You may be struggling to pay bills every month, but so are plenty of other people.
The Consumer Financial Protection Bureau on Tuesday reported that 43 percent of American adults struggle to make ends meet, based on the results of a national survey conducted in 2016 on the financial well-being of U.S. consumers.
About 34 percent of all consumers surveyed reported experiencing material hardships — these include running out of food, not being able to afford a place to live or lacking the money to seek medical treatment — in the past year, the bureau said.
In the survey, the bureau asked more than 6,000 participants from all walks of life to answer 10 questions about current and future financial security and freedom of choice, and to give a score from 0 to 100 on each question. The average consumer score was 54 in the survey. Not surprisingly, consumers surveyed said that their financial conditions were closely tied to their level of education, income and employment status, according to the bureau.
Young adults are especially susceptible to financial hardships, the agency found.
Millennials — those age 34 and below — reported an average score of 51 for their financial well-being, 10 points lower than seniors ages 65 and up and three points lower than the national average.
The report, what the bureau calls “the first of its kind,” not only provides a view of the the overall state of financial conditions in the U.S., it also sheds light on how individuals from different demographics are faring financially.
Adults with scores of 50 or below have a high likelihood — more than 50 percent — of struggling to pay bills and of experiencing difficult financial situations, according to the report.
In contrast, those who reported scores of 61 and above had a much lower probability — less than 10 percent — that they would have trouble paying for basic needs.
Savings = stability
Of all the factors examined, the bureau found that the amount of savings and financial cushions is the most important when it comes to disparities in people’s financial situations.
The average financial well-being for adults with savings of less than $250 — the lowest level — is 41. That compares with 68 for people with the highest level of savings — $75,000 or more, according to the report.
Similar differences in scores were seen with the ability to absorb unexpected expenses.
“These findings highlight the importance of savings and other safety nets in helping people to feel financially secure, one of the basic elements of financial well-being,” the report said.
Having some sort of financial knowledge appears to benefit financial well-being.
The survey found that individuals with higher levels of financial confidence, knowledge and day-to-day money management behaviors tend to report better financial conditions.
Apart from the survey, the bureau initiated an interactive online tool allowing consumers to measure their own financial well-being.
7 tips to improve your financial health:
Have “rainy day” cash available. Often, people who feel they are broke don’t have the means to absorb unexpected expenses. We’ve ranked the best options for when you need cash fast. A good rule of thumb is to set aside at least three to six months’ worth of living expenses.
Save. Save. Save. It’s never too early to start saving for retirement. Financial planners often suggest you stash at least 10 percent of your income every month.
Focus on paying down high interest debts. Sometime it makes more sense to pay off debt than to save, especially if you have high-interest debt like credit cards. Here are four fast ways to achieve that goal.
Consider changing your lifestyle. Lifestyle inflation is the ultimate budget-killer — a widespread phenomenon that occurs when people spend more as their incomes increase.
Learn to ignore the Joneses. Focusing on your needs and goals rather than aligning them with the people in your life or in your social media feed is critical to being happy with the state of your finances and your life.
Come up with strategies to help break your negative spending habits. For example, we’ve written about a simple $20 rule that can help break your credit card addiction. Explore other ways to break bad money habits here.
Educate yourself. The more you know about your finances, the better off you’ll be. It doesn’t have to be complicated. Simply using an app to track your spending or asking your HR department for a review of your retirement savings options are good places to start. The key is to engage in day-to-day money management and establish a habit of saving and budgeting.
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 2.57% – 6.84% APR, and fixed rates range from 3.18% – 7.24% 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 $250,000.
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.
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 3.69% to 9.25% APR;
fixed rates available from
6.22% to 11.58% APR
Borrow up to 100% of the
cost of attendance
Good or excellent credit
required without a
*Rates current as of Oct. 9, 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 3.250% to 6.78% APR and variable rates range from 2.750% – 6.590% 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 3.18% to 7.24%, and variable APRs range start at 2.57%, 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 $500,000.
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 6.64%. 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 Parent 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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The American Dental Education Association (ADEA) shares numerous statistics about dental school debt and the profound impact it can make on new dentists’ lives. According to the agency, the average dental school debt for indebted dental school graduates from the class of 2016 reached $262,119. Large debt loads were reported at both public schools and private schools — $238,582 and $291,668, respectively.
Even more startling is the fact that more than 30% of indebted dental graduates from the class of 2016 reported debt loads of more than $300,000.
These statistics show just how expensive dental school can be, but they also make us wonder if dental school is truly worth the cost. This guide was created to show how a dental education can pay off with proper loan and money management. If you’re considering a future in dental school and worrying about the high price tag, keep reading to learn more.
Is dental school worth it?
Before anyone can gauge whether dental school is worth it, it’s crucial to consider the level of income one can expect in this career. According to the U.S. Department of Labor’s Bureau of Labor Statistics, dentists earned an annual mean wage of $173,860 nationally as of May 2016. It is important to note, however, that the bottom 10% of earners brought in only $67,690 that year, while the bottom 25% of earners made an average of $106,180.
The key to deciphering dentist income is figuring out how much you might earn after you gain some experience and the type of dentistry role you might take on. It’s only natural to expect dentists to earn more as they progress through their careers, but the industry they work in can also impact their earnings.
As the BLS reports, some industries paid dentists considerably more in 2016, including residential intellectual and developmental disability, mental health, and substance abuse facilities ($184,620) and offices of dentists ($176,470).
Location matters, too, of course. Some states reported consistently higher incomes for dentists that year, including Delaware ($236,130), North Carolina ($236,020), Alaska ($234,240), New Hampshire ($220,480), and Nevada ($210,690).
With these salaries in mind, it’s easier to see how one might overcome $200,000+ in educational debt compared to workers in other, lower-paying industries.
Still, it’s important to note that dental school debt can still make a big impact on any dentist’s finances after graduation. A dentist with the average debt load of $262,119 at 6% APR would need to fork over a minimum of $2,910.06 per month if they chose standard, 10-year loan repayment after graduation per LendingTree’s loan calculator (Note: LendingTree is the parent company of MagnifyMoney). Because of this, some dentists choose alternative repayment options that allow them to pay smaller monthly payments for a lengthier timeline. How long it takes a dental graduate to repay their debt depends on whether they choose standard, 10-year repayment or opt for an alternative repayment plan instead.
Is dental school right for you?
Part II: How to Pay for Dental School
If you answered “yes” to all or most of the questions above, considering a dental education could be a smart move. Still, it’s important to learn more about the different ways to pay for dental education and the debt repayment options that may be available to you. We’ll cover these concepts and more in this section.
Federal vs. Private Student Loans for Dental School
Federal student loans for dental school
Federal loans can be valuable for students who need to borrow money for dental education. Several different types of student loans are available, each having their own benefits and drawbacks. Federal student loans are often a good option for dental students since they offer relatively low interest rates and help students qualify for federal perks like income-driven repayment and student loan forgiveness programs.
Pros of federal student loans:
Fixed and competitive interest rates
Access to federal loan repayment and student loan forgiveness programs
The government can pay your interest while you’re in college if you qualify for subsidized loans
Flexible repayment plans
Access to student loan forbearance and deferment (if you qualify)
You don’t need a credit check to qualify for most federal student loans
You can defer repayment until you graduate college or drop down to half-time
Cons of federal student loans:
Borrowing caps that limit the amount of federal loans you can take out
You may need to take out more loans to cover the costs of dental school
The government can garnish your wages if you miss many payments
When to consider federal student loans:
You are gearing up for dental school and want a low, fixed-interest rate
You haven’t surpassed borrowing limits on federal loans yet
You want options in terms of deferment, forbearance, and income-driven repayment in the future
Private student loans for dental school
Private loans offer an alternative option for dental students to use instead of, or in addition to, federal student loans. Private student loans are offered through private lenders, which means their rates and repayment terms vary. Many dental students wind up taking out private student loans once they have borrowed as much federal aid as they could receive.
Pros of private student loans:
Rates can be lower than federal loans if you have excellent credit and/or a co-signer
Loan limits can be high enough to cover your entire cost of admission
The application process and loan disbursement may happen faster than federal student loans
Cons of private student loans:
You typically need good or excellent credit to qualify
You may need a co-signer
Interest rates can be fixed or variable
You don’t qualify for 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 loans:
You’ve tapped out your federal student loan limits but still need to borrow money
You qualify for a lower interest rate
You don’t want to take advantage of federal plans or protections on your student loans
This program is offered through the Dr. Anthony Volpe Research Center and is open to 1-2 dental students per year. The goal is to help students apply classroom and lab experiences to real-world scenarios students will find in the field of dentistry.
Award amount: Award varies.
Qualifications: You must be a dental student to qualify.
Deadline to apply in 2017: Application period opens in late December and closes in late January.
This award was created to encourage dental students to conduct important research in their field by creating a financial incentive. The goal of the award is to promote advances in preventative dentistry.
Award amount: A $5,000 grant is awarded to one student each year.
Qualifications: According to the American Dental Association Foundation, dental students pursuing this grant must be in pursuit of one of the following dental degree programs at an eligible institution: D.D.S. or D.M.D., D.D.S./D.M.D. and Ph.D. dual degree, Ph.D. or equivalent, or M.P.H., M.S. or equivalent.
Deadline to apply in 2017: The application period opens the first Friday of each April and closes the last Friday of each June.
This ADA Foundation scholarship helps select students defray the overwhelming costs of dental education and is meant to apply to academically gifted students.
Award amount: Scholarships up to $2,500 are available.
Qualifications: Students must be in their second year of school, must be enrolled full time, must demonstrate financial need, and must have a GPA of at least 3.25. References and minority status are also required.
Deadline to apply in 2017: Applications open the first Friday in September and close the second Friday in November.
This program offers two $5,000 awards to dental students who are nominated by someone else after demonstrating leadership skills in pursuit of their dental education.
Award amount: Two $5,000 awards are granted each year.
Qualifications: Students must be nominated and be in the process of earning a D.D.S. or D.M.D. degree from a dental school accredited by the Commission on Dental Accreditation. Students must also be under the age of 40 and a student, graduate student, or resident in their first five years of residency.
Deadline to apply in 2017: The nomination period begins the first Friday in April and ends the last Friday in June.
This scholarship is open to 27 dental students nominated by the dean of their school.
Award amount: Awards come in the form of $5,000 scholarships.
Qualifications: Students must be nominated by the dean of their school and must be in the class of 2018 or class of 2019 at a dental school accredited by the Commission on Dental Accreditation. Students must also demonstrate financial need.
Deadline to apply in 2017: The deadline to apply for a 2017 scholarship was May 17, 2017. A 2018 deadline will be announced soon.
This scholarship, which was created to commemorate Senator Barry Goldwater, is open to students who pursue research careers in natural sciences, mathematics, and engineering.
Award amount: Scholarships of up to $7,500 per year are available.
Qualifications: You must be a full-time sophomore or junior student pursuing a dental degree or a degree at a four-year or two-year school. Medical research must be a central part of your career goals.
Deadline to apply in 2017: Application period opens the first Tuesday in September and ends the last Friday in January.
Part III: How to Pay Back Dental School Debt
Due to the many federal and private loan programs available, students entering dental school have plenty of options to compare and contrast. Since dental school funds borrowed need to be repaid eventually, however, it’s important for students to educate themselves on their many repayment options as well.
Repayment programs to consider
Here are the repayment programs students can choose as they wrap up their dental degrees.
Income-Driven Repayment Plans
For federal student loan borrowers, there are several different income-driven repayment programs, each with their own stipulations and intended audience. The following table highlights each program and how it works.
Is an income-driven repayment plan right for you?
Income-driven repayment may be a good option for dental students who want to make lower monthly payments than they would with standard, 10-year repayment plans. These plans are also a good option for students who want their loans forgiven after 20-25 years. Keep in mind, however, that forgiven loan amounts are considered taxable income in the year they are forgiven.
The Public Service Loan Forgiveness Plan offers students the opportunity to have their student loans forgiven after 10 years provided they work in an approved public service position during that time. Once a student finds eligible employment and starts working, they can have their loans forgiven after 10 years and 120 months of timely loan payments.
While this program can be advantageous for dental graduates, it’s important to note that changes to this program could be on the way. It still works as promised for the time being, but budget cuts of the future could bring this program to an end or bring on considerable changes to benefits.
Who is eligible?
Dentists who agree to work in government-approved public service positions may be eligible for the Public Service Loan Forgiveness (PSLF) Program. You can learn more about qualifying employment here.
Is this program right for you?
This program can work well for dentists who want to work in public service or in an area with a high need for dentists and other health care workers. After 10 years, your loan balances will be forgiven, and you are free to move on to other employment if you wish.
This program offers tuition assistance up to 100% for individuals who serve in the U.S. Army while working on their degree. The Army will pay your tuition, your required books, and most academic fees while offering a monthly stipend of up to $2,000.
Who is eligible?
Dental students who qualify to serve in the U.S. Army may qualify for this program. You must be 21-42 years of age, be a U.S. citizen, and meet prescribed medical standards.
How to apply
For additional information, contact your local Army recruiter, call 1-800-USA-Army, or visit Healthcare.GoArmy.com.
National Health Service Corps Loan Repayment Program
This program offers tax-free loan repayment assistance for individuals entering qualified health care careers. Licensed health care providers may earn up to $50,000 for a two-year commitment to NHSC-approved employment in a high-need area.
Who is eligible?
Dentists who agree to work in an NHSC-approved career for at least two years can qualify for this assistance.
How to apply
Contact the National Health Service Corps to apply. You can also explore the NHSC website for tips on the application process.
State Loan Repayment Programs for Dentists
5 tips to pay off your student loans faster
While loan repayment programs can help you whittle away your student loans, there are several strategies that can help you reduce the amounts you owe whether you sign up for special programs or not. Here are five tips to pay your loans off faster no matter your situation or how much you owe:
#1: Start paying right away.
According to the U.S. Department of Education’s blog, paying your loans right away – whether you have to or not – can be a smart move. While student loan payments may not be required until you graduate, you can reduce the amount of interest you’ll pay over time by paying any amounts you can toward your loans as you can.
#2: Refinance your loans to a lower rate.
Refinancing student loans into a new loan product with a lower interest rate and better terms can help you save money on interest over the long haul. This is especially true with private student loans since rates tend to be competitive and can change over time. Keep in mind, however, that refinancing federal student loans with a private lender can cause you to miss out on certain federal perks and protections including income-driven repayment, deferment, or forbearance.
Signing up for automatically debited payments can take the stress out of repaying your student loans. By setting up automatic bank drafts, you can rest assured your loan payment is taken care of and you won’t face late fees or penalties. Some lenders also offer an interest rate reduction for enrolling in their automatic payment plan. This is where savings come into play since a lower interest rate means less of your payment goes toward interest over time.
#3: Sign up for automatic payments.
Signing up for automatically debited payments can take the stress out of repaying your student loans. By setting up automatic bank drafts, you can rest assured your loan payment is taken care of and you won’t face late fees or penalties. Some lenders also offer an interest rate reduction for enrolling in their automatic payment plan. This is where savings come into play since a lower interest rate means less of your payment goes toward interest over time.
#4: Pay more than the minimum payment.
This tip might seem obvious, but it’s extremely important. Whether you start paying your loans off right away or wait until you graduate and have to start making payments, paying more than the minimum will let you pay off your loans faster. The more you can pay toward the principal of your loan balance, the more you save on interest and the faster your loans will disappear.
#5: Consider a loan repayment program.
Some of the programs we listed above (such as the PSLF Plan or state loan repayment assistance programs) can help you get out of debt faster while gaining valuable work experience. These programs typically require you to work in a specific shortage area for a predetermined length of time, so they’re not for everyone. If you do qualify and apply, however, you could have your loans forgiven completely or earn tens of thousands of dollars in loan repayment assistance.
Frequently Asked Questions: Paying for Dental School
Determine your current interest rate and compare it to the new rate you could qualify for. If the difference is substantial, refinancing can make a lot of financial sense. With a lower interest rate, you could save money and pay off your debts faster. However, it’s important to remember that you’ll lose federal student loan benefits if you refinance federal loans with a private lender.
One of the best ways to reduce the amount of money you owe for dental school is to spend less on your education to begin with. As you consider dental schools, make sure to compare program details such as the price of tuition, room, and board. How much you pay for school has a direct correlation to how much you’ll need to borrow.
Start by filling out a FAFSA form, or Free Application for Federal Student Aid. This form helps schools determine how much federal aid you might qualify for. You should also contact the financial aid office at your dental school. They can point you toward applicable school-based scholarships and grants you may not even know about.
While the amount of time it takes dental students to find employment varies, the ADEA reports that dental school graduates typically enter the workforce much faster than colleagues in many other health professions.
According to the ADEA, any college major that offers a well-rounded education or fosters a foundation in science is appropriate for future dental students. This goes against the common wisdom that a major in biology or a similar subject is required.
The ADEA reports that both designations mean the same thing – that the dentist graduated from an accredited dental school. Universities determine which degree they award, and it has no bearing on employment opportunity or earnings.
More than half a million Americans are working toward Public Service Loan Forgiveness (PSLF), a program that eliminates federal student loan debt for people with jobs in the public sector. But the proposed 2018 White House budget reportedly calls for ending PSLF for future borrowers — and even current participants’ status could be in doubt, with a lawsuit claiming the government has reversed previous assurances given to certain borrowers that their employment qualifies.
Final decisions have not yet been made in either scenario. But even with this uncertainty, there are steps both current borrowers and interested potential future PSLF participants can take to make themselves as secure as possible.
First, a quick primer on PSLF: The program began in October 2007 under George W. Bush, and it wipes clean the remaining federal student debt for qualifying borrowers who have made 120 payments, or 10 years’ worth (more information is available at StudentAid.gov/publicservice). So the earliest any public service worker could receive loan forgiveness under PSLF is October 2017.
“The idea is to avoid making debt a disincentive to choosing public service,” explains Mark Kantrowitz, a student loan expert and publisher at college scholarship site Cappex.com. “Think about a public defender. They might make $40,000 a year, but they’ll incur $120,000 in debt for law school. That debt-to-income ratio is impossible, so PSLF makes that career path possible — and attracts people who might have otherwise taken high-paying private-sector jobs.”
Public Service Loan Forgiveness — on the chopping block?
At this time, the biggest threat to the future of PSLF is President Donald Trump’s 2018 White House education budget proposal. The budget proposal would eliminate PSLF — citing costs — and replace all current income-based repayment/forgiveness plans with a single income-driven system. While existing borrowers would be grandfathered into PSLF, any new students who take out their first federal loans on or after July 1, 2018, would not qualify. Still, all of this can happen only if Congress passes the budget — and it remains to be seen whether this section will pass as currently written in the proposal.
If you’re one of the more than 550,000 borrowers who is already working toward forgiveness — that is, you have already taken out at least one federal loan and/or you’ve completed school and are working in public service — the proposed cancellation of PSLF won’t affect you. Again, if the program is cut, it will impact only students who take out their first federal loans on or after July 1, 2018.
But even existing borrowers working toward PSLF can’t fully relax. As first reported by The New York Times, the Department of Education added a serious wrinkle by sending letters to people saying their employment was no longer eligible for PSLF, after the borrowers had confirmed with their loan servicer that they qualified. Four borrowers and the American Bar Association have filed a lawsuit against the department, and the case is currently in progress.
That may leave many workers questioning whether or not they will ultimately be eligible for loan forgiveness after all — even if they work in the nonprofit or public sector. MagnifyMoney has spoken to experts and reviewed the rules of the program to help.
How Can I Be Sure I Qualify for Public Service Loan Forgiveness?
Qualifying for PSLF depends on meeting several specific requirements, so the first step in determining your eligibility is to make sure your loans and employment check all the boxes.
1. Your student loan must qualify for forgiveness.
Direct PLUS Loans—for parents and graduate or professional students
Direct Consolidation Loans
Note that loans made under other federal student loan programs may become eligible for PSLF if they’re consolidated into a Direct Consolidation Loan, but only payments toward that consolidated loan will count toward the 120-payment requirement. And, according to ED, parents who borrowed a Direct PLUS Loan “may qualify for forgiveness of the PLUS loan, if the parent borrower—not the student on whose behalf the loan was obtained—is employed by a public service organization.”
2. You must be enrolled in the right type of repayment plan.
You must be enrolled in one of the Direct Loan repayment plans, some of which are income-based. The umbrella term for these plans is income-driven repayment plans, which include the Pay As You Earn and Income-Based Repayment plans. While payments under other types of Direct Loan plans, like the 10-year Standard Repayment Plan, do qualify and count toward your 120 payments, you’ll want to switch to an income-driven plan as soon as possible — because if you stick with a standard 10-year repayment, you’ll have paid off your loan in full after 10 years with nothing left to be forgiven under PSLF. Check the official PSLF site for more details. And note that private loans, including bank loans that are “federally guaranteed,” do not qualify.
3. You must make 120 on-time payments while employed full time by an eligible employer.
If you drop to part-time work, those payments won’t qualify. You must also be employed full time in public service at the time you apply for loan forgiveness and at the time the remaining balance on your eligible loans is forgiven. After you make your 120th payment you’ll need to submit the forgiveness application, which the Department of Education says will be available in September 2017.
4. Your employer must count as a public service organization.
This is the big one, and the most complicated step of the process for some borrowers to figure out. While the Education Department does address types of employers that fit under the PSLF program, there are some gray areas. Broadly, the types of employers that qualify include governmental groups, not-for-profit tax-exempt organizations known as 501(c)(3)s, and private not-for-profits. That last category includes military; public safety, health, education, and library services; and more.
Pro tip: Certify that your employer is included in the program every year.
Each year and whenever you change employers, you should fill out and send an Employment Certification form to FedLoan Servicing. The form isn’t required to be submitted on an annual basis, but it’s highly recommended to fill it out annually so there are no unhappy surprises down the road. It also helps you keep track of progress toward your 120 payments and gives you a chance to find out whether there is any change to your eligibility status.
What if you fear your job’s eligibility is unclear?
The validity of that FedLoan Servicing certification form is at the center of the lawsuit against the Department of Education. Although it’s important to have your employer’s eligibility certified by the department, the Education Department has said the form isn’t necessarily binding and the eligibility of employers can possibly change. As The New York Times put it, the department’s position implies “that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent … are not binding and can be rescinded at any time, the [DOE] said.”
That puts existing borrowers in a tough spot, says Joseph Orsolini, CFP and president of College Aid Planners: “[PSLF] is sort of an all-or-nothing in that you can’t apply for the forgiveness until you’ve already done your 120 payments. So to have someone choose this career path and work for years only to be told, ‘never mind, you no longer qualify even though we said you did,’ it would be hard for them not to see that as reneging on a deal.”
That possibility is “terrifying” for Frances Harrell, 35, a preservation specialist who works for a nonprofit that supports small and medium-size libraries in caring for their collections. She completed a library graduate school program in 2013 and emerged with a total of about $125,000 in debt, including her undergraduate loans.
“Everyone I know is in public service, and we all saw the Times article [about the PSLF lawsuit] and flipped out,” says Harrell, who currently lives in Gainesville, Fla. “I felt like I had been dropped in a bucket of ice. We’re making life decisions based on this understanding, and it feels so precarious not to have any true confirmation that we’ll get the forgiveness in the end.”
Harrell has also dealt with confusion from loan servicers and other experts — and based on incorrect advice, she nearly consolidated her loans in a way that would have reset the clock on her years of payments.
Christopher Razo, 22, who this month will begin classes at Chicago’s John Marshall Law School, is relieved that he is enrolling before the 2018 uncertainty begins. Razo is one of Orsolini’s clients, and he plans to take advantage of PSLF while working toward his dream of becoming a state attorney.
“[PSLF] is complex as it is, so my initial thought was, ‘Wow, great timing for me that I’m starting in 2017,’” Razo says. “But I understand the program affects way more than just me. [PSLF] gives you comfort to pursue public-service goals without having to make your employment about the money. I’m optimistic that [lawmakers] will see the good in the program so it can continue.”
When in doubt: Follow the ‘3 phone call rule’
While borrowers may think their loan servicer has all of the answers, Harrell’s situation isn’t uncommon, says Orsolini. He recommends “the three phone call rule”: Call three times and ask the same question, documenting whom you spoke to and when.
“These programs are complicated — which is one of the issues that critics [of PSLF] bring up — and you don’t always get the right information,” Orsolini says. “Before you plan your whole life around the [first] answer you get, you have to double- and triple-check that it’s right.”
If you’re taking out your first qualifying loan on or after July 1, 2018, Orsolini says “there’s not much to do besides hurry up and wait” to see what happens with the White House budget as it relates to PSLF.
“The important thing to remember is that a proposal is just a proposal, and these don’t always see the light of day,” Orsolini adds. “It doesn’t do any good to be overly worried, but you’ll want to keep a close eye on the news.”
Other types of loan forgiveness, cancellation, or discharge:
PSLF isn’t the only option. But not all types of federal student loans offer the same forgiveness, cancellation, or discharge options. See the chart below and check out StudentEd.gov pages here and here for more details.
Still, borrowers should know Trump’s desire to streamline federal programs into a single option means some of these loan types and forgiveness plans could be changed or canceled as well.