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College Students and Recent Grads

Applying for Public Service Student Loan Forgiveness: A Step-By-Step Guide

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Public Service Loan Forgiveness (PSLF) is a program designed to attract workers to jobs in the public sector by wiping clean remaining federal student loan debt after 120 qualifying payments.

Those payments represent 10 years’ worth of work with a qualifying public service employer, so because PSLF began in October 2007, the first applicants are just beginning to submit their forgiveness forms.

Qualifying for PSLF means meeting specific requirements for the employer, the loan type and the repayment plan — and the details can be overwhelming.

With that in mind, here’s a step-by-step guide to applying for PSLF.

Step 1: Figure out if you qualify.

First, it helps to understand why PSLF exists.

“It’s meant to be a light at the end of the tunnel for public service jobs, when people know they could make much more money going private,” says Betsy Mayotte, director of consumer outreach and compliance at the nonprofit American Student Assistance. “A lot of the careers — social workers, teachers, public defenders — require advanced degrees. The problem there is that people would accrue all this debt, then find they couldn’t stay in these public sector careers because they didn’t pay well.”

But the definition of public service is strictly defined, and “it’s not your job that matters, but your employer,” Mayotte adds. “It matters who signs your paycheck. You can be a groundskeeper at a state school and qualify. Conversely, you can feel as if your job is public service, but if your employer doesn’t meet the specific definitions, you don’t meet PSLF requirements.”

Employers that qualify for PSLF, per the U.S. Department of Education

  • A government organization (including a federal, state, local, or tribal organization, agency or entity; a public child or family service agency; or a tribal college or university)
  • A nonprofit, tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code
  • A private, nonprofit organization (though not a labor union or a partisan political organization) that provides one or more of the following public services:
    • Emergency management
    • Military service
    • Public safety
    • Law enforcement
    • Public interest law services
    • Early childhood education (including licensed or regulated health care, Head Start and state-funded pre-kindergarten)
    • Public service for individuals with disabilities and the elderly
    • Public health (including nurses, nurse practitioners, nurses in a clinical setting and full-time professionals engaged in health care practitioner and support occupations)
    • Public education
    • Public library services
    • School library or other school-based services

Employers that DO NOT qualify for PSLF

  • For-profit organizations (this includes for-profit government contractors)
  • Nonprofits that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code or that do not provide a qualifying public service as their primary function
  • Labor unions
  • Partisan political organizations

You must work full time (whatever your employer characterizes that to be — though it must be an average of at least 30 hours per week by the PSLF definition) for one of these qualifying employers, or part time for two or more as long as it adds up to 30 hours per week, while you make your 120 on-time payments. You’ll also need to be in qualifying employment when you apply for your loan forgiveness.

Because you won’t be able to apply for PSLF until you have completed qualifying payments, it helps to build up a paper trail over the years. You should fill out and send an employment certification form (ECF) to FedLoan Servicing, which handles PSLF, each year and whenever you change employers. You’ll fill out personal information and have your employer sign the form before sending it in. The form isn’t required, but you’ll receive a response detailing your progress toward your 120 payments and confirming your eligibility — great for peace of mind as well as record-keeping.

“While you’re not required to submit the ECF at any point, it’s always a great idea to keep records,” says Adam Minsky, a Boston attorney who specializes in student loan and consumer issues. “An employer could go out of business, or lose the records of your employment. Mistakes can be made with paperwork. So if you find yourself having to make a case for yourself later, it helps to have all of this on record.”

FedLoan Servicing says my employer isn’t eligible. Can I appeal?

If the response to your ECF comes back and someone says your employer does not qualify you for PSLF, that’s generally the final decision, says Mayotte. “You can theoretically appeal, but these employer types are all pretty straightforward,” she adds. “The overarching rule is that there’s no wiggle room: You work for the government, a 501(c)(3) nonprofit or another qualifying nonprofit. The exception might be if you work for one of these other qualifying nonprofits, but you’ll need to make a case.”

To appeal, you can resend your ECF to FedLoan Servicing and ask for another review, or contact the Department of Education’s ombudsman unit. In both cases you should include evidence to show why you think your employer should qualify, Mayotte says.

But barring a clerical mistake by FedLoan Servicing, a change in decision is exceedingly rare.

Ensure your loan type and repayment plan qualify

PSLF provides forgiveness only for federal Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans. Private loans, including bank loans that are “federally guaranteed,” do not qualify.

Loans made under other federal student loan programs, like Perkins Loans, aren’t eligible for PSLF on their own. They may become eligible, if they’re consolidated into a Direct Consolidation Loan — but it’s important to know that only payments toward that consolidated loan will count toward the 120-payment requirement.

Speaking of consolidation, here’s another thing you should know: If you consolidate qualifying loans, the clock resets to zero payments. A consolidation is considered a new loan, and again, only payments toward the consolidated loan will be counted toward your 120.

Don’t know which types of federal student loans you have? Check the Education Department site My Federal Student Aid. A pro tip from the Education Department: “Generally, if you see a loan type with ‘Direct’ in the name on My Federal Student Aid, then it is a Direct Loan; otherwise, it is a loan made under another federal student loan program.”

Additionally, you must be enrolled in the right type of repayment plan. Qualifying repayment plans include all four of the income-driven repayment plans, which base your monthly payment on your income and family size: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), income-based repayment (IBR); and income-contingent repayment (ICR).

Payments under the 10-year standard repayment plan qualify, but you’ll want to switch to an income-driven plan as soon as possible. If you stick with that 10-year repayment you’ll have paid off the loan, with nothing left to be forgiven under PSLF when you become eligible for it.

Make 120 qualifying payments

You’ll need to make all of those 120 payments during qualifying employment to apply for PSLF, but you don’t need to provide proof of those payments. Again, Minsky advises that it’s wise to keep your own records just in case there’s a clerical issue later — but generally, FedLoan Servicing will confirm the payments itself.

Note that the 120 payments do not have to be consecutive (nor, then, must be your employment with a qualifying public service employer). If you had periods of deferment or forbearance and stopped paying your loans, the count will pick up where you left off once you begin paying anew. Even defaulting on your loan payments doesn’t disqualify you, but you’ll need to rehabilitate the defaulted loan with your servicer before the payments can count toward your 120 again.

The payments do need to be on time, defined as “those received by your federal loan servicer no later than 15 days after the scheduled payment due date.” If your payment isn’t on time, or you pay less than what you’re required to that month, it won’t count toward your 120. You may make multiple smaller payments, but they must add up to at least the minimum payment amount for that month.

Step 2: Apply for loan forgiveness

After you’ve completed your 120 payments — phew, you did it! — go to the PSLF application here. The form is six pages long, but the actual application is only two. And you, the employee, must fill out only the first page: basic personal information like your date of birth, Social Security number and contact details. You’ll also need to certify under penalty of law that the information you’re submitting is truthful.

The second page is for detailing the employer’s information, and either you or your employer can fill out the top part. Here’s what it requires:

  • Employer’s name
  • Federal Employer Identification Number (FEIN, which can be found on your W-2 — or ask your HR department)
  • Your dates of employment
  • Whether you were a full- or part-time worker
  • Which category of public service your employer falls under

At the bottom of the page, there’s a section for your employer to sign, certifying that the information above is accurate.

You’ll need to repeat that process for every qualifying employer. (That’s why it’s smart to keep track of it all by submitting ECF forms annually and whenever you change employers.)

The remaining four pages of the application form reiterate the details of what it takes to qualify for PSLF. They also explain where to send the completed application form:

  • You can mail to

    U.S. Department of Education, FedLoan Servicing
    P.O. Box 69184
    Harrisburg, PA 17106-9184

  • Fax to 717-720-1628; or
  • More information here

In rare cases, you may not be able to obtain employers’ certification. There’s a checkbox on page 1: “Check this box if you cannot obtain certification from your employer because the organization is closed or because the organization has refused to certify your employment. The Department will follow up to assist you in getting documentation of your employment.”

“That’s another reason it’s prudent to send the ECF forms every year, because you’ll already have a signature on record,” Mayotte says. “I’ve heard of a few cases where employers were not comfortable filling out the form for privacy reasons, but usually if you show them the form and explain a bit, you can change their mind.”

Mayotte says borrowers should contact FedLoan Servicing for alternatives if they find themselves in this situation.

FAQ and other things to know

The process is estimated to take up to 60 days, a Department of Education spokesman confirmed to MagnifyMoney.

Yes. If you’ve made your 120 payments and are looking to switch to an employer who isn’t eligible, be sure to file your PSLF application first. You must also be employed full time at a qualifying employer or employers at the time the forgiveness is granted, according to the Department of Education.

“No concrete proposal seems imminent, but whenever something happens, there’s a general view among experts that a change to PSLF won’t be retroactive to existing borrowers,” Minsky says.

The payment count restarts, back at zero. The consolidated loan is considered a new loan, and only payments toward it will count.

No. If you have private student loans that you are struggling to repay, be sure to reach out and talk with your lender. While most private lenders do not offer forgiveness they still may be able to help you out. Additionally, consider looking into student loan refinancing as a way to lower your monthly payments and make them a bit more manageable.

Here are the employer certification form and the PSLF application.

While studentaid.ed.gov has all of the official information, it’s spread across different pages and can be unwieldy. American Student Assistance offers an excellent guide that breaks down the basics and also links to official webpages and forms.

Alternative loan forgiveness programs

Beyond PSLF, there are other federal programs to forgive or discharge federal student debt. These include:

Industry-specific forgiveness programs

  • Perkins Loan Cancellation and Discharge: This applies to people who perform certain types of public service or are employed in certain occupations. According to the Department of Education, for each complete year of service a percentage of the loan may be forgiven. That percentage varies by job/employer type, and the following workers qualify:
    • Volunteer in the Peace Corps or ACTION program (including VISTA)
    • Teacher
    • Member of the Armed Forces (serving in area of hostilities)
    • Nurse or medical technician
    • Law enforcement or corrections officer
    • Head Start worker
    • Child or family services worker
    • Professional provider of early intervention services
  • Teacher Loan Forgiveness: Teachers who work full time for five complete and consecutive academic years (in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications) may be eligible for forgiveness of up to a combined total of $17,500 on Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Federal Stafford Loans. (Those who have only PLUS loans are not eligible.) Read more about loan forgiveness programs available to teachers, including TEACH Grants and state forgiveness programs.
  • Programs for lawyers: Lawyers with at least $10,000 in federal student loans may qualify for the Department of Justice Attorney Student Loan Repayment Program (ASLRP). Additionally, the John R. Justice Student Loan repayment program provides assistance for state and federal public defenders and state prosecutors for at least three years and is renewable after 3 years. Benefits cannot exceed $10,000 in a calendar year and cannot exceed $60,000 per attorney total. .) Read more about programs for lawyers, including forgiveness programs through specific law schools and certain states.
  • Programs for doctors and health professions: Several programs are available, including multiple military doctor loan forgiveness options through the Army, Navy and Air Force. Other options include state-specific forgiveness and the National Health Service Corps (NHSC), which can provide up to a $50,000 to repay a health profession student loan in exchange for a two-year commitment to a NHSC site in a high-need area.

Income-based repayment plans

  • This isn’t a traditional cancellation program like what’s above. These four federal income-driven repayment plans base your monthly payment on your income: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), income-based repayment (IBR) and income-contingent repayment (ICR).The payment terms vary, and your outstanding balance is forgiven after your repayment term of 20 to 25 years is complete. Because the monthly amount you owe will fluctuate based on your income, you could end up repaying your loans before your term is up, or you could have a balance that will be forgiven. However, if you receive student loan forgiveness this way, the canceled debt is taxable. (Only borrowers whose loan forgiveness stems from their employment are exempt from paying taxes on canceled student loan debt.)

Loan discharges for special circumstances

There are a few other times you may be able to get your student loans forgiven, but they’re relatively rare, and they’re generally because of bad circumstances. You can find out more about these discharges on the Department of Education’s website:

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Julianne Pepitone
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Julianne Pepitone is a writer at MagnifyMoney. You can email Julianne here

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5 Reasons Student Loan Forgiveness May Not Be Worth It

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Waking up to find student loans wiped out is a common fantasy for many borrowers. For a lucky few eligible for student loan forgiveness programs, this dream can become a reality.

You might love the idea of getting free money to repay student debt — until you see the fine print, that is. The process to have your student loans written off isn’t likely to be quick, easy, or painless.

But is student loan forgiveness worth it?

For some people, student loan forgiveness and assistance programs can be a huge help in getting out of debt. Yet for other borrowers, pursuing forgiveness can be a bigger headache than they’re willing to deal with.

Here are five reasons student loan forgiveness might not be worth it.

1. You might wait 25 years for student loan forgiveness

Depending on the student loan forgiveness program you pursue, you might be waiting decades to have your student loans forgiven. The longest period for student loan forgiveness is 25 years, under certain income-driven repayment plans:

  • The Revised Pay As You Earn (REPAYE) Plan requires 25 years of repayment to qualify for student loan forgiveness for borrowers using the plan to repay any graduate school loans.
  • The Income-Based Repayment Plan grants student loan forgiveness after 25 years of repayment for borrowers who took out their first student loan before July 1, 2014.
  • The Income-Contingent Repayment Plan requires 25 years of repayment for forgiveness for all borrowers.

Other student loan forgiveness programs offer to write off student loans much sooner. The Teacher Student Loan Forgiveness program offers debt forgiveness after just five years of full-time teaching work. The Public Service Loan Forgiveness (PSLF) program requires just 120 qualifying monthly payments, which can be made in 10 years.

The sooner you can erase your student debt, the more likely it is that banking on student loan forgiveness will pay off. But if pursuing student loan forgiveness means waiting 20 or 25 years to qualify, consider all your other options before proceeding.

2. You could wind up paying more

Under forgiveness programs, the amount of student loans written off is not what you initially owe, but rather any student loan balance remaining after the payments you’ve made. If you get student loan forgiveness after 25 years, for example, this will only wipe out what’s left after you’ve made 300 student loan payments.

This forgiven portion of your student loans might be smaller than you’d hoped. Not only that, but repayment plans that make student loan forgiveness beneficial can actually set monthly payments that are less than your student loan interest charges. In this case, interest accrues and can be added to the principal, increasing your balance. As a result, the total principal and interest repaid over the life of the loan might also be higher.

Consider a borrower who has $40,000 in student debt and earns just $28,800 out of college, enrolled in the REPAYE income-driven repayment. According to the Consumer Financial Protection Bureau (CFPB), such a borrower would repay $48,370 on a standard 10-year repayment plan. Under REPAYE, however, the total principal and interest repaid would be nearly $20,000 more, at $68,156.

IDR forgiveness provides a nice guarantee that you won’t be repaying student loans for longer than 25 years. But projecting your costs with a student loan IBR calculator can help you figure out whether or not you’re likely to come out ahead.

3. Your career choices (and pay) might be limited

Some student loan forgiveness assistance provides relief and erases student debt, but only if you’re willing to make a specific employment commitment. Here are some examples of student loan forgiveness programs with requirements tied to your work:

  • Teacher Loan Forgiveness requires five years of full-time employment in an underserved community.
  • PSLF requires 120 payments made while you’re working in a qualifying “public service” job; this includes working for a government agency or a 501(3)(c) nonprofit organization.
  • National Health Service Corps (NHSC) and many state governments offer loan repayment assistance for lawyers, dentists, physicians, nurses, and other skilled workers that are in high demand. They usually require two or more years of employment in an underserved area to qualify for forgiveness.
  • Military student loan forgiveness can also be an option to get some student loans repaid. The Active Duty Health Professions Loan Repayment Program provides up to $120,000 in loan repayment assistance over three years of service.

All of these programs can provide student loan forgiveness, but only if you meet the employment commitments — yet the employment offered isn’t always the most advantageous. They often require relocation and can keep you from choosing or changing jobs as you wish, as well as limit career opportunities later on.

Additionally, jobs that qualify you for student loan forgiveness often pay far less than what you could earn elsewhere. Fulfilling the employment requirements could mean missing out on higher pay, and the amount of debt forgiven won’t always be enough to cover this discrepancy in earnings.

Seeking student loan forgiveness that’s tied to employment can make sense if these programs already align with your career goals. If not, you should take some time weighing the tradeoffs against the benefits.

4. You can get taxed for forgiven student loans

Student loan forgiveness isn’t always free, either. Many forms of student loan repayment assistance or forgiveness are considered a type of taxable income. This means that you’ll be responsible for paying tax on the balance of your forgiven student loans.

Here are the types of student loan forgiveness that would likely come with a tax bill:

  • IDR forgiveness: After making the 20 to 25 years of payments required to qualify for forgiveness through an IDR, the remaining balance is forgiven. But the IRS still considers it income, and it will increase your tax liability.
  • Some student loan repayment assistance programs (LRAPs): If you participate in a student loan repayment assistance program, the help you get paying off your student debt could also be considered taxable income. Consider a physician’s assistant who joins the military and takes advantage of an applicable LRAP. This loan assistance is treated as bonus pay — and therefore taxable income — with the net after-tax amount then applied to student debt.

Other forms of student loan forgiveness are tax-exempt, however. Any student loans forgiven through PSLF are not taxable, for instance.

Additionally, IRS rules state that certain LRAPs can provide student loan forgiveness or assistance tax-free:

  • The National Health Service Corps Loan Repayment Program
  • Educational loan repayment programs funded by the Public Health Service Act
  • State LRAPs or forgiveness programs for health professionals working in underserved areas

It might not always be obvious which loan forgiveness programs will shield you from tax liabilities later on. Make sure you investigate and understand the possible tax implications of a student loan forgiveness or assistance program before enrolling — so you won’t unexpectedly owe thousands on forgiven debt later.

5. You won’t have any guarantees

Lastly, student loan forgiveness can be risky simply because life doesn’t always turn out the way we plan or prefer. Even if you’ve made all the right choices and followed a student loan forgiveness program to a T, there are no guarantees that you’ll receive forgiveness.

Errors can mess up your student loan forgiveness. Some loan forgiveness programs and LRAPs are complicated to the point of being ridiculously confusing. This can make it tricky to get it right when qualifying and applying for these types of loan assistance. With PSLF, for example, you could jeopardize your eligibility if you fail to consolidate certain student loans, and you could delay forgiveness if you miss payments or defer debt.

Student loan servicers have also caused problems for borrowers, according to a recent report from the Consumer Financial Protection Bureau. Borrowers complained that servicers didn’t clarify if the borrower qualified for PSLF, and that servicers did not process consolidations or changes to repayment plans in a timely fashion. Servicers even enrolled borrowers in payment plans that were ineligible for PSLF, despite the borrower expressing interest in the forgiveness program.

The future is foggy for many student loan forgiveness programs. PSLF, in particular, has had a rocky start. The first borrowers just barely received forgiveness through PSLF in early 2018, yet recent federal budget plans included proposals to end PSLF for borrowers taking out loans in upcoming years, for example.

The proposals were axed from the final budget, and PSLF seems safe (for now), but changes might still be made to this or other similar programs. Borrowers should be optimistically cautious about counting on student loan forgiveness and watch out for policy changes that could affect them.

Along with looking into your student loan forgiveness options, it can be worthwhile to compare them to other student loan strategies. Making extra payments on student debt can help you knock it out faster and pay less interest, for instance. Refinancing student loans can be another option to lower student loan rates and costs.

Only by exploring and comparing different student loan repayment paths can you find the best option for your current circumstances and future plans.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elyssa Kirkham
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College Students and Recent Grads

How to Consolidate Student Loans: Your Complete Guide

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Keeping track of multiple student loans from several different loan servicers gets confusing fast. Fortunately, you can simplify student loan repayment through combining multiple student loans into a single payment.

There are two ways to combine many loans into one: through federal student loan consolidation or via private student loan refinancing. Although the term “consolidation” is sometimes used to refer to both these options, consolidation and refinancing have some key differences.

For instance, federal consolidation only applies to federal student loans, and it doesn’t lower your interest rate. Refinancing, on the other hand, can combine federal and private student loans together, and it could get you a lower rate.

Both approaches have advantages and drawbacks, so it’s essential to weigh the pros and cons before making any changes to your student loans. This full guide will take a deep dive into how to consolidate student loans, as well as compare consolidation and refinancing so you can decide which strategy is right for you.

Student loan consolidation vs. refinancing: The basics

While both consolidation and refinancing can combine several student loans into a single loan, they do so in different ways. This chart shows the key differences between consolidating student loans and refinancing them.


Note that while both consolidation and refinancing can combine loans, you don’t actually have to include more than one loan. There could be benefits to consolidating or refinancing a single student loan.

For instance, a parent borrower might consolidate a parent PLUS loan to make it eligible for Income-Contingent Repayment, which cuts your monthly repayment amount. Or a student might refinance a single student loan to get a lower interest rate and save money.

Even if you have several student loans, you can also cherry-pick one or two to consolidate or refinance, depending on what would be most beneficial.

What is federal student loan consolidation?

Consolidation turns one or more of your federal loans into a new loan, possibly with a new term length. For this, you’ll need to apply for a direct consolidation loan from Federal Student Aid.

You can combine most types of federal student loans, including direct loans (also known as Stafford loans), as well as parent PLUS or grad PLUS loans, and federal family education loans (FFELs).

You’re typically eligible to consolidate school loans once you’ve graduated, withdrawn from school or dropped below half-time enrollment.

6 pros of consolidating student loans

Federal student loan consolidation comes with a variety of benefits, as well as some drawbacks. Let’s look at benefits first.

1. Simplify repayment by combining multiple loans into one

If you consolidate multiple loans, you turn them into a single loan. Instead of having multiple payments each month, you’ll just make one payment toward your new, consolidated loan. You will only have to remember a single interest rate and one loan servicer.

According to a 2017 report from Experian, the average student loan borrower has 3.7 loans. Consolidating these could simplify repayment and make it more manageable.

2. Opportunity to choose a new repayment plan and adjust your monthly payment

When consolidating student loans, you can choose a new repayment plan. You can return to the standard 10-year plan with fixed payments, or you can lower your payments via the graduated repayment plan, in which the payment amounts increase over time. Likewise, you can extend your terms and lower your monthly payment on an extended repayment plan, or choose an income-driven plan which will cap your payments based on your disposable income.

Choosing something long-term will keep you in debt for longer and means you pay more interest overall, but it also could lower your monthly payments. If you’re struggling to keep up with high bills each month, choosing a longer term could save your budget.

3. Chance to choose a new loan servicer

Along with choosing a new repayment plan, you’ll also get the chance to choose a new loan servicer. Your options for federal loan servicers are:

  • Navient
  • Nelnet
  • Great Lakes (now owned by Nelnet)
  • FedLoan Servicing (PHEAA)
  • HESC/EdFinancial
  • CornerStone
  • Granite State – GSMR
  • OSLA Servicing
  • Debt Management and Collections System

If you’ve had a good experience with your current loan servicer, you can stick with them. But if you haven’t, you’ll get the chance to switch and hopefully have better communication with the next.

4. Make parent PLUS loans eligible for Income-Contingent Repayment (ICR)

Parent PLUS loans are designed for parents who are helping pay for their child’s education. But they’re only eligible for one income-driven repayment plan — ICR — and only after the borrower has first consolidated the loan.

After turning your parent PLUS loan into a direct consolidation loan, you can select ICR as your repayment plan. ICR adjusts your payments to 20% of your discretionary income or to the amount your payment would be on a 12-year fixed plan, whichever is lower.

If you still have a balance at the end of the term on your income-driven term (25 years), it could be forgiven.

5. Rehabilitate student loans that are in default

Federal consolidation is also one way to rehabilitate student loans that are in default. If you fall behind on payments, your student loans could go into default, which could result in a host of bad consequences.

Your credit score could plummet, for instance, and the federal government could garnish your wages, tax refund or even Social Security benefits. If your loans are in default, it’s essential to pull them out and get them back in good standing.

One option for doing this is consolidating the defaulted student loans into a direct consolidation loan and placing them on an income-driven repayment plan. Your defaulted loan will be eligible after you make three consecutive, on-time payments.

Once your loan is out of default, it will once again be eligible for federal programs and protections, such as forbearance and deferment.

6. It’s free to apply, and there’s no credit check

Anyone with federal student loans can apply for a direct consolidation loan at no cost. If a company is charging you a fee, beware: You can easily complete the application on your own for free.

What’s more, you don’t need to pass a credit check or meet an income threshold to qualify. As long as you have qualifying loans, you can consolidate.

4 cons of consolidation

Along with the advantages of federal consolidation, there could be some downsides to consider. Make sure you understand the potential cons before applying for a direct consolidation loan.

1. You could get a slightly higher interest rate

Federal consolidation doesn’t get you a lower interest rate. In fact, it could actually result in a slightly higher interest rate.

When you consolidate multiple loans, Federal Student Aid determines your new rate by taking the weighted average of your interest rates. Then, it rounds up to the nearest one-eighth of 1%.

This isn’t a big increase, but be aware that consolidation won’t save you money on interest.

2. You’ll pay more overall if you choose a longer repayment term

Not only will consolidation not save you money on interest, but it could cost you more overall if you choose a longer repayment term. For instance, income-driven plans extend your terms to 20 or 25 years.

Your monthly payments will become more affordable, but you’ll also fork over a lot more in interest over the life of the loan. The only way to save on interest would be to pay off your loan ahead of schedule.

Of course, lowering your monthly payments might help your budget in the short term. But make sure you understand the long-term consequences before adding years to your debt.

3. Your previous payments won’t count toward PSLF or forgiveness from an income-driven plan

The federal government offers a few options for loan forgiveness after years of qualifying payments. The Public Service Loan Forgiveness (PSLF) program, for example, awards loan forgiveness after 10 years of working in a qualifying organization.

And income-driven plans, such as Income-Based Repayment or Pay As You Earn, end in loan forgiveness if you still have a balance after 20 or 25 years. To qualify for any of these programs, you must make a certain number of on-time, consecutive payments.

When you consolidate, though, you reset the clock on your payments. Any payments you made before you consolidated wouldn’t count toward the PSLF or income-driven plan requirements. You’d have to start over again, which could mean you won’t see forgiveness for many more years.

Note that if you’re working toward PSLF, you should put your loans on extended repayment or an income-driven plan right away. If you stay on the standard 10-year plan, you won’t have any balance left to forgive after 10 years of service.

4. Private student loans aren’t eligible

Finally, private student loans are not eligible for federal consolidation. You can only bundle federal student loans into a direct consolidation loan.

So if you borrowed from a private lender, such as Sallie Mae or LendKey, you would still have to pay these back separately with your assigned loan servicer.

How to consolidate student loans and apply for a direct consolidation loan

Source: https://studentaid.ed.gov/sa/

If you’re wondering how to consolidate student loans, rest assured the process is easy. According to Federal Student Aid, most people complete the application in less than 30 minutes.

You can apply at StudentLoans.gov with the consolidation loan application and promissory note. Before logging into your account with your FSA ID, collect the personal and financial information listed in the “What do I need?” section. For instance, you’ll need your loan documents to complete the form.

Along with providing your information, you’ll also indicate which loans you want to consolidate, and which ones you don’t (if any). You’ll also choose a repayment plan, whether it’s the standard plan, graduated repayment, extended repayment or an income-driven plan.

Make sure to read over your application before hitting submit, and speak with your loan servicer if you run into any confusion during the process.

Student loan refinancing can also combine multiple loans into one

Federal student loan consolidation isn’t the only way to replace several loans with a single student loan. You can also achieve this through student loan refinancing. While you consolidate school loans with the federal government, you would refinance with a private lender. This lender might be a bank, credit union or an online lender, such as SoFi or CommonBond.

Both federal and private student loans are eligible for refinancing, and you can refinance one loan or several together. Not only could this simplify repayment, but you might also qualify for a lower interest rate. Plus, just as with the federal student loan consolidation, you’ll get the chance to choose new repayment terms.

Refinancing can be a savvy strategy for saving money on your student loans and restructuring your debt, but first, you’ll need to qualify.

3 pros of student loan refinancing

So what are the advantages of refinancing student loans? Here are three big ones.

1. A single monthly payment is easier to track

Refinancing is similar to consolidation in that it can combine several loans together. Your refinancing provider, or the loan servicer it partners with, will be your new loan servicer.

If you refinance a Navient loan with SoFi, for instance, SoFi would be your new point of contact. And you’ll only have to keep track of one payment, instead of budgeting for multiple payments each month.

2. You could secure a lower interest rate

If you qualify for a refinancing offer, you could snag a lower interest rate on your student loans. SoFi has variable rates starting at 2.47% and fixed rates from 3.90%, for example. These are significantly lower than the 5.05% attached to direct loans or the 7.6% on PLUS loans.

Cutting your interest rate can go a long way toward saving you money on your debt. With less interest to keep up with, you might even be able to pay off your loan more quickly.

3. You’ll get to choose new repayment terms on your loan

Along with choosing a variable or fixed rate on your refinanced student loan, you can also pick new repayment terms. Most lenders offer terms from five years up to 15 or 20 years.

If you can swing higher monthly payments, you could choose a short term to get out of debt fast and save money on interest. If you need some relief, on the other hand, you could reduce your payments with a longer term but pay more interest throughout the life of the loan.

Note that you can always throw extra payments at your student loans without penalty. So even if you need to choose a longer term now, you can still prepay your loan if your income increases in the future.

3 cons of refinancing

Although saving money through refinancing might sound ideal, make sure you understand the potential disadvantages before applying.

1. You’ll lose access to federal programs and protections

Refinancing federal student loans with a private lender means you turn them into a private loan. And private loans are not eligible for federal protections or programs, such as PSLF.

If you’re relying on any federal options, it wouldn’t be a good idea to refinance. Similarly, you might not want to refinance if you’re concerned about your ability to repay the loan.

Private lenders don’t usually offer as much flexibility as the federal government does when it comes to repayment. For instance, they don’t have income-driven repayment plans, and only some lenders offer forbearance or deferment if you go back to school or run into economic hardship.

So before you refinance, find out which, if any, benefits your lender offers to borrowers. If you’re concerned, you might wait to refinance until you’re confident you have a steady income and the means to pay back your loan on time.

2. You need to pass a credit and income check to qualify

Unlike consolidation, not everyone will qualify for refinancing. Since you apply with a private lender, you’ll have to meet its underwriting requirements for credit and income. The criteria are in place to ensure you have the financial means to pay back any money you borrow.

3. You might have to apply with a cosigner

If you can’t qualify on your own or are trying to get the lowest rates possible, you could apply with a creditworthy cosigner, such as a parent. By signing onto the loan, your cosigner will share responsibility for your debt.

This might not be a problem if you and your cosigner are on the same page about sharing debt. But if you can’t pay back the loan, this agreement could ultimately do damage to your cosigner’s finances, not to mention your relationship with that person.

Before adding someone to your student loan, make sure to set clear expectations about who will pay back the loan and what will happen if you run into financial hardship. Also, find out if your lender offers cosigner release. Some will remove your cosigner from the loan after a few years of on-time repayments.

How to refinance your student loans with a private lender

Since there are lots of lenders that provide student loan refinancing, you’ll want to shop around to find one with the best offer. Along with finding the lowest interest rate, you might consider additional factors, like customer reviews or extra benefits, such as forbearance or cosigner release.

Banks, credit unions, and online lenders provide student loan refinancing. Some online lenders, such as SoFi, CommonBond and Earnest, make it easy to prequalify and check your rates from your computer or phone.

You’ll provide a few pieces of information, and these lenders will show if you prequalify. This check only takes a minute, and it won’t impact your credit score at all. Note, however, that when you choose a lender and submit a full application, you will need to consent to a “hard” credit inquiry, which can reduce your credit score slightly.

Once you’ve chosen a lender, you’ll submit basic information, such as your name, address, degree, university data, total loan debt and monthly housing payment. You’ll also provide proof of income and official statements for any private or federal student loans you wish to refinance.

As soon as you’re approved, you can choose your repayment term, as well as select a fixed or variable interest rate.

Make sure you keep paying off your old loans until you’re 100% certain your refinanced loan is up and running. You wouldn’t want to fall behind on payments before everything has been processed, so wait for your new lender to give you the green light before you forget about your old student loans.

Federal consolidation vs. refinancing: Which is the right choice for you?

Since both federal student loan consolidation and private student loan refinancing come with pros and cons, how do you decide which one is right for you? The decision comes down to your needs and goals as a borrower.

If you’re looking to simplify repayment or get out of default while at the same time retaining eligibility for federal repayment plans, consolidation would likely be the better choice. But if you’ve been paying your student loans for a few years and have a steady income, refinancing could be a wise strategy for saving money on your debt — and maybe even paying off your student loans ahead of schedule.

Take the time to understand your options so you can make the right choice with your student debt. By doing your due diligence, you’ll be able to find the strategy that best helps you manage your debt as you work toward paying it off in full.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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College Students and Recent Grads

Can’t Pay Your Student Loans? You Can Lose Your License in These 16 States

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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In many states, failing to repay student loans could cost one a professional license to perform a job, and in the case of Iowa and South Dakota, even losing a driver’s license.

Sens. Elizabeth Warren (D-Mass.) and Marco Rubio (R-Fla.) in June introduced legislation that would prevent states from suspending, revoking or denying state licenses because borrowers default on their student loans, in the hopes of alleviating some of the financial burdens on Americans who are already saddled with student loan debt.

Americans owe a whopping $1.53 trillion in student loan debt, and almost 11 percent of the debt was at least 90 days delinquent or in default at the end of the first quarter of 2018, according to the Federal Reserve Bank of New York. Meanwhile, almost 30 percent of workers in the United States need a professional license to perform their job, according to The Brookings Institution.

In recent years, six states — North Dakota, Washington, New Jersey, California, Oklahoma and Virginia — have repealed laws that allowed states to suspend or revoke professional licenses as a penalty for student loan default. The Warren-Rubio bill exercises such efforts at the federal level.

After reading state laws, MagnifyMoney found that as of Aug. 24, 2018, at least 16 states deny, suspend or revoke state-issued professional or driver’s licenses if loan borrowers default on their student loans. In some states, such laws impact a wide range of professions requiring a state license, such as teachers, nurses and barbers; in others, only certain jobs are affected. Here are the states where these penalties exist and may be enforced:

Alaska

Overview of the law

When borrowers default on student loans (payments are 180 or more days past due) made by the Alaska Commission on Postsecondary Education, the state’s higher education agency may order licensing entities to not renew the debtors’ licenses. The licensing authority can take action to stop granting a license renewal once they receive notice of unpaid student loans.

Jobs affected

All jobs that require state-issued professional licenses, certificates, permits to perform, including teachers, nurses, pharmacists, security guards and pesticide applicators.

If you lost your license because of student loan debt

The licensing agency will notify you of the refusal of non-renewal. Within 30 days of receiving the notice, you may request a review by the commission. However, in order to have your license renewed after the review, you have to prove that: 1) you have paid off the entire loan, including interest and principal, along with all the collection costs; or 2) you have entered into a payment plan with the commission and have made on-time payments in full for the four most recent and consecutive months under the plan.

Arkansas

Overview of the law

The Arkansas State Medical Board may revoke or suspend a license, impose penalties or refuse to issue a license when a physician in this state has breached a Rural Medical Practice Student Loan and Scholarship contract. Recipients of rural medical practice loans are obligated to practice medical care in rural Arkansas full time and follow the terms in the contract they signed with the state’s student loan and scholarship Board.

Jobs affected

Physicians on Rural Medical Practice Student Loan and Scholarship contracts.

If you lost your license because of student loan debt

The loan recipients who get their medical licenses suspended won’t be able to practice for a period of time equivalent to the time they failed to follow their loan obligations. They can’t get their licenses back until they pay off their loan and penalties.

Florida

Overview of the law

In Florida, the Department of Health may suspend a state-licensed health care practitioner who has failed to repay a student loan issued or guaranteed by the state or the federal government. The borrower will be fined 10 percent of the defaulted loan amount.

Jobs affected

More than 50 professions that require state health department licenses, including nurses, medical physicists, body piercers, septic tank contractors and dentists. See the full list here.

If you lost your license because of student loan debt

To lift the suspension, the borrower has to enter a new payment term agreed by all parties of the loan and pay the fine within 45 days after he/she was notified of the suspension.

Georgia

Overview of the law

A professional licensing board can suspend the license of anyone who has defaulted on any federal education loan. Authorities may also suspend licenses of people who failed to comply with service obligations under any service-conditional scholarship program.

Jobs affected

More than 40 professions that require state-issued professional licenses. A few examples: chiropractors, dietitians, librarians and physical therapists. See a full list on this page, under the drop-down menu “Boards and Licensed Professions.”

If you lost your license because of student loan debt

When the licensing board receives written notification that you are making payments on the loan or satisfying the service, it can restore your license.

Hawaii

Overview of the law

Hawaii licensing authorities can deny a license application or a renewal or suspend a professional license if you default on a student loan made or guaranteed by the state, state agencies or the federal government. License suspension can also occur if you are not complying with obligations under a student loan repayment contract or a scholarship contract. Your license could also be in jeopardy if you are at least 60 days past due with payments under a repayment plan.

Jobs affected

Jobs that require professional licenses issued under 25 state licensing boards.

If you lost your license because of student loan debt

Your license can be renewed or reinstated when the licensing authority is notified that you are making payments or satisfying the terms of the student loan, student loan repayment contract or scholarship contract and are no longer in default or breach of the loan or contract.

Illinois

Overview of the law

The Division of Professional Regulation of the Department of Financial and Professional Regulation can deny licenses or renewals to those who have defaulted student loans or scholarships provided or guaranteed by the Illinois Student Assistance Commission, any governmental agency of the state or any federal government agency. Your license can also be suspended or revoked if you are proven to have failed to make satisfactory repayments for a delinquent or defaulted loan after a hearing.

Jobs affected

Jobs that require state-issued professional licenses. The professions include physicians, nurses, pharmacists, physical therapists, dentists, barbers, accountants and more. Check out the full list of state-licensed occupations in Illinois here.

If you can’t apply for a license because of student loan debt

If you have established a “satisfactory repayment record,” the department may issue a license or renewal.

Iowa

Overview of the law

Any license authorized by state laws, including a driver’s license, can be denied, revoked or suspended if a borrower has defaulted on a loan owed to or collected by the Iowa College Student Aid Commission.

Licenses affected

Professional licenses issued by the state that workers need to engage in a trade, profession or business. There’s no single, full list of affected licenses, but such licenses include those for massage therapists, social workers and interior designers; those who drive; and recreational licenses for hunting, fishing, boating or other activities.

If you lost your license because of student loan debt

You can get a license approved or reinstated if you schedule a conference with the commission to enter into an agreed on a repayment plan or pay off the debt within 20 days after you receive a mailed notice about your alleged loan default or a notice of suspension, revocation, denial of issuance or non-renewal of a license.

Kentucky

Overview of the law

In Kentucky, licensing agencies may not issue or renew a professional or vocational license to someone who’s in default or has failed to meet any repayment obligation under any financial assistance program administered by the Kentucky Higher Education Assistance Authority.

Jobs affected

Jobs that require state-issued professional licenses, including home inspectors, athlete agents, alcohol and drug counselors and more.

If you lost your license because of student loan debt

You should receive a notice either from the Kentucky Higher Education Assistance Authority or from a relevant licensing authority giving you a deadline to respond to the notice and enter into a “satisfactory” repayment agreement. Assuming you do, the authority will send the licensing agency a notice certifying that you are no longer in default and have made satisfactory repayments, repaid the loan in full or have been waived from repaying the debt. At that point, you may resume your professional or occupational license.

Louisiana

Overview of the law

The state of Louisiana can deny an application for or renewal of any professional or occupational license to anyone who has defaulted on a federal student loan guaranteed by the Louisiana Student Financial Assistance Commission (LOSFA).

Jobs affected

Jobs that require state-issued professional licenses, which include dentists, nurses, physical therapists, insurance agents and more.

If you lost your license because of student loan debt

LOSFA has entered into a contract with the Educational Credit Management Corp. (ECMC) for the servicing its LOSFA-guaranteed federal student loans. LOSFA advises borrowers to contact ECMC to enter a payment arrangement with ECMC or repay the loan. LOSFA needs to confirm compliance with your loan obligations for your license to be released.

Massachusetts

Overview of the law

A professional or occupational license can be denied for any applicant who is in default on an educational loan under any program administered by the Massachusetts Education Financing Authority (MEFA) or the Massachusetts Higher Education Assistance Corp. (MHEAC). MEFA offers loans to students who are residents of or attend college in Massachusetts. MHEAC, known as American Student Assistance, provides federal student loan programs.

Jobs affected

Nearly 170 jobs that require state-issued professional licenses from 39 boards of registration. The professions include architects, psychologists, physicians and more. See a full list of state licensing boards here.

If your license is denied because of student loan debt

You should receive a notice of denial and can then ask your loan agency for a review of the alleged default within 30 days of receiving the notice. If you enter into a repayment agreement or other arrangement with the loan agency, or if the agency determines that the notice of default was in error, the educational loan agency will notify the relevant licensing authority, which will then issue the license to you.

Minnesota

Overview of the law

In Minnesota, health professionals who have defaulted on a federally secured student loan or failed to fulfill a repayment or service obligation can face denial of a license by a health-related licensing board. The board can also take disciplinary action against the debtor.

Jobs affected

Health-related professionals, including physicians, nurses, dentists, therapists and barbers. See a full list of the state’s health licensing boards here.

If your license application is denied because of student loan debt

A licensing board has to consider the reasons for the default. It cannot impose disciplinary action against anyone with total and permanent disability or long-term temporary disability lasting longer than a year.

Mississippi

Overview of the law

When certain health care practitioners and hospital employees fail to comply with an educational loan contract obtained through a state-paid educational leave program, their professional licenses can be revoked. Grantees of the paid education leave program entered a contract with a state health institution, where they agreed to work in a health care profession, such as a physical therapist, or as a licensed practical nurse in the same sponsoring institution for a period of time equivalent to the amount of time when the applicant receives paid leave compensation.

Jobs affected

Health-related professionals and hospital workers who earned their licenses through educational paid leaves offered by state health institutions. This includes nurses, nurse practitioners, speech pathologists, psychologists, occupational therapists, physical therapists and any other needed professions determined by the sponsoring state health institution.

If your license is revoked because of student loan debt

A revoked license will be restored if you can prove that your contract is no longer in default.

New Mexico

Overview of the law

Under the state law, New Mexico barbers and cosmetologists may face denial of issuance or renewal, suspension or revocation of their occupation licenses if they have defaulted on a student loan. The state statute doesn’t specify what kind of student loans they are. (Repeal of this rule was scheduled in 2014 but delayed to 2020.)

Jobs affected

Barbers and cosmetologists.

If your license is denied renewal because of student loan debt

Before the Board of Barbers and Cosmetologists takes any action against your license, you can request a hearing within 20 days after being served a written notice about the default. After the hearing, the board will take steps to impose a fine up to $999 or take other disciplinary actions, which may include suspension, revocation or refusal to renew a license. The state statute doesn’t offer information about resolutions for those who’ve lost their licenses because of student loan default. The New Mexico Board of Barbers and Cosmetologists has not responded to MagnifyMoney’s inquiry regarding the remedies.

South Dakota

Overview of the law

South Dakota established the Obligation Recovery Center in 2015 to recover debts owed to the state, including unpaid university tuition or fees. The state law demands a number of licenses, registrations and permits, including a driver’s license, be withheld from anyone who owes money to the state. While South Dakota is not in the student loan business, students have reportedly had their driver’s licenses suspended because their unpaid student debt got transferred to the Obligation Recovery Center, which at that point became debt owed to the state.

Affected licenses

Driver’s licenses, a hunting or fishing license, a state park or camping permit, a registration for a motor vehicle, motorcycle or boat.

If you lost your license because of student loan debt

In order to restore the license or permit, the debtor has to either pay the debt in full or has entered into a payment plan with the center and be current on payments.

Tennessee

Overview of the law

State licensing authority may suspend, deny or revoke the license of anyone defaulted on a repayment or service obligation under any state or federal student loan or service-conditional scholarship program.

Jobs affected

Jobs that require government-issued professional licenses, including teachers, dentists, massage therapists, nurses, barbers, geologists, accountants and many more. (There is no single, full list of affected licenses.)

If you lost your license because of student loan debt

Within 90 days after you receive notification of the alleged default, you can keep your license if you pay off the debt, enter into a payment plan or service obligation or comply with an approved repayment plan.

Texas

Overview of the law

Licensing agencies in Texas can deny a renewal for a license to anyone who has defaulted on a student loan or a repayment agreement guaranteed by the Texas Guaranteed Student Loan Corp.

Affected jobs

All professions that require state-issued professional licenses. The rule applies to auctioneers, electricians, midwives, physicians and many more.

If you can’t renew your license because of student loan debt

Your license can be renewed if the Texas Guaranteed Student Loan Corp. issues a certificate to clarify that you have entered a repayment agreement or the loan is not in default anymore.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Best of, College Students and Recent Grads, Credit Cards

Best Student Credit Cards November 2018

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Getting a credit card while you’re in college might seem dangerous or confusing. But if you are able to use a student credit card responsibly, you do not need to be afraid, and you can set yourself up for financial success after you leave school.

Fortunately, learning how to choose and use the right student credit card is relatively simple. Make sure you avoid annual fees and go with a bank or credit union you can trust. When you get the card, make sure you use it responsibly and pay the balance in full and on time every month. If you do these things consistently over time, you can leave school with an excellent credit score. And if you want to rent an apartment or buy a car, having a good credit score is very important.

Our Top Pick

Discover it® Student Cash Back

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on Discover Bank’s secure website

Rates & Fees

Read Full Review

Discover it® Student Cash Back

Annual fee
$0
Rewards Rate
5% cash back at different places each quarter like gas stations, grocery stores, restaurants or Amazon.com up to the quarterly maximum each time you activate, 1% unlimited cash back on all other purchases - automatically.
Regular APR
14.99% - 23.99% Variable
Credit required
fair-credit
Fair Credit

Magnify Glass Pros

  • Good Grades Reward program: Did you study extra hard this year? If you’ve gotten a 3.0 GPA or higher for an entire school year, Discover will reward you with an extra $20 statement credit. You can get this reward for up to five years in a row as long as you’re still a current student when you apply.
  • Free FICO® score: Just like how you have grades for your classes, your FICO® score is your “grade” for your credit. Credit cards have a huge effect on your FICO® score. You can watch how your new credit card affects your score over time with a free FICO® score update on your monthly statement.
  • 5% cash back : You can earn up to 5% cash back at different places that change each quarter, on up to $1,500 in purchases every quarter that you activate. Past categories have included things like Amazon purchases, restaurants, and ground transportation. Even if you don’t buy something in the bonus category, you’ll still earn 1% cash back on all other purchases.
  • Cash back match at end of your first year: In addition to rotating 5% cash back categories, new cardmembers will also get an intro bonus. When your first card anniversary comes around, Discover will automatically match your cash back rewards you earned during your first year.

Cons Cons

  • Remember to sign up for bonus places: Even though this card comes with a great cash back rewards program, it comes with a catch: you’ll need to manually activate the bonus places each quarter. You can do this by calling Discover or logging in to your account online. If you forget, you’ll still earn 1% cash back if you make any purchases in the qualifying categories.
  • Gift certificates only available at certain levels: You can redeem your rewards for many things such as Amazon purchases, a statement credit, or a donation to a charity, to name a few. But, if you’d like to get a gift card instead, you’ll need a cash back balance of at least $20 saved up in your account.
Bottom line

Bottom line

The Discover it® Student Cash Back offers great perks for college students, such as a rewards program for good grades and a free FICO® score so you can learn about your credit firsthand. Its cash back rewards program is our favorite. No other card for students (that we could find) offers the opportunity to earn up to 5% cash back. And with no annual fee, this is our top pick.

Read our full review of the Discover it® Student Cash Back

Best for Commuter Students

Bank of America® Cash Rewards Credit Card for Students

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on Bank Of America’s secure website

Bank of America® Cash Rewards Credit Card for Students

Annual fee
$0
Rewards Rate
1% cash back on every purchase, 2% at grocery stores and wholesale clubs, and 3% on gas for the first $2,500 in combined grocery/wholesale club/gas purchases each quarter.
Regular Purchase APR
15.24% - 25.24% Variable
Credit required
good-credit

Good

Magnify Glass Pros

  • Cashback program: You’ll earn 1% cash back on every purchase, 2% at grocery stores and wholesale clubs, and 3% on gas for the first $2,500 in combined grocery/wholesale club/gas purchases each quarter. The higher rate you get for gas purchases is great for students who commute to class.
  • Redemption bonus: If you’re a Bank of America customer, you’ll receive a 10% customer bonus every time you redeem your cash back into a Bank of America® checking or savings account. The bonus is even better if you’re a Bank of America Preferred Rewards client — you could get a 25-75% bonus. Cardholders who redeem this way will maximize their cash back.
  • Free FICO® Score: A large part of getting a credit card in college is to build your credit score. The hope is that monitoring your FICO® Score on a monthly basis will let you see your score rise through proper credit behavior.

Cons Cons

  • Foreign transaction fee: This card has a foreign transaction fee of 3% of the U.S. dollar amount of each transaction, not suitable for students who travel abroad. You will negate any cash back earned while using this card outside the U.S.
Bottom line

Bottom line

The Bank of America® Cash Rewards Credit Card for Students is a great option for students who commute to class and spend on groceries. This card has an added redemption bonus for Bank of America® checking or savings accountholders that is a great way to increase your cash back.

Best Flat-Rate Card

Journey® Student Rewards from Capital One®

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on Capital One’s secure website

Read Full Review

Journey® Student Rewards from Capital One®

Annual fee
$0
Rewards Rate
1% Cash Back on all purchases; 0.25% Cash Back bonus on the cash back you earn each month you pay on time
Regular Purchase APR
24.99% (Variable)
Credit required
bad-credit
Average/Fair/Limited

Magnify Glass Pros

  • 1.25% cash back if you pay on time: Each purchase you make earns a flat-rate 1% Cash Back on all purchases; 0.25% Cash Back bonus on the cash back you earn each month you pay on time. This makes it handy for people who want as simple a card as possible. And it rewards great behavior.
  • Higher credit lines after on-time payments: If you’re approved for this card, you’ll receive a credit line of at least $300. If you make five on-time payments in a row, you can call Capital One and ask them to increase your credit line.
  • No foreign transaction fee: This is a great card to take overseas, because you won’t have to pay any foreign transaction fees. Most cards charge an average 3% foreign transaction fee, but Journey allows you to use your card abroad without being charged extra fees.

Cons Cons

  • High APR: This card carries an APR of 24.99% (Variable). That’s almost twice as high as some other student credit cards, such as the Wells Fargo Cash Back CollegeSM Card with a rate as low as 12.90% - 22.90% Variable APR. It’s just one more incentive to pay off your bill in full each month.
Bottom line

Bottom line

We really like this card because it actively rewards you for developing good credit-management behavior by offering a small cash back bonus for on-time payments. In addition, the cash back program is straightforward with no confusing categories to remember or opt into, making this card a good option for students who want a simple, flat-rate card.

Read our full review of the Journey® Student Rewards from Capital One®

Best Intro Bonus

Wells Fargo Cash Back CollegeSM Card

Annual fee
$0
Rewards Rate
3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases
Regular Purchase APR
12.90% - 22.90% Variable
Credit required
fair-credit
excellent-credit
Good/Excellent

Magnify Glass Pros

  • Interest rates as low as 12.90% - 22.90% Variable APR: Depending on your credit, your interest rate could be between 12.90% - 22.90% Variable APR, but there is no guarantee you’ll receive the lower rate. This is a lower variable APR range than most student cards, and can help if you aren’t able to pay your balance in full one month.
  • Intro Rewards Bonus: 3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases
  • Access to credit education: Wells Fargo provides you with all sorts of tools and information to learn about things like credit, budgeting, and expense tracking. While this is a nice feature, it’s not exclusive to Wells Fargo. You can get this information from free tools such as Mint, or even reading books and blogs. But it is pretty handy having it right at your fingertips when logged in to your account.

Cons Cons

  • Need to be a Wells Fargo member to apply online: You can go into any one of the 6,000+ branches and apply for the card. You can also apply online, but you’ll need to be an existing Wells Fargo customer. However, anyone can open a checking account online with a minimum deposit of $25.
  • High bars for some cash back redemption options: There are a lot of redemption options available through Wells Fargo’s own online cash back rewards mall. However, if you’d just like straight cash, you have a few options. You can request a direct deposit into your Wells Fargo checking account, savings account, or Wells Fargo credit card (if applicable) in $25 increments, or request a paper check in $20 increments. That can take a long time to accumulate if you’re not spending much with your card.
Bottom line

Bottom line

The Wells Fargo Cash Back CollegeSM Card is a relatively simple card with a great intro bonus of 3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases In addition, the low variable APR is handy for those who think they’ll be carrying a balance on their credit card from month to month at some point in the future. This is generally something we recommend against, but if you can’t avoid it, the Wells Fargo Cash Back CollegeSM Card is your best bet.

Read our full review of the Wells Fargo Cash Back CollegeSM Card

Altra Federal Credit Union Student Visa® Credit Card

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on Altra’s secure website

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Altra Federal Credit Union Student Visa® Credit Card

Annual fee
$0
Rewards Rate
Earn double Reward Points on every dollar of purchases in the first 60 days after opening your new account, then 1 point per dollar spent.
Regular Purchase APR
15.65% Fixed

Magnify Glass Pros

  • $20 reward for good credit card usage: If you can maintain your account in an “exceptional way” for your first year, you’ll get a bonus $20 reward on your card’s anniversary. All you have to do is not have any late payments, don’t charge over your card’s limit, and use your card for at least six out of twelve months.
  • Up to $500 random winner each quarter: It’s like playing the lottery, except you don’t have to buy a lottery ticket. Each quarter Altra will choose one student cardholder at random and pay back all of their purchases from the previous month, anywhere between $50 to $500.
  • Earn rewards: For the first 60 days after you open your account, you’ll earn 2 points per dollar spent. After that you’ll earn 1 point per dollar spent. You can redeem these points for cash back, merchandise through their online rewards mall, or travel.
  • Redeem points for a lower interest rate: If you’ll need a car in the future, this might be a good credit card to get. You can trade in 5,000 points for a 0.25% reduction, or 10,000 points for a 0.50% reduction on an auto loan through Altra Federal Credit Union. That could end up saving you a ton of cash in the long run.

Cons Cons

  • 1% foreign transaction fee: This is definitely one card to leave at home if you’ll be traveling or studying abroad. Most credit cards charge a 3% foreign transaction fee, so this is on the low side. Still, it’s not too hard to find a student credit card with no foreign transaction fee, such as the Discover it® Student Cash Back or the Journey® Student Rewards from Capital One® card.
  • Must join Altra Federal Credit Union: Luckily, anyone can join, but it might take a bit of legwork on your part compared to a bank. If you don’t meet certain membership eligibility criteria, you can join the Altra Foundation for $5. Then you’ll need to open a savings account with a minimum $5 deposit that must remain in the account while you have your card open.
Bottom line

Bottom line

If you’re a student who doesn’t mind working with a credit union, Altra provides a card that has several rewards benefits. This card is a good option if you may be taking out an auto loan in the next few years, since you’ll benefit from a reduced interest rate by trading in your rewards points. In addition to earning rewards, using this card responsibly can help you build credit.

Read our full review of the Altra Federal Credit Union Student Visa® Credit Card

Best for Studying Abroad

Bank of America® Travel Rewards Credit Card for Students

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on Bank Of America’s secure website

Bank of America® Travel Rewards Credit Card for Students

Annual fee
$0
Rewards Rate
Earn unlimited 1.5 points for every $1 you spend on all purchases everywhere, every time and no expiration on points.
Regular Purchase APR
16.99% - 24.99% Variable
Credit required
good-credit
Excellent/Good

Magnify Glass Pros

  • Chip + PIN technology: Most credit cards have chip + signature technology, and while this is good inside the U.S. you may face issue when traveling abroad. That’s where a card with chip + PIN functionality is the safest bet when traveling outside the U.S.
  • No foreign transaction fees: When you travel abroad you will not be charged additional fees like other cards.
  • Cashback rewards: You will earn unlimited 1.5 points for every $1 you spend on all purchases everywhere, every time and no expiration on points. This is a decent flat-rate that isn’t limited to bonus categories.
  • Redemption bonus: Bank of America customers will receive a 10% customer bonus every time cash back is redeemed into a Bank of America® checking or savings account. The bonus is even better if you’re a Bank of America® Preferred Rewards client — you could get a 25% – 75% bonus. Redeeming this way allows you to maximize your cash back rewards.
  • Free FICO® Score: The main reason to get a credit card as a student is to boost your credit score. So, actually being able to see your credit score is a huge help, especially as you can watch it climb over time with good credit management.

Cons Cons

  • Subpar cashback rate: The cash back rate for this card is lower than other cards. However, cards with higher cash back rates often charge foreign transactions fees, not making them ideal for students traveling abroad.
Bottom line

Bottom line

Students who are interested in studying abroad should consider the Bank of America® Travel Rewards Credit Card for Students. You’ll earn a good cash back rate on all purchases and will not be charge a foreign transaction fee on purchases made outside the U.S.

Best Secured Card

Discover it® Secured

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on Discover Bank’s secure website

Rates & Fees

Read Full Review

Discover it® Secured

Annual fee
$0
Minimum Deposit
$200
Regular APR
24.99% Variable
Credit required
bad-credit
Poor/New to Credit

Magnify Glass Pros

  • Cashback program: This card has a feature uncommon to other secure cards — a cashback program. You earn 2% cash back at restaurants or gas stations on up to $1,000 in combined purchases each quarter. Plus 1% cash back on all other credit card purchases.
  • Cashback Match™: Discover will match ALL the cash back you’ve earned at the end of your first year, automatically. There’s no signing up. And no limit to how much is matched (new cardmembers only). This is a great added bonus that increases your cash back in Year 1.
  • Automatic monthly reviews after eight months: Discover makes it easy for you to transition to an unsecured card with monthly reviews of your account starting after eight months. Reviews are based on responsible credit management across all of your credit cards and loans.

Cons Cons

  • Security deposit: You need to deposit a minimum of $200 in order to open this card. This will become your credit line, so a $200 deposit gives you a $200 credit line. If you want a higher credit limit, you need to increase your deposit. The security deposit is refundable, meaning you will receive your deposit back if you close the card, as long as your account is in good standing.
Bottom line

Bottom line

The Discover it® Secured is great for students who want to build credit. This card easily transitions you to an unsecured card when the time is right, and you can earn cash back. With proper credit behavior, you’ll soon be on your way to an unsecured card.

Read our full review of the Discover it® Secured

Best for No Credit History

Deserve® EDU Mastercard

APPLY NOW Secured

on Deserve’s secure website

Deserve® EDU Mastercard

Annual fee
$0
Rewards Rate
1% unlimited cash back on ALL purchases
Regular Purchase APR
20.49% Variable
Credit required
bad-credit
Fair/Good Credit or No Credit

Magnify Glass Pros

  • No credit history required: You can qualify for this card without any credit history, making this a great option for students new to credit. You don’t even need a Social Security number when applying.
  • Reimbursement for Amazon Prime Student*: This card will reimburse you for the cost of a year of Amazon Prime Student (valued at $49). You need to charge your membership to this card to qualify, and you will not be reimbursed for subsequent years’ membership fees.
  • No foreign transaction fee: Whether you travel abroad or study abroad, you can rest easy: There are no foreign transaction fees with this card.

Cons Cons

  • Low cash back rate: The rewards program has a subpar 1% unlimited cash back on ALL purchases. You can do better with some of the other cards mentioned in this post. Though as a student, rewards shouldn’t be your primary focus — instead, build your credit so you can qualify for better non-student cards.
Bottom line

Bottom line

The Deserve® Edu Mastercard for Students is a great choice for students who are looking to build credit. Deserve markets their cards for those who may have trouble qualifying for credit, and students who fall into this category may more easily qualify for this card than for cards from traditional banks. You can earn cash back, and receive a great promotional offer of a year of Amazon Prime Student for free*.

Also ConsiderAlso Consider

Golden 1 Platinum Rewards for Students

Golden 1 Credit Union Platinum Rewards for Students:

This credit card offers a snazzy rewards program: rather than accumulate points, you’ll get a cash rebate instead. All you have to do is make a purchase. At the end of the month, you’ll get a rebate of 3% of gas, grocery, and restaurant purchases, and 1% of all other purchases deposited back into your Golden 1 savings account at the end of the month. You can join Golden 1 by joining the Financial Fitness Association for $8 per year and keeping at least $5 in a savings account.

What should I look for in a student credit card?

The most important thing to consider when looking for a student credit card is that it charges no annual fee. You should never have to pay to build your credit score. Fortunately, most student cards don’t charge you an annual fee, but it’s still something to watch out for.

The second most important thing you should keep an eye out for are tools that help you learn about credit or even promote good credit-building habits. For example, some student credit cards will give you a free monthly FICO® score update. You can use this freebie to see in real time how your credit score changes as you build credit history by keeping the card open, or paying down your credit card balance, for example.

The last thing you should be considering when picking out a student credit card is the rewards program. I know, I know, it seems counterintuitive. But stick with me — I’ll show you why in the next question.

Why shouldn’t I be concerned about maximizing my rewards while in college?

Rewards cards are nice to have. But if you’re a college student, here’s the truth: you probably won’t spend enough to earn meaningful rewards.

Why? With a good rewards program, you can earn points or cash back. A small percentage of your monthly spending can add up quickly. However, given the tight budget that most college students live on, it will probably take a while to earn meaningful rewards. For example, if you earn 1.25% cash back and spend $300 a month on your card, you would earn $45 of cash back during the year.

College students are very good at making good use of $45. And our favorite card offers a great cash back rewards program. Just don’t expect to earn a lot of cash back, given the tight budget of a college student.

Why should I get a credit card as a college student?

There are a lot of great reasons why you should get a credit card, as long as you can commit to using it responsibly.

The single biggest reason why you should get a credit card as a college student is because you can start establishing a credit history now. When you graduate from college, you will need a good credit score to get an apartment. And your future employer will likely check your credit report. Building a good credit history while still in college will help prepare you for life after graduation.

Getting a credit card while in college can also train you to develop good credit habits now. But you need to be honest with yourself. If you find that you can’t avoid the temptation of maxing out your credit card, you might want to switch to a debit card or cash.

Finally, getting a credit card now can be the motivation you need to start learning about credit. These skills aren’t hard to learn, and they could save you thousands or even hundreds of thousands of dollars later in life (when you want a mortgage, for example).

What is the CARD Act and why should I care about it?

Many years ago, credit card companies would market on college campuses. You could get a free beer mug or t-shirt in exchange for a credit card application. And you would be able to qualify for a credit card without having any income. The Credit Card Accountability Responsibility and Disclosure (CARD) Act was signed into law in May 2009 to change a number of practices.

How did the CARD Act change student credit cards?

The CARD Act made a lot of changes in how credit card issuers do business with students. One of the biggest changes was requiring students to be able to demonstrate an ability to pay. If you are under 21 and do not have sufficient income (a campus job, for example), you would need to get a co-signer.

In addition, colleges must now limit the amount of credit card marketing on campus. The days of free t-shirts and pizzas in exchange for credit card applications are gone. But that doesn’t mean it is impossible for a college student to get a credit card. Some highly reputable banks and credit unions still offer student cards. And building a good credit score while still in college is still highly recommended.

How can I protect myself from racking up debt?

When used properly, credit cards are a very convenient method of repayment. However, when not used properly, you can end up deep in credit card debt. It is important to establish a healthy relationship to credit now, with your first credit card.

You should try to ensure that you pay off your credit card bill in full and on time every month. Ideally, you should set up an automatic monthly payment. And to keep yourself on track, take advantage of alerts offered by most credit card companies. You can even get daily text messages reminding you of your balance.

How can I automate my credit card usage?

If all of this sounds confusing, don’t worry. There’s actually a way you can automate your payments so you never even have to bother with the hassle of using a credit card. All it takes is a few minutes of upfront work.

First, you’ll need at least one recurring monthly bill of the same amount, such as Netflix or Spotify. Log in to your account and set up an automatic payment each month using your credit card. Make a note of how much your monthly bill costs.

Next, log in to your bank account. Set up a second automatic payment to go to your credit card each month for the same amount as the bill. If your bank doesn’t offer the option to set up automatic payments, you may also be able to set up your credit card to automatically withdraw the amount of the bill from your bank.

Because you know this bill will be for the same amount each month (barring any price increases), you can literally just leave this running in the background each month on autopilot. You don’t even have to carry your credit card in your wallet if you don’t want to. Then, when you graduate, you’ll automatically have an improved credit score!

What happens to my student credit card when I graduate?

Congratulations! You’ve made it to the finish line. But what about your student credit card? You will have a few options once you graduate and we detail them here.

Here is a summary of our favorite cards:

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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College Students and Recent Grads

Top Checking Accounts for College Grads

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Top Checking Accounts for College Grads
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For many college students, their default banking option while in school is a student checking account, which is typically free. Unfortunately, when you graduate you lose those benefits. Many student checking accounts will begin to charge you monthly maintenance fees unless you meet certain requirements.

So, where do you go from there?

Few young adults would turn to their parents for fashion or dating advice and, yet, one of the most common ways we’ve found young people choose their bank account is by going with whichever bank their parents already use. This could be a bigger faux pas than stealing your dad’s old pair of parachute pants.

The bank your parents use may carry fees or have requirements that don’t meet your lifestyle or budget, and make accounts expensive to use.

But where do you even begin to choose the right checking account?

When you’re nearing graduation, start planning your bank transition.

Many banks send a letter in the mail a few months prior to your expected graduation date informing you that your student checking account is going transition to a non-student account. If you’re not careful and you disregard the letter, you may be transitioned into an account that charges a fee if you don’t meet certain requirements.

You can always call the bank and ask to switch to a different account or you can choose a new account that offers more benefits, like interest and ATM fee refunds.

The 5 key things you should look for in a checking account

When you’re shopping around for a new checking account, there are several things you should look for to ensure you’re getting the most value from your account:

  1. A $0 monthly fee: Sometimes banks may say they don’t charge a monthly fee but read the fine print — they may require a minimum monthly balance in order to avoid it. There are plenty of free checking accounts available for you to open, so there’s no reason to stay stuck with an account that charges a monthly fee. Take note some accounts may require you to meet certain criteria to maintain a free account like using a debit card, enrolling in eStatements or maintaining a minimum daily balance.
  2. No minimum daily balance: Accounts without minimum daily balances mean you can have a $0 balance at any given time. This may allow you to have a free account without meeting balance requirements — note, other terms may apply to maintain a free account.
  3. APY: Annual Percentage Yield is the total amount of interest you will earn on balances in your account. Opening an account that earns you interest on your balance is an easy way to be rewarded for money that would typically sit without earning anything. Some checking accounts earn interest, albeit rarely, but you should definitely aim to earn a decent APY on your savings account.
  4. ATM fee refunds: You may not be able to access an in-network ATM at all times, so accounts providing ATM fee refunds can reimburse you for ATM fees you may incur while using out-of-network ATMs. Those $3 or $5 charges add up!
  5. No or low overdraft fees: Most banks charge you an overdraft fee of around $35 if you spend more money than you have available in your account. Therefore, it’s a good idea to choose an account that has no or low overdraft fees.

Top overall checking accounts for college grads

The best checking accounts will have a number of features that are both simple and low cost. For the top overall checking accounts, we chose accounts that have no monthly service fees, no ATM fees, refunds for ATM fees from other banks, interest earned on your deposited balances and with strong mobile banking apps. While there is no all-inclusive account that contains every benefit, the accounts below are sure to provide value whether you want a high interest rate, unlimited ATM fee refunds or 24/7 live customer support.

1. Aspiration – The Aspiration Summit Account

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$10

Unlimited

0.25% APY on balances up to $2,499.99

1.00% APY on balances $2,500+

The Aspiration Summit Account offers a wide range of benefits for account holders and has few fees. The amount to open is fairly low, and once you open your account there is no minimum monthly balance to maintain — though the more money you keep in your account, the more interest you’ll earn.

Another helpful feature is unlimited ATM fee refunds. That means you can either use in-network ATMs (filter by checking “SUM”) and avoid fees, or use any other ATM and be reimbursed for any fees incurred at the end of the month. If you’re looking for an interest checking account with no ATM fees, the Aspiration Summit Account is a solid choice.

LEARN MORE Secured

on Aspiration’s secure website

Member FDIC

2. nbkc bank – Personal Account

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$5

Up to $12 a month

0.90% APY on all balances

nbkc has several locations in the Kansas City region. Anyone can sign up for an account, however. This just means if you don’t reside nearby, you’ll have to rely on their online banking system.

The nbkc Personal Account earns interest on your balances and has no hidden fees. Typical checking accounts charge overdraft fees and stop payment fees, among others, but nbkc doesn’t.

The two fees that may apply are for less common transactions — $5 to send domestic wires and $45 to send or receive international wires.

You can use 24,000+ MoneyPass® ATMs in the U.S. for free, and if you use out-of-network ATMs you’ll be reimbursed up to $12 a month. This account is a good choice if you want a checking account that has minimal fees and earns interest.

LEARN MORE Secured

on nbkc bank’s secure website

Member FDIC

3. Ally Bank – Interest Checking Account

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$0

Up to $10 per statement cycle

0.10% on daily balances less than $15,000

0.60% on daily balances $15,000+

Ally Bank is an overall great online bank and their Interest Checking Account is a standout choice if you want to open an account without depositing any money. There are some standout perks with this card like 24/7 live customer care and the ability to send money with Zelle®.

There are also no ATM fees at U.S. Allpoint® ATMs, and you’ll receive up to $10 per statement cycle for fees charged at other ATMs nationwide. This account earns at a lower interest rate than the two mentioned earlier, but it’s still better than typical banks. Ally Bank’s Interest Checking Account provides account holders with a well-rounded experience and the ability to earn interest.

LEARN MORE Secured

on Ally Bank’s secure website

Member FDIC

Check out our full list of the best checking accounts.

Top free checking accounts for college grads

Free checking accounts are a great way to save on the monthly service fees many banks charge if you don’t meet deposit or balance requirements. The checking accounts listed below are all free, and if there are requirements, they’re minor like enrolling in eStatements or using a debit card. These accounts can be a good choice if you often have a fluctuating or low account balance and don’t want to worry about maintaining the requirements big banks impose to keep their accounts free.

1. Atlantic Stewardship Bank – Cash Back Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$1

Unlimited

Does not earn interest. But it does offer 0.50% cash back if you meet requirements*

Atlantic Stewardship Bank is headquartered in New Jersey and donates 10% of its profits annually to Christian and nonprofit organizations. Its Cash Back Checking account has a minor opening deposit and basic requirements for you to meet to get the added perks.

*When you make 12 debit card transactions each cycle and enroll in online banking and eStatements, you can receive unlimited ATM fee refunds and the chance to earn rewards at 0.50% cash back on debit card purchases.

LEARN MORE Secured

on Atlantic Stewardship Bank’s secure website

Member FDIC

2. Radius Bank – Radius Hybrid Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$10

Unlimited

0.85% on balances $2,500+

Radius Bank is a community bank headquartered in Boston. The Radius Hybrid Checking account is free as long as you open the account with the required deposit and meet three simple requirements: Enroll in online banking, receive eStatements and choose to receive a debit card. Unlike other checking accounts that require you to make a certain number of debit card transactions a month, Radius Bank does not. In addition to simple requirements, there are unlimited ATM fee refunds at the end of each statement cycle.

LEARN MORE Secured

on Radius Bank’s secure website

Member FDIC

3. Bay State Savings Bank – Free Kasasa Cash®

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$0

Unlimited

0.05% if qualifications are not met

(2.01% up to $20,000 if you meet requirements listed below*)

Bay State Savings Bank was founded in Worcester, Mass., and is an independent community bank with the goal of maintaining long-term relationships with consumers and giving back to the community via the Bay State Savings Charitable Foundation.

If you want a free account that is always free — meaning no requirements for you to meet — check out their the Free Kasasa Cash® account.

There’s a small minimum deposit to open the account and you automatically earn interest on your balances.

*If you want the added perks of unlimited ATM fee refunds and a higher 2.01% APY, you need to enroll in electronic statements and online banking, as well make 12 PIN-based debit card transactions each month.

If you don’t meet those requirements, you’ll still earn 0.05% APY, but will have to pay $0.75 per ATM transaction (plus any fee the ATM operator charges). There are thousands of surcharge-free ATMs provided by the SUM® ATM network.

LEARN MORE Secured

on Bay State Savings Bank’s secure website

Member FDIC

Check out our full list of the best free checking accounts.

Top high-yield checking accounts for college grads

Since most checking accounts offer little to no interest, high-yield checking accounts are a great way for you to maximize the money that typically would just sit in your account without earning interest. These accounts often offer interest rates that fluctuate depending on how much money you have in the account. However, in order to earn interest, there are some requirements that you may have to meet such as making a certain number of debit card transactions and enrolling in eStatements.

1. First Financial Credit Union – High 5 Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$0

Up to $10 per statement cycle

5.00% APY on balances up to $2,500

0.10% APY on balances of $2,500.01 or more

The High 5 Checking account from First Financial Credit Union is a free account that has fewer requirements for you to follow to qualify for the interest rates compared with other high-yield checking accounts. That’s why it tops our list.

All you need to do is enroll in eStatements and complete 15 signature-based debit card transactions in the statement period. In addition, there are surcharge-free STAR® ATMs to use, plus out-of-network ATM fee refunds of up to $10 per statement cycle. You can also earn Buzz® Points with your debit card that can be redeemed as statement credit, gift cards and other rewards.

LEARN MORE Secured

on First Financial CU (IL)’s secure website

NCUA Insured

2. America’s Credit Union – Affinity Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$0

None

5.00% APY on balances up to $1,000

0.10% APY on balances between $1,000.01 - $15,000

0.25% APY on balances over $15,000

Like most high-yield checking accounts, you’ll need to jump through a few hoops before you qualify for the higher rate. Here are the four requirements:

  • Have $15,000 in combined loans or deposits with ACU
  • Have a $500 direct deposit each month
  • Sign up for eStatements
  • Complete 10 debit transactions in-store that post and settle during the monthly statement period

In addition, there are 30,000+ surcharge-free ATMs for you to use, and while there are no ATM fee refunds, you receive 10 free ATM fee withdrawals per month — that means America’s Credit Union will not charge you for using an out-of-network ATM, but you will have to pay whatever fee the ATM operator charges.

LEARN MORE Secured

on America's Credit Union’s secure website

NCUA Insured

3. La Capitol Federal Credit Union – Choice Plus Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$2, waived if you enroll in eStatements

$0*

$50

Up to $25 per month

4.25% APY on balances up to $3,000

2.00% APY on balances $3,000-$10,000

0.10% APY on balances over $10,000 (or on all balances if you don’t make 15 or more posted non-ATM debit card transactions per month)

This checking account has a $2 monthly service fee, which can easily be waived if you enroll in eStatements.

*While the terms state a minimum balance requirement of $1,000 and a low balance fee of $8, the fee can be waived if you make 15 or more posted non-ATM debit card transactions per month.

To earn the top interest rate on your checking balance, you just need to make at least 15 or more posted non-ATM debit card transactions per month. There are numerous surcharge-free La Capitol ATMs for you to use, and after signing up for eStatements you can receive up to $25 per month in ATM fee refunds when you use out-of-network ATMs.

LEARN MORE Secured

on La Capitol Federal Credit Union’s secure website

NCUA Insured

Check out our full list of the best high-yield checking accounts.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alexandria White
Alexandria White |

Alexandria White is a writer at MagnifyMoney. You can email Alexandria at alexandria@magnifymoney.com

TAGS:

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College Students and Recent Grads, Pay Down My Debt

7 Best Options to Refinance Student Loans – Get Your Lowest Rate

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Updated: November 1, 2018

Are you tired of paying a high interest rate on your student loan debt? You may be looking for ways to refinance your student loans at a lower interest rate, but don’t know where to turn. We have created the most complete list of lenders currently willing to refinance student loan debt. We recommend you start here and check rates from the top 7 national lenders offering the best student loan refinance products. All of these lenders (except Discover) also allow you to check your rate without impacting your score (using a soft credit pull), and offer the best rates of 2018:

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

3.90% - 7.98%


Fixed Rate*

2.47% - 6.99%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on SoFi’s secure website

EarnestA+

20


Years

3.89% - 6.97%


Fixed Rate

2.47% - 6.30%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on Earnest’s secure website

CommonBondA+

20


Years

3.20% - 7.25%


Fixed Rate

2.69% - 7.21%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on CommonBond’s secure website

LendKeyA+

20


Years

3.49% - 8.82%


Fixed Rate

2.51% - 8.09%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
Learn more Secured

on LendKey’s secure website

Laurel Road BankA+

20


Years

3.50% - 7.02%


Fixed Rate

3.02% - 6.44%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured

on Laurel Road Bank’s secure website

Citizens BankA+

20


Years

3.75% - 8.69%


Fixed Rate

2.79% - 8.39%


Variable Rate

$90k / $350k


Undergraduate /
Graduate
Learn more Secured

on Citizens Bank (RI)’s secure website

Discover Student LoansA+

20


Years

5.24% - 8.24%


Fixed Rate

4.87% - 8.12%


Variable Rate

$150k


Undergraduate /
Graduate
Learn more Secured

on Discover Bank’s secure website

You should always shop around for the best rate. Don’t worry about the impact on your credit score of applying to multiple lenders: so long as you complete all of your applications within 14 days, it will only count as one inquiry on your credit score.

We have also created:

But before you refinance, read on to see if you are ready to refinance your student loans.

Can I get approved?

Loan approval rules vary by lender. However, all of the lenders will want:

  • Proof that you can afford your payments. That means you have a job with income that is sufficient to cover your student loans and all of your other expenses.
  • Proof that you are a responsible borrower, with a demonstrated record of on-time payments. For some lenders, that means that they use the traditional FICO, requiring a good score. For other lenders, they may just have some basic rules, like no missed payments, or a certain number of on-time payments required to prove that you are responsible.
LenderMinimum credit scoreEligible degreesEligible loansAnnual income
requirements
Employment
requirement
 
SoFi

Good or Excellent
score needed

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on SoFi’s secure website

Earnest

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Earnest’s secure website

CommonBond

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on CommonBond’s secure website

LendKey

680

Undergraduate
& Graduate

Private & Federal

$24K

Yes

Learn more Secured

on LendKey’s secure website

Laurel Road Bank

Not published

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured

on Laurel Road Bank’s secure website

Citizens Bank

680

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

$24K

Yes

Learn more Secured

on Citizens Bank (RI)’s secure website

Discover Student Loans

Not published

Undergraduate
& Graduate

Private & Federal

None

Yes

Learn more Secured

on Discover Bank’s secure website

Diving Deeper: The best places to consider a refinance

If you go to other sites they may claim to compare several student loan offers in one step. Just beware that they might only show you deals that pay them a referral fee, so you could miss out on lenders ready to give you better terms. Below is what we believe is the most comprehensive list of current student loan refinancing lenders.

You should take the time to shop around. FICO says there is little to no impact on your credit score for rate shopping as many providers as you’d like in a single shopping period (which can be between 14-30 days, depending upon the version of FICO). So set aside a day and apply to as many as you feel comfortable with to get a sense of who is ready to give you the best terms.

Here are more details on the 7 lenders offering the lowest interest rates:

1. SoFi

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on SoFi’s secure website

Read Full Review

SoFi : Variable rates from 2.47% and Fixed Rates from 3.90% (with AutoPay)*

SoFiwas one of the first lenders to start offering student loan refinancing products. More MagnifyMoney readers have chosen SoFi than any other lender. The only requirement is that you graduated from a Title IV school. In order to qualify, you need to have a degree, a good job and good income.

Pros Pros

  • Borrowers can refinance private, federal and Parent PLUS loans together: Through SoFi, borrowers have the ability to combine all of their student loans (private, federal and Parent PLUS) when refinancing. Along with the ability to refinance Parent PLUS loans, parents can also transfer the PLUS loans into their child’s name.
  • Access to career coaches: SoFi offers their borrowers access to their Career Advisory Group who work one-on-one with borrowers to help plan their career paths and futures.
  • Unemployment protection: SoFi offers some help if you lose your job. During the period of unemployment they will pause your payments (for up to 12 months) and work with you to find a new job. However, just remember that any unemployment protection offered by SoFi would be weaker than the income-driven repayment options of federal loans.

Cons Cons

  • No cosigner release: While they offer you the opportunity to refinance with a cosigner, it is important to know that SoFi does not offer borrowers the opportunity to release a cosigner later on down the road.
  • You lose certain protections if you refinance a federal loan: This con is not unique to SoFi (and you will find it with all other private lenders). Federal loans come with certain protections, including robust income-driven payment protection options. You will forfeit those protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

SoFi is really the original student loan refinance company, and is now certainly the largest. SoFi has consistently offered low interest rates and has received good reviews for service. In addition, SoFi invests heavily in building a “community” – which means you can start to get other benefits once you are a SoFi member.

SoFi has taken a radical new approach when it comes to the online finance industry, not only with student loans but in the personal loan, wealth management and mortgage markets as well. With their career development programs and networking events, SoFi shows that they have a lot to offer, not only in the lending space but in other aspects of their customers lives as well.

2. Earnest

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on Earnest’s secure website

Read Full Review

Earnest : Variable Rates from 2.47% and Fixed Rates from 3.89% (with AutoPay)

Earnest focuses on lending to borrowers who show promise of being financially responsible borrowers. Because of this, they offer merit-based loans versus credit-based ones. 

Pros Pros

  • Flexible repayment options: Earnest offers some of the most flexible options when it comes to repayment. They allow you to choose any term length between 5-20 years. You can choose your own monthly payment, based upon what you can afford (to the penny). Earnest also offers bi-weekly payments and “skip a payment” if you run into difficulty.
  • Ability to switch between variable and fixed rates: With Earnest, you can switch between fixed and variable rates throughout the life of your loan. You can do that one time every six months until the loan is paid off. That means you can take advantage of the low variable interest rates now, and then lock in a higher fixed rate later.
  • Loans serviced in-house: Earnest is one of just a few lenders that provides in-house loan servicing versus using a third-party servicer.

Cons Cons

  • Cannot apply with a cosigner: Unlike many of the other lenders, Earnest does not allow borrowers to apply for student loan refinancing with a cosigner.
  • No option to transfer Parent PLUS loans to Child: If you are a parent that is looking to refinance your Parent PLUS loan into your child’s name, it is important to note that this cannot be done through refinancing with Earnest.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

Earnest, who was recently acquired by Navient, is making a name for themselves within the student refinancing space. With their flexible repayment options and low rates, they are definitely an option worth exploring.

3. CommonBond

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on CommonBond’s secure website

Read Full Review

CommonBond : Variable Rates from 2.69% and Fixed Rates from 3.20% (with AutoPay)

CommonBond started out lending exclusively to graduate students. They initially targeted doctors with more than $100,000 of debt. Over time, CommonBond has expanded and now offers student loan refinancing options to graduates of almost any university (graduate and undergraduate).

Pros Pros

  • Hybrid loan option: CommonBond offers a unique “Hybrid” rate option in which rates are fixed for five years and then become variable for five years. This option can be a good choice for borrowers who intend to make extra payments and plan on paying off their student loans within the first five years. If you can a better interest rate on the Hybrid loan than the Fixed-rate option, you may end up paying less over the life of the loan.
  • Social promise: CommonBond will fund the education of someone in need in an emerging market for every loan that closes. So not only will you save money, but someone in need will get access to an education.
  • “CommonBridge” unemployment protection program: CommonBond is here to help if you lose your job. Similar to SoFi, they will pause your payments and assist you in finding a new job.

Cons Cons

  • Does not offer refinancing in the following states: Idaho, Louisiana, Mississippi, Nevada, South Dakota and Vermont.
  • You lose certain protections if you refinance a federal loan: When refinancing with any private lender, you will give up certain protections if you refinance a federal loan to a private loan.

Bottom line

Bottom line

CommonBond not only offers low rates but is also making a social impact along the way. Consider checking out everything that CommonBond has to offer in term of student loan refinancing.

4. LendKey

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on LendKey’s secure website

Read Full Review

LendKey : Variable Rates from 2.51% and Fixed Rates from 3.49% (with AutoPay)

LendKey works with community banks and credit unions across the country. Although you apply with LendKey, your loan will be with a community bank. Over the past year, LendKey has become increasingly competitive on pricing, and frequently has a better rate than some of the more famous marketplace lenders.

Pros Pros

  • Opportunity to work with local banks and credit unions: LendKey is a platform of community banks and credit unions, which are known for providing a more personalized customer experience and competitive interest rates.
  • Offers interest-only payment repayment: Many of the lenders on LendKey offer the option to make interest-only payments for the first four years of repayment.

Cons Cons

  • Rates can vary depending on where you live: The rate that is advertised on LendKey is the lowest possible rate among all of its lenders, and some of these lenders are only available to residents of specific areas. So even if you have an excellent credit report, there is still a possibility that you will not receive the lowest rate, depending on geographic location.
  • No Parent PLUS refinancing available: Unlike several of the other student loan refinancing companies, borrowers do not have the ability to refinance Parent PLUS loans with LendKey.
  • You lose certain protections if you refinance a federal loan: As when refinancing federal loans with any private lender, you will give up your federal protections if you refinance your federal loan to a private one.

Bottom line

Bottom line

LendKey is a good option to keep in mind if you are looking for an alternative to big bank lending. If you prefer working with a credit union or community bank, LendKey may be the route to uncovering your best offer.

5. Laurel Road Bank

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on Laurel Road Bank’s secure website

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Laurel Road Bank : Variable Rates from 3.02% and Fixed Rates from 3.50% (with AutoPay)

Laurel Road Bank offers a highly competitive product when it comes to student loan refinancing.

Pros Pros

  • Forgiveness in the case of death or disability: They may forgive the total student loan amount owed if the borrower dies before paying off their debt. In the case that the borrower suffers a permanent disability that results in a significant reduction to their income,Laurel Road Bank may forgive some, if not all of the amount owed.
  • Offers good perks for Residents and Fellows: Laurel Road Bank allows medical and dental students to pay only $100 per month throughout their residency or fellowship and up to six months after training. It is important for borrowers to keep in mind that the interest that accrues during this time will be added on to the total loan balance.

Cons Cons

  • Higher late fees: While many lenders charge late fees,Laurel Road Bank’s late fee can be slightly steeper than most at 5% or $28 (whichever is less) for a payment that is over 15 days late.
  • You lose certain protections if you refinance a federal loan: While not specific to Laurel Road Bank, it is important to keep in mind that you will give up certain protections when refinancing a federal loan with any private lender.

Bottom line

Bottom line

As a lender,Laurel Road Bank prides itself on offering personalized service while leveraging technology to make the student loan refinancing process a quick and simple one. Consider checking out their low-rate student loan refinancing product, which is offered in all 50 states.

6. Citizens Bank

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on Citizens Bank (RI)’s secure website

Read Full Review

Citizens Bank (RI) : Variable Rates from 2.79% and Fixed Rates from 3.75% (with AutoPay)

Citizens Bank offers student loan refinancing for both private and federal loans through its Education Refinance Loan.

Pros Pros

No degree is required to refinance: If you are a borrower who did not graduate, with Citizens Bank, you are still eligible to refinance the loans that you accumulated over the period you did attend. In order to do so, borrowers much no longer be enrolled in school.

Loyalty discount: Citizens Bank offers a 0.25% discount if you already have an account with Citizens.

Cons Cons

Cannot transfer Parent PLUS loans to Child: If you are looking to refinance your Parent PLUS loan into your child’s name, this cannot be done through Citizens Bank.

You lose certain protections if you refinance a federal loan: Any time that you refinance a federal loan to a private loan, you will give up the protections, forgiveness programs and repayment plans that come with the federal loan.

Bottom line

Bottom line

The Education Refinance Loan offered by Citizens Bank is a good one to consider, especially if you are looking to stick with a traditional banking option. Consider looking into the competitive rates that Citizens Bank has to offer.

7. Discover

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on Discover Student Loans’s secure website

Discover Student Loans : Variable Rates from 4.87% and Fixed Rates from 5.24% (with AutoPay)

Discover, with an array of competitive financial products, offers student loan refinancing for both private and federal loans through their private consolidation loan product.

Pros Pros

  • In-house loan servicing: When refinancing with Discover, they service their loans in-house versus using a third-party servicer.
  • Offer a variety of deferment options: Discover offers four different deferment options for borrowers. If you decide to go back to school, you may be eligible for in-school deferment as long as you are enrolled for at least half-time. In addition to in-school deferment, Discover offers deferment to borrowers on active military duty (up to 3 years), in eligible public service careers (up to 3 years) and those in a health professions residency program (up to 5 years).

Cons Cons

  • Performs a hard credit pull: While most lenders do a soft credit check, Discover does perform a hard pull on your credit.
  • No Parent PLUS refinancing available: Discover does not offer borrowers the option of refinancing their Parent PLUS loans.
  • You lose certain protections if you refinance a federal loan: Be careful when deciding to refinance your federal student loans because when doing so, you will lose access federal protections, forgiveness programs and repayment plans.

Bottom line

Bottom line

If you’re looking for a well-established bank to refinance your student loans, Discover may be the way to go. Just keep in mind that if you apply for a student loan refinance with Discover, they will do a hard pull on your credit.

 

Additional Student Loan Refinance Companies

In addition to the Top 7, there are many more lenders offering to refinance student loans. Below is a listing of all providers we have found so far. This list includes credit unions that may have limited membership. We will continue to update this list as we find more lenders:

Traditional Banks

  • First Republic Eagle Gold. The interest rates are great, but this option is not for everyone. Fixed rates range from 1.95% – 4.45% APR. You need to visit a branch and open a checking account (which has a $3,500 minimum balance to avoid fees). Branches are located in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland (Oregon), Boston, Palm Beach (Florida), Greenwich or New York City. Loans must be $60,000 – $300,000. First Republic wants to recruit their future high net worth clients with this product.
  • Wells Fargo: As a traditional lender, Wells Fargo will look at credit score and debt burden. They offer both fixed and variable loans, with variable rates starting at 4.74% and fixed rates starting at 5.24%. You would likely get much lower interest rates from some of the new Silicon Valley lenders or the credit unions.

Credit Unions

  • Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 3.75% APR. You can borrow up to $100,000 for up to 25 years.
  • Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 4.07% and fixed rates start at 4.70%.
  • Thrivent: Partnered with Thrivent Federal Credit Union, Thrivent Student Loan Resources offers variable rates starting at 4.13% APR and fixed rates starting at 3.99% APR. It is important to note that in order to qualify for refinancing through Thrivent, you must be a member of the Thrivent Federal Credit Union. If not already a member, borrowers can apply for membership during the student refinance application process.
  • UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $150,000 and rates start as low as 3.87% (variable) and 3.99% APR (fixed).

Online Lending Institutions

  • Education Loan Finance:This is a student loan refinancing option that is offered through SouthEast Bank. They have competitive rates with variable rates ranging from 2.55% – 6.01% APR and fixed rates ranging from 3.09% – 6.69% APR. Education Loan Finance also offers a “Fast Track Bonus”, so if you accept your offer within 30 days of your application date, you can earn $100 bonus cash.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 4.29% – 7.89% (fixed) and 4.25% – 7.85% APR (variable).
  • IHelp : This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.00% to 8.00% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Purefy: Purefy lenders offer variable rates ranging from 2.79%-8.39% APR and fixed interest rates ranging from 3.75% – 9.66% APR. You can borrow up to $150,000 for up to 15 years. Just answer a few questions on their site, and you can get an indication of the rate.
  • RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.

Is it worth it to refinance student loans?

If you are in financial difficulty and can’t afford your monthly payments, a refinance is not the solution. Instead, you should look at options to avoid a default on student loan debt.

This is particularly important if you have Federal loans.

Don’t refinance Federal loans unless you are very comfortable with your ability to repay. Think hard about the chances you won’t be able to make payments for a few months. Once you refinance student loans, you may lose flexible Federal payment options that can help you if you genuinely can’t afford the payments you have today. Check the Federal loan repayment estimator to make sure you see all the Federal options you have right now.

If you can afford your monthly payment, but you have been a sloppy payer, then you will likely need to demonstrate responsibility before applying for a refinance.

But, if you can afford your current monthly payment and have been responsible with those payments, then a refinance could be possible and help you pay the debt off sooner.

Like any form of debt, your goal with a student loan should be to pay as low an interest rate as possible. Other than a mortgage, you will likely never have a debt as large as your student loan.

If you are able to reduce the interest rate by refinancing, then you should consider the transaction. However, make sure you include the following in any decision:

Is there an origination fee?

Many lenders have no fee, which is great news. If there is an origination fee, you need to make sure that it is worth paying. If you plan on paying off your loan very quickly, then you may not want to pay a fee. But, if you are going to be paying your loan for a long time, a fee may be worth paying.

Is the interest rate fixed or variable?

Variable interest rates will almost always be lower than fixed interest rates. But there is a reason: you end up taking all of the interest rate risk. We are currently at all-time low interest rates. So, we know that interest rates will go up, we just don’t know when.

This is a judgment call. Just remember, when rates go up, so do your payments. And, in a higher rate environment, you will not be able to refinance your student loans to a better option (because all rates will be going up).

We typically recommend fixing the rate as much as possible, unless you know that you can pay off your debt during a short time period. If you think it will take you 20 years to pay off your loan, you don’t want to bet on the next 20 years of interest rates. But, if you think you will pay it off in five years, you may want to take the bet. Some providers with variable rates will cap them, which can help temper some of the risk.

You can also compare all of these loan options in one chart with our comparison tool. It lists the rates, loan amounts, and kinds of loans each lender is willing to refinance. You can also email us with any questions at info@magnifymoney.com.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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College Students and Recent Grads

Where a College Degree Matters Most

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

value of a college degree
iStock

Earning your college degree can open the door to more career opportunities and a higher income. But, as a recent MagnifyMoney study points out, college degrees are more valuable in some metropolitan areas than in others.

Where you live has a major impact on your income, both during your working years and after you retire. Correspondingly, college degree holders in some cities are more likely to find employment, become homeowners or secure health insurance coverage than their peers elsewhere.

We examined income, employment and related data for degree and non-degree holders across the 50 largest metropolitan areas in the U.S. and ranked each area from 0 to 100. This “final score” represents the overall value of a bachelor’s degree in each area.

Here’s what we discovered about where a college degree matters most.

Top 5 cities where degrees are worth the most

Based on the study, the earnings-and-opportunities premium for those with college degrees seem most pronounced in wealthy and highly educated cities. The five places where degree-holders’ incomes outperformed were:

  • 1. San Jose, Calif. — At 79.1, this tech-industry nexus had the biggest boost for those with four or more years of college.
  • 2. Washington, D.C. — The nation’s capital, also known for its universities and policy institutes, ranked second, at 78.4.
  • 3. San Francisco — This neighbor to top-ranking San Jose scored 71.7.
  • 4. Raleigh, N.C. — With a rating of 71.5, Raleigh, home to many major corporate headquarters, came in fourth place.
  • 5. Austin — The Lone Star state capital rounded out the top five, with a score of 70.6

… And 5 cities where degrees matter least

  • 50. Riverside, Calif. — Of the top 50 U.S. metro areas surveyed, this neighbor to Los Angeles ranked lowest in terms of college degrees translating into higher salaries, rating 43.2 in our study.
  • 49. Las Vegas — This entertainment hotspot also had one of the smallest premiums for degree holders, with a score of 43.3.
  • 48. Buffalo, N.Y. — With a rating of 45.7, the upstate New York metropolis came third from last on our list.
  • 47. Pittsburgh — Pennsylvania’s second-largest city also fell low on the list, with a score of 47.4.
  • 46. Louisville, Ky. — At 51.7, Louisville ranks fifth from the bottom.

How a college degree affects income

A college degree remains a valuable asset for professionals, even when considering the student debt that often goes with it. On average, people with a bachelor’s degree make $22,422 more than those with only a high school diploma, as well as $16,682 more than those who attended some college or even received an associate’s degree.

But the difference is most pronounced in certain areas, such as San Jose, Washington, D.C., and San Francisco. As noted above, San Jose tops the list for places where college degrees are the most valuable. In this Californian city where nearly half the population has a bachelor’s degree or higher, the median income for degree holders is 83.6% above that for non-degree holders.

San Jose residents with college degrees also don’t seem to have a ton of student debt dragging down their finances. The ratio of median student loan balance to median degree-holder income was just 18.6%, the lowest of any metro area included in this study.

On the flip side, a college degree doesn’t correlate with a major boost in income in all areas. In Las Vegas, where 22.8% of the residents have a bachelor’s or higher, a degree only increases median income by 16.9%. In Riverside, California, the increase is just 20.4%.

Both these figures are well below the overall average of 53.9%. Plus, the ratio of median student loan balance to median income was 52.5% in Las Vegas and 58.2% in Riverside. So not only do residents see a lower return on investment from their degrees, but they also end up with burdensome student loan debt that’s difficult to pay off.

A relatively smaller salary and larger debt creates other problems, too. For example, if you’re hoping to use student loan refinancing to lower your interest rate or reduce your monthly payments, you’ll have more trouble qualifying for refinance with less pay and a heavier debt load.

It appears that differences in cost of living or earning opportunities can impact the value of a college degree to a major extent. Although a college degree increases earning potential anywhere, its effects are much stronger in some areas than in others.

How a college degree affects retirement income

Although a four-year degree’s effect on income varies by location, its impact on funds for retirement appears to be more steady. Overall, college degree holders have an average of 42.2% more in retirement income than those without a degree. This figure only changes by about 10 percentage points or less when factoring in location.

Retirement income refers to the money you have coming in after you retire. This could come from retirement savings, but it might also come from other assets, insurance, inheritances, stocks, pensions or Social Security allowances.

Surprisingly, having a degree only meant a 34.4% boost in retirement income in San Jose, the city where degree holders chalked up the biggest jump in income. The only city where a degree was even less valuable in terms of retirement income was Cleveland, where degree holders received an average of 32.2% more in median retirement income.

So why are people with degrees in areas like Cleveland only making 32.2% more than those without degrees, while those in other cities, such as Austin, get an average of 52.9% more? One key difference might be the availability of blue collar and government jobs with pensions.

Certain areas might provide more public sector jobs and other employment opportunities that come with pensions but don’t require college degrees. In those cities, non-degree holders might be better financially protected, even if they don’t have as high an earning potential as those with degrees.

Unfortunately, pensions in the private sector have become less and less common, and there’s no guarantee that even public sector pensions will continue to be available in the future. For now, though, they seem to be helping retired degree and non-degree holders alike, albeit in certain cities more than others.

How a college degree affects employment opportunities

Earning your bachelor’s doesn’t just open the door to higher-paying jobs; it also increases your chances of gaining employment at all. According to our study, degree holders are 52.7% more likely to be employed than non-degree holders.

Holding a college degree was most useful in Birmingham, Baltimore and Milwaukee, where degree holders were 63.7%, 63.7%, and 62.9% more likely to be employed, respectively.

On the other side of the spectrum, it had the lowest effect in Austin (35.4%), Los Angeles (39%), and Denver (40.5%).

According to the Bureau of Labor Statistics, a higher level of education corresponds with lower unemployment across the U.S. Bachelor’s degree holders had the lowest unemployment rate of 2.1% in April 2018. The data showed jobless rates rising for workers at lower education levels: 3.5% for people with some college education, 4.3% for high school graduates, and 5.9% for those without a high school diploma.

That said, employment opportunities vary by location, and some cities host industries that have little presence elsewhere. So while your education level impacts your chances of employment, so too does the metropolitan area in which you live.

How a college degree affects homeownership

Since higher education can lead to a higher income, it should come as no surprise that degree holders are also more likely to own homes. Overall, college graduates are 21.8% more likely to be homeowners than non-college graduates.

In San Antonio, bachelor’s degree holders are 40% more likely to be homeowners. In Las Vegas, having a degree correlates with a 33.7% greater chance of owning a home, and in L.A. it comes with a 31.4% greater chance.

That said, having your degree doesn’t necessarily mean you’re more likely to own a house. In Pittsburgh, degree holders are only 0.7% more likely to be homeowners. And in Buffalo, that likelihood is only 11.3% higher.

Lots of factors play into homeownership, including the average age of the local population, how much student debt residents have and of course, the cost of real estate itself. In some areas, low prices might make it easier for all residents to buy homes, regardless of whether they hold a college degree and receive the higher income that often goes with it.

On the flip side, high costs of living could make homeownership cost-prohibitive for everyone, especially if degree holders are paying off large amounts of student debt. With high student loan payments, graduates might be wary of taking on a mortgage — or might not have the financial credentials to qualify in the first place.

How a college degree affects health insurance coverage

The U.S. has an employer-based health insurance system, meaning many of us rely on our employers to provide coverage. Since employers tend to subsidize health care costs, employer-sponsored plans are typically the most affordable.

Since we saw that college degree holders tend to have higher rates of employment, as well as bigger salaries, it follows that they’re also more likely to have health insurance. The difference is not particularly dramatic, though: Overall, those with degrees are just 11.5% more likely to have health insurance.

The gap is most evident in Houston, Dallas and Miami, where college graduates are 20.1%, 18.2%, and 18.1% more likely than non-college graduates to have coverage, respectively. But in Buffalo, Boston and Providence, the difference is minimal, with the relative likelihood at just 4.4%, 4.5%, and 5.9%, respectively.

One variable to consider is the availability of state-sponsored health insurance. For instance, Massachusetts has MassHealth, a state-run program that provides affordable health insurance to low-income residents. If your state has a similar program, you might not need employer-sponsored health insurance if you meet eligibility criteria. But if not, you could be facing high premiums without the help of an employer.

College degrees remain valuable, despite high rates of student debt

With the high rates of student debt in the U.S. — $1.48 trillion at the latest count — it’s natural to feel skeptical about the value of a college degree. But even with the student loans that often accompany higher education, a college degree remains valuable across the country.

Not only does it correlate with higher income, but it also boosts your chances of employment. Plus, having your degree could lead to higher retirement income, an increased chance of homeownership and a greater likelihood of health insurance coverage.

That said, the value of a degree isn’t the same everywhere. Some cities might be home to industries that look for college degree holders, while others might not have as many employment opportunities or high-income careers.

If you’re looking for the greatest return on investment for your degree, consider moving to an area with job opportunities in your current field. Cost of living might be another important factor when choosing where to live, as it could have a big impact on your chances of becoming a homeowner.

By being selective about where you reside, you can leverage your college degree into a high-paying career, as well as a higher income after you retire. Not only will earning your college degree likely lead to greater financial stability but optimizing where you live can also help put your degree to work for you.

Methodology

This study was conducted by Prabhat Kumar and Aditya Patil. It was limited to the 50 largest statistical metropolitan areas by population, and measured differences between people ages 25 and older with and without four-year degree educations or higher. Six metrics were scored from 0 to 100: ratio of median loan balance to median income for degree holders; difference in median incomes between degree holders and non-degree holders; difference in median retirement incomes; difference in unemployment rates; difference in homeownership rates; and the difference in health insurance coverage. These were assigned weights and then combined into one score. Income and rent values were normalized using the Regional Price Parity from the Bureau of Economic Analysis to account for variability in buying power across the MSAs. Data was sourced from 2016 American Community Survey data from the U.S. Census hosted on IPUMS and American FactFinder and from a student loan balance study published in May by LendingTree (our parent company).

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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College Students and Recent Grads

Are Your Extra Student Loan Payments Being Applied Correctly?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you want to pay off student loans faster, making extra payments is one of the smartest ways to do so. Beside knocking off some of your debt early, you’ll also pay less interest on the smaller remaining loan balance, saving you money over the life of your loan.

Paying extra on student loans and making it count, however, can be a little more complicated than just sending in an additional check. These extra payments are often applied in less-than-optimal ways that keep you from getting out of debt sooner, and in some cases they can even increase the amount you repay.

This can leave you frustrated and wondering why your prepayments aren’t making the dent you’d expected in your student loan debt. Here’s what could be going wrong with your extra student loan payments, and what you can do to make it right.

Common ways extra student loan payments get messed up

Every borrower should be aware of common errors and issues that can arise when paying extra on student loans. Reviewing these problems will ensure you know what to watch for when you prepay student loans.

Here are some frequently encountered issues surrounding extra student loan payments.

Student loan payments are applied to interest first

Perhaps you’ve been sending an extra payment every month a couple of weeks after paying your monthly bill. But to your surprise, the student loan balance hasn’t decreased by the full amount you sent in.

The reason that your payments don’t seem to go as far comes down to student loan interest. Payments you make toward student loans are almost always first applied to outstanding interest and fees, and principal second.

So an extra payment will be used first to pay interest charges, which are assessed based on your daily balance. Only then is the leftover applied to the principal.

Extra payments are credited against future payments

Perhaps you notice something even weirder — you make an extra payment, and then your due date is simply pushed back. What gives?

Some student loan servicers or lenders will credit extra payments toward a future payment, according to the Consumer Financial Protection Bureau. Most student loan servicers, such as Nelnet, will apply the extra payment to a student loan principal, but then advance the due date for you next payment.

Having your due date moved back isn’t always ideal, however, especially if you’re making extra payments so you can get out of debt faster. A delayed payment could throw off automatic payments set up by your servicer, for instance.

You might have to manually send in your extra payment to keep things on track. And if you choose not to make your next payment as usual, the payment you’re making isn’t exactly “extra,” but simply made early.

Lenders reset monthly payments

Another common practice among some student loan servicers and lenders is to reset a student loan repayment schedule, also called “redisclosure,” according to the CFPB.

When a redisclosure happens on your loan, your loan is re-amortized under a new loan schedule which can cause your monthly payments to rise or fall. Most often, however, lenders will lower monthly payments that will repay the new balance under the old loan term.

This actually occurred with my husband’s private student loans, after we started making extra payments on these each month. It wasn’t much — the minimum was around $260 per month, and we simply rounded payments up to an even $300.

But then something unexpected happened: Every month, we’d get a notice that our minimum payment had been recalculated and ever-so-slightly lowered. If we made this new, lower minimum payment, we’d pay off the loans under the original 20-year term.

While having the option to pay less seemed nice at the time, we never did. Following the new, lower payments would have meant paying more in interest and spending more time in debt than we wanted.

Extra payments aren’t applied to the preferred loan

Most students borrow as they advance through school, originating one or two different loans per semester. This means that most borrowers’ student debt is spread across multiple loans.

If you have the same servicer for multiple student loans and make an extra payment, however, it won’t be obvious to the servicer how you want the payment applied. In most cases, the servicer will split the extra payment across your student loans.

This can cause issues, however, if you want to target one balance at a time — an action at the heart of popular payoff strategies, such as the debt snowball or debt avalanche.

The debt avalanche method, in which you pay the highest-interest loan off first, can be especially effective in slashing the total amount you pay in interest on your student debt. Consider this example from the CFPB in which a borrower who, a year into repayment, begins paying $100 extra each month on three student loans, each with a balance of $10,000 but with varying interest rates.

 Starting BalanceStandard monthly payment without extra $100Monthly payment if extra $100 split evenly among loansMonthly payments if extra $100 applied to highest-rate loan

Loan 1 (7% interest rate)

$10,000

$116.11

$149.44

$116.11

Loan 2 (9% interest rate)

$10,000

$126.68

$160.02

$126.68

Loan 3 (13% interest rate)

$10,000

$149.31

$182.64

$249.31

Total Monthly Payment

$392.10

$492.10

$492.10

Savings at Payoff

$4,514.98 saved over life of loan

$5,403.62 saved over life of loan

Source: Consumer Financial Protection Bureau

The difference is real: If the borrower tells their servicer to apply the extra $100 payments to their highest-interest loan, they will pay nearly $900 less in interest than if they were divided evenly across all three loans.

5 tips to make extra student loan payments without a hitch

Now that you’re aware of common issues that can come up when paying extra on student loans, you might be wondering how you can avoid them.

Here are five steps you can take to ensure your student loan payments are applied exactly when, where and how you’d prefer.

1. Find your lender’s policy on prepayments

One of the first things you should do is get familiar with your servicer or lender’s policy for applying extra student loan payments (often called prepayments). Usually, this policy will spell out the lender’s standard method of applying any extra payments made above and beyond the monthly minimum.

For example, you’ll know whether extra payments are divided up proportionally across all outstanding loans (as with FedLoan) or applied first to the highest-interest loan (as with NelNet). You’ll also get a heads up on whether the student loan servicer will advance your due date or redisclose your loan if you prepay on this debt.

2. Instruct your servicer how to apply extra student loan payments

Just because your servicer has a policy for handling extra student loan payments doesn’t mean you’re stuck following it. Simply tell your servicer how you’d prefer your extra payments to be applied, and most will comply.

All it takes is sending a letter to your lender with instructions on how you’d like it to handle all excess repayment. Here is a student loan payment instruction sample you can follow, provided by the CFPB. (And here is the full sample letter.)

I am writing to provide you instructions on how to apply payments when I send an amount greater than the minimum amount due. Please apply payments as follows:

  1. After applying the minimum amount due for each loan, any additional amount should be applied to the loan that is accruing the highest interest rate.
  2. If there are multiple loans with the same interest rate, please apply the additional amount to the loan with the lowest outstanding principal balance.
  3. If any additional amount above the minimum amount due ends up paying off an individual loan, please then apply any remaining part of my payment to the loan with the next highest interest rate.

It is possible that I may find an option to refinance my loans to a lower rate with another lender. If this lender or any third party makes payments to my account on my behalf, you should use the instructions outlined above.

Retain these instructions. Please apply these instructions to all future overpayments. Please confirm that these payments will be processed as specified, or please provide an explanation as to why you are unable to follow these instructions.

This letter is just a template, so feel free to make any adjustments you see fit. For example, if you have unsubsidized loans and subsidized loans with the same interest rate, you might instruct your lender to apply payments to the unsubsidized loan first. Or, you might want to instruct your servicer not advance the due date when you make extra payments.

You can also add instructions specific to any individual extra payment if you’d like it applied differently than the servicer’s policy or your previous instructions.

3. Select corresponding payment options

Fortunately, many student loan servicers and lenders are making it easier for borrowers to clarify how they want extra payment applied.

Nelnet, for example, will display a box that reads “Do not advance due date.” If you leave it unchecked, your due date will be moved back in line with how much extra you’ve paid. Select NelNet’s “Do not advance due date” option, however, and the payment will be applied without affecting future payments.

Similarly, FedLoan allows borrowers to pay off extra on a specific loan by “targeting” their payments. By doing so, you get to select exactly the loan you want to pay extra on and indicate that you don’t want this amount applied toward a future payment.

For borrowers who prefer to pay by paper check, you can still provide instructions with your payment. Simply write the instruction on the memo line, such as “Apply to highest-interest loan only” or “Do not advance due date.” Or you can write them on a separate paper to mail with the check, and simply indicate on the memo line to refer to the enclosed instructions.

4. Keep records of all instructions and payments made

Even if you’ve done your part to communicate with your lender, your responsibility doesn’t stop there. You’ll want to keep excellent records of any extra payments you make.

  • Save copies of any instructions you send to your lender about how to apply extra payments, along with any confirmation or response it sends you in return.
  • Keep proof of payment for all funds you send to your student loan servicer. Keep copies of any check you write. Take screenshots of any confirmation or other messages that display after making an extra payment online.
  • Check that payments are processed without a hitch. Review statements sent to you by your lender, and make sure that any payments and changes to your principal listed are in line with your own records.

5. Contact your student loan servicer

If you ever run across anything that doesn’t match up, reach out to your lender or servicer as soon as possible. They can review your account, see where the discrepancy is arising, and resolve any issues so you can reap the full benefits of your extra student loan payments.

While some borrowers have issuers with their student loan servicer, many others make extra payments with no trouble at all. By keeping an eye on your student debt and applying these tips, you can ensure your student loan payments go further toward getting you out of debt.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elyssa Kirkham
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Elyssa Kirkham is a writer at MagnifyMoney. You can email Elyssa here

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College Students and Recent Grads

How to Refinance Your Student Loans, Even If You Didn’t Graduate

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you left school before completing the requirements for your degree, you’re not alone. According to College Atlas, 56% of students who start a four-year school drop out before year six of their college careers. Finances play a big role in the decision, with the study finding that students from low-income households were 7.6 times more likely to withdraw than those from well-off backgrounds.

But even if you left school before graduating, you might still owe a significant amount in student loans. Refinancing is one strategy for managing debt, but your options for lenders who will refinance student loans without a degree are limited. If you’re looking for help refinancing student loans without a degree, here’s what you need to know.

Lenders offering student loan refinance with no degree

When you refinance student loans, you can simplify your debt by consolidating multiple student loans into one. You might qualify for a lower interest rate, and you can adjust your monthly payments by choosing new repayment terms.

Although your options for refinancing student loans without a college degree are narrower, they do exist. The following lenders will work with you to restructure your debt, even if you didn’t graduate from college. Note that rates and terms below are accurate as of October 2018.

  • Citizens Bank
    • Refinances student loans starting at $10,000
    • Offers APRs between 2.79% and 8.69%
  • Discover
    • Refinances student loans from $5,000
    • Offers APRs between 4.87% and 8.24%
  • PNC
    • Requires that you’ve been repaying your student loans for at least 24 months
    • Offers rates between 4.98% and 7.59% APR
  • RISLA
    • Refinances student loans starting at $7,500
    • Offers APRs between 3.49% and 7.64% (with autopay)
  • Wells Fargo
    • Refinances student loans starting at $5,000
    • Offers rates between 5.24% and 9.99% APR

Most online lenders, however, such as SoFi and CommonBond, do require a degree as part of their refinancing eligibility criteria. So if you’re searching for a lender, you might want to first look at the ones listed above. If possible, get a few different offers so you can find one with the best terms.

Eligibility for student loan refinance without a degree

In order to refinance student loans, you’ll need to fulfill certain eligibility requirements. First, you’ll have to meet the lender’s underwriting standards for credit and income.

Although few lenders advertise a specific cutoff, most look for a decent credit score. They also look for a steady source of income that you’ve had for a number of months or years. RISLA, for instance, requires that you’re making an annual salary of $40,000 or more.

Along with strong credit and income, you might also need to have a certain amount in savings and to meet a threshold for debt-to-income ratio. If your debt-to-income ratio is too high, the lender will be concerned about your ability to pay back the loan.

If you can’t fulfill these criteria, there is another option: You could apply with a creditworthy cosigner. Applying with a cosigner could boost your chances of approval, as well as help you qualify for a lower interest rate.

However, your cosigner will share responsibility for the debt, meaning their finances will suffer if you can’t pay back the loan. Make sure you and your cosigner set clear expectations about who will repay the debt — and what will happen if you lose your income — before entering a student loan refinance agreement together.

Pros and cons of refinancing student loans

Although refinancing student loans with no degree can be tricky, finding the right lender could be well worth it. When you refinance student loans, you could snag a lower interest rate on your debt. As a result, you could save hundreds or even thousands of dollars over the life of your loans.

You’ll also get the chance to choose new repayment terms. You could pick a shorter term to get out of debt faster. Or you could choose a longer term to reduce your monthly student loan payments and give your finances some breathing room.

Another benefit to student loan refinancing is combining multiple loans into one. If you’re struggling to track various due dates and bills, this consolidation could simplify repayment.

But at the same time, there are potential disadvantages to refinancing student loans.

When you refinance federal loans, for instance, you turn them into a private one. As a result, you lose access to federal protections and benefits, such as income-driven repayment plans, forbearance, deferment and Public Service Loan Forgiveness. If you’re relying on any of these programs, refinancing wouldn’t make sense for your situation.

But if you don’t need any federal options — and you’re confident you can pay back your loan on time — student loan refinance could be a savvy move. You’ll just have fewer options for refinancing providers than a borrower who graduated with his or her degree.

Other options for student loan repayment

If you’re looking for strategies to manage your student loans, refinancing isn’t your only option. If you have federal student loans, for instance, you could adjust your monthly payments with an income-driven repayment plan. You have four main options:

  • Income-Based Repayment
  • Pay As You Earn
  • Revised Pay As You Earn
  • Income-Contingent Repayment

All these income-driven repayment plans take your income and family size into account to adjust your monthly bills. They also extend your terms to 20 or 25 years, and if you still have a balance at the end, the government forgives the rest. That said, any forgiven amount will be treated as taxable income, so you’ll still have one last bill to pay on your debt.

And if you’re facing financial hardship, you could postpone payments on your federal student loans through forbearance or deferment. These programs can help you avoid default, but interest might continue to accrue on your loans.

Finally, you could choose a career that qualifies for student loan forgiveness or repayment assistance. Some of the careers eligible for forgiveness do require a degree, however, so you might consider returning to school to increase your career mobility.

These programs, by the way, are available for federal student loans, but not for private ones. If you’re struggling to pay back your private student loans, speak with your lender or servicer about your options. Although private lenders don’t typically offer as many options, yours might be able to work with you to find a solution.

Managing your student loans after withdrawing from college

Even if you didn’t finish college, you might be stuck paying off student loans from the years you did attend. That debt can be tough to pay back, especially if you have high interest rates.

But once you have a decent credit score and steady income — or can apply with a cosigner who does — you could refinance for a lower rate. Although you won’t qualify with every lender, you do have options for refinancing student loans without a degree.

And if you’re struggling to get hired for a job without your bachelor’s degree, consider returning to school to finish up your graduation requirements. Scholarships and grants could help you cover costs so you don’t have to take on additional debt to return to school.

Although it’s not for everyone, returning to school could increase your earning potential and career opportunities. In the end, you can use your higher income to get rid of your student debt once and for all.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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