation. Other payment plans start your payments immediately. Still others require interest-only payments while you’re in school, with principal payments being added after graduation.
Does the lender offer any type of deferment in times of economic hardship? Some lenders will even work with you to help you find a new job or temporarily reduce monthly payments while you are in specific employment conundrums.
There are a slew of different repayment options depending on which type of loan you take out. Whether you start repayment during your studies or after, there are some things you can do to prepare.
Federal grad school debt
Students are not required to make payments until six months after their graduation — or nine months if you have a Perkins Loan. Just because you don’t have to make payments during this time period doesn’t mean you shouldn’t.
When to start repaying your federal grad school loan debt
The types of federal loans available to you as a graduate student accrue interest while you’re in school and during your grace period/deferment. You are not required to pay that interest immediately, but the unpaid interest will be added to your principal balance.
By making interest-only payments while you’re in school, you prevent these interest rates from multiplying upon themselves, saving you money.
You can pay toward the principal while you are in school as well, if you so choose, as there is no prepayment penalty on federal student loans.
Parents who have PLUS loans are typically required to start repaying immediately after the loan is disbursed. You can, however, request a deferment for the period during which your child is in school. It would be wise to make interest-only payments during this period if you choose to go this route.
Federal loan forgiveness and repayment assistance programs
Federal loans give you access to many advantaged repayment and forgiveness programs. Keep in mind that while advantaged repayment plans are designed to make your monthly payment lower, they have the potential to cost you more over the course of your loan — especially if they don’t end in forgiveness — as interest will be charged over a longer period of time.
Income-Based Repayment (IBR)
If you took out your first student loan prior to July 1, 2014, and your student loan payments are more than 15 percent of your discretionary income, this program allows you to pay a maximum of 15 percent of your discretionary income for 25 years. After that point, your remaining debt is forgiven.
If you took out your first student loan after July 1, 2017, the capped percentage is 10 percent, and you will only have to pay it for 20 years.
Take your income and subtract 150 percent of the poverty level in your state. If your monthly student loan debt payments are more than 10 percent of the difference, you may qualify for PAYE. Use this calculator to see if you qualify.
Your monthly payments will be limited to 10 percent of your income and will never exceed what you would pay on a 10-year Standard Plan. After 20 years, the remainder of your debt will be forgiven.
You only qualify for this plan if your first student loan was disbursed after October 1, 2007, and you have received at least one disbursement since October 1, 2011.
REPAYE does not have the same timing restrictions of PAYE. In fact, the date you took out your loans is irrelevant. There are also no income restrictions.
However, while you will only have to pay 10 percent of your discretionary income, there is no protection stating that your payments will not exceed those of a 10-year Standard Plan. You could end up paying more with this program — especially with a higher income.
Remaining balances on graduate school loans will be forgiven after 25 years.
Under PSLF, you make payments for 10 years while you’re working 30+ hours per week and considered a full-time employee by your employer. This job must be in a position of service, and the remainder of your loan balance will be forgiven. Your 10 years of payments should be made under IBR, ICR, PAYE, or REPAYE.
States have regional needs in a number of different fields, including medicine, education, social work, veterinary sciences, law, and more. Across the country there are programs offering to pay off portions of your debt if you agree to live and work in high-need communities.
Different lenders will require different repayment terms from their borrowers. Be sure to understand what is expected of you before signing on the dotted line. Ask questions like:
Will I be required to make payments while I am in school?
If so, are they interest-only payments?
Will there be a grace period after graduation?
Do you have any deferment options in case of economic hardship?
What is the maximum time allowed for deferment?
When you should start repaying private grad school debt
The sooner you can pay off debt, the better. If your loan requires you to make principal and interest payments, make them without delinquency.
Before you make any payments prior to their due date, make sure there is no prepayment penalty. Otherwise a good portion of the money you think you’re throwing at your debt could end up going toward fees instead.
Learn more: Refinancing grad school debt
If you can get a lower interest rate on your student loans by refinancing, you may be able to save money as long as you pay off your debt in the same amount of time.
In order to avoid ruining your credit score, you may also want to refinance if you cannot afford your monthly payments.
Are you a parent who wanted to help your child finance his or her education, and ended up taking out more loans than anticipated? Many parents find themselves in a precarious situation as they try to plan for retirement and while balancing student loan debt.
If you’re looking to save on the amount of interest you’re paying, SoFi’s Parent PLUS loan refinance program may be right for you.
Details of the Parent PLUS Loan
You can refinance a minimum of $5,000 under SoFi. Fixed rates range from 3.35% to 6.75% APR and variable rates range from 2.815% – 6.490% APR (these rates assume you enroll in autopayment).
Terms of 5, 7, 10, and 15 years are available. Variable rates on terms of 5, 7, and 10 years are capped at 8.95%, while the 15 year term is capped at 9.95%.
An example payment looks like this: if you refinance $10,000 on a 5 year term with a fixed APR of 5.49%, your monthly payment will be $190.97 and you’ll pay a total of $11,457.93 over the life of the loan. If you refinance $10,000 on a 5 year term with a variable APR of 4.2%, your monthly payment will be $185.07 and you’ll pay a total of $11,104.43.
How Does the Parent PLUS Loan From SoFi Compare to a Federal PLUS Loan?
The interest rate for Federal Direct PLUS Loans disbursed on or after July 1st, 2015 and before July 1st, 2016 is 6.84%. During much of the 2000s, interest rates were higher. Currently, interest rates are fixed – variable rates are unavailable.
Most people are looking to refinance to save money, and SoFi offers very competitive rates compared with the Direct PLUS Loan, especially on variable rates.
While there are no fees to refinance, you should calculate your estimated savings before going through the process. Be aware if you do refinance, you’ll lose out on certain benefits that come with having Federal student loans, such as deferment, forbearance, and various repayment options.
PLUS loans made to parents are eligible for the Graduated or Extended Repayment Plans, and Direct PLUS loans are also eligible for forgiveness. In some cases, PLUS loans can be discharged due to the death of the borrower (or student).
Private loans often don’t extend these same benefits. In fact, SoFi explicitly states on its legal page that this loan “is not discharged in the event of death or permanent disability of the borrower or student on whose behalf the loan is taken out.”
You must be a U.S. citizen or permanent resident and employed to be approved. SoFi is unable to lend in Nevada, and variable rates aren’t offered in Illinois, Ohio, or Tennessee. The loans must have been used to obtain at least a Bachelor’s degree with an eligible school as well.
There are no specific credit score requirements as SoFi tries to take a broader view of borrowers. It focuses on income and credit history instead.
Application Process and Documents Needed
The application process to refinance a PLUS Loan with SoFi is easy and can be done completely online. The application takes around 15 minutes to complete, and you’ll know whether or not you qualify by going through the pre-approval process first. During this portion of the application, a soft credit inquiry is used. If you decide to move forward with the loan offered to you, a hard credit inquiry will be used.
You’ll be asked to upload a few documents, so it’s a good idea to have the following ready to go:
Proof of residence – ID with matching address, otherwise a utility bill dated within the last 60 days is okay
Proof of income – most recent pay stubs
Proof of citizenship – a passport or birth certificate can be provided
Verification of loans – most recent loan statements for the loans you’re refinancing
Once you submit this documentation, SoFi’s review team gets to work on evaluating your loan. If no other documentation is needed, reviews can take anywhere from 2 to 3 weeks to complete.
The Fine Print
There isn’t an origination fee or application fee, and there are no prepayment penalties. Rates are determined on a number of factors, including the term you choose, your income, and your credit history.
There are late fees associated with the loan. The Parent PLUS Refinance program is currently offered through SoFi’s lending partner, Mohela, and it assesses any fees owed. When you receive the paperwork for the loan, the fees can be found under the disclosures.
Repayment Assistance Options
If you’re struggling to repay the loan after refinancing with SoFi, we recommend you contact a representative and make them aware of the situation. The worst thing you can do with any loan is not make a payment.
SoFi offers unemployment protection on a case-by-case basis, during which payments can be paused for a period of 3 to 12 months.
Pros and Cons of SoFi Parent PLUS Loan
Pro: SoFi offers much better rates than the 6.84% fixed rate that comes with Direct PLUS loans. If you have a higher interest rate – around 8% – you’ll stand to benefit even more.
Con: As we mentioned, refinancing means losing out on benefits associated with Federal student loans. If you’re not as concerned about needing repayment assistance, the savings might be enough to make refinancing worthwhile.
Pro: SoFi also offers variable interest rates, whereas the most recent Direct PLUS loans don’t. Variable rates can be tricky, though – SoFi says rates may change on a monthly basis. If you value stability and peace of mind, variable rates may not be for you. If you’re trying to pay off your balance quicker, and a lower interest rate would help, then it might be worth considering this option.
Con: You may have to extend the repayment term to get a lower monthly payment, as SoFi offers terms up to 15 years. Unfortunately, this increases the amount of interest you’ll pay over the life of the loan. It’s important to use a calculator to estimate how much your savings will be to make sure refinancing is worth it. For example, if you have less than 5 years remaining on your loan, refinancing may not save you a lot of money.
Pro: SoFi offers unemployment protection, and you can also take advantage of SoFi’s career assistance program. If you or your child is experiencing trouble finding employment, it will connect you with its network of alumni and give you tools and tips to succeed in your job search.
If you don’t qualify with SoFi, you can try these lenders that also offer refinancing options:
CommonBond: Fixed APRs range from 3.35% to 7.12%, and variable APRs range start at 2.81%, and terms offered are 5, 10, 15, and 20 years. CommonBond also has hybrid APRs. Only a 10 year term is offered with this choice; it starts off as fixed for 5 years, and changes over to variable for 5 years. There are no origination fees or application fees, no prepayment penalty, and CommonBond actually allows you to transfer your loan to your child (which isn’t allowed with Federal loans). You can borrow a maximum of $110,000.
Citizens Bank: Citizens Bank refinances Parent PLUS and Direct PLUS loans through its Education Refinance program. The minimum amount you can refinance is $10,000 and up to $90,000 for Bachelor’s degrees and below, $130,000 for graduate and doctoral degrees, and $170,000 for professional degrees. For a Bachelor’s degree and above, you must have made 3 consecutive monthly payments to refinance. For anything less than a Bachelor’s degree, you must have made 12 consecutive monthly payments. The loan you’re refinancing must be in repayment status and can’t be enrolled in an Income-Based Repayment plan. Fixed APRs start at 6.24%. Terms of 5, 10, 15, or 20 years are offered. You need a minimum income of $24,000 to qualify.
Be sure to shop around as there are other lenders out there that will refinance PLUS loans – you want to make sure you’re getting the best rates and terms available to you so you can save the most. Shopping around within 30 days will only count as one credit inquiry, so your credit won’t get penalized heavily. Take advantage of this and lessen the burden of student loan payments so you can focus on saving for your future.
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