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Can You Discharge Student Loans in Bankruptcy?

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Students throwing graduation hats

Student loans have been a hot topic in recent news and for good reason. The level of student loan debt in the United States has grown substantially over the past several decades. As of 2014, the balance of student loan debt reached $1.2 trillion. Students burdened with debt have one option when it comes to repayment: pay the debt. However, in extreme circumstances, it may be possible to completely discharge student loan debt in bankruptcy.

How to Discharge Student Loans in Bankruptcy

The U.S. Department of Education website provides four cases in which federal student loans may be discharged. Those include:

  1. Closed school discharge
  2. Total and permanent disability discharge
  3. Death discharge
  4. Bankruptcy discharge

There are a few more options for partial discharge with qualifications. The website lists bankruptcy as an option in rare cases.

“If you file Chapter 7 or Chapter 13 bankruptcy, you may have your loan discharged in bankruptcy only if the bankruptcy court finds that repayment would impose undue hardship on you and your dependents. This must be decided in an adversary proceeding in bankruptcy court. Your creditors may be present to challenge the request.”

The U.S. bankruptcy court will use the three-part Brunner test to determine if the student loans are eligible for discharge in bankruptcy. To show hardship you must show that:

  1. If you were forced to repay the loan, you would not be able to maintain a minimal standard of living.
  2. There is evidence that this hardship will continue for a significant portion of the loan repayment period.
  3. You made good-faith efforts to repay the loan before filing bankruptcy (usually this means you have been in repayment for a minimum of five years).

If you are unable to satisfy any of the three requirements, the loan will not be discharged. However in a study published in the American Bankruptcy Law Journal by Jason Iuliano, 39% of those who applied were granted at least some discharge.

For example, if you are 30 and your student loan payments make up a significant portion of your total income, and you can prove that this hardship will continue for many years you might be able to have your student loans included in your bankruptcy.

But if you just started making payments and have not attempted to use available programs such as income-based repayment, then you may have a harder time discharging your student loans.

If you feel that bankruptcy is for you, consult a lawyer and consider including your student loans.

[Struggling to pay back private student loans? Learn about loan modification here.]

Ramifications of Bankruptcy

Choosing to eliminate your student loans using bankruptcy is a difficult path. Moreover, you will mark your credit report for 7 or 10 years with a bankruptcy filing. This could prevent you from purchasing a home, opening new lines of credit, and benefiting from the best rates to borrow money. It could also prevent you from getting a job with credit pre-screening.

Options So You Can Avoid Bankruptcy

If you would rather avoid bankruptcy, here are more ways to eliminate your student loan debt.

Reduce or Halt Your Current Payment

Determine if you are eligible for deferment or forbearance. A deferment is a period during which repayment of the principal and interest of your loan is temporarily delayed. Depending on the type of loan you have, the federal government may pay the interest on your loan during this period.

If you can’t make your scheduled student loan payments, but don’t qualify for deferment, a forbearance may allow you to stop making payments or reduce your monthly payment for up to 12 months.

[Miss a student loan payment? Learn how to find help here.]

Choose a Reduced Payment Plan

For federal loans, there are a few repayment plans that can help you manage your student loan repayment. Choose one of the following:

  • Income Based Repayment Plan – Payments are calculated based on your discretionary income and can extend up to 25 years of repayment.
  • Graduated Repayment Plan – Payments start off small then increase every two years for a maximum of 10 years of repayment.
  • Extended Repayment Plan – Payments can extend up to 25 years of repayment.
  • Pay as You Earn Repayment Plan – Payments are calculated based on your discretionary income and can extend up to 20 years of repayment.
  • Income-Contingent Repayment Plan – Payments are based on your adjusted gross income and can extend up to 25 years of repayment.
  • Income Sensitive Repayment Plan – Payments are based on your annual income and last for a maximum of 10 years; however, you will pay more over time versus the standard 10-year repayment plan.

[Read about Student Loan Forgiveness Programs Here.]

Career Based Discharged

You can also have your student loans discharged if you take a certain career path and your loans are: Direct, FFEL Program, or Federal Perkins loans. Private loans are often not eligible for forgiveness programs. As an eligible public service employee you can have 100% of your loan balance forgiven after 120 consecutive payments; this assumes that you maintain your status as an eligible public service employee while making those payments. If combined with one of the reduced payment plan options that could mean a substantial reduction in total repayment balance.

Check out our Student Loan Refinance table to compare your options.

 

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College Students and Recent Grads

America’s Biggest Millennial Boomtowns

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 August, we published our study of America’s biggest boomtowns. It looked at three categories of data — industry growth, population and housing changes and workforce opportunities. As a follow-up to our study, we are providing a look at the top 50 metro areas that are attracting millennials and helping them prosper.

Using four metrics (millennial population change, workforce participation, unemployment rate and median wages), we scored the top 50 cities. A 100 was the highest possible score.

Here is a look at our findings.

Hover over a metro in the map below to see how it performed between 2011 and 2016.

Key findings

  • San Francisco topped our list of millennial boomtowns with a final score of 89, thanks to top growth in the millennial labor force, wages and overall population.
  • Denver and Austin, Texas, come in second and third, with scores of 80.6 and 80. The two cities saw notable millennial population growth and dropping unemployment rates.
  • All but two of the top 10 metros lie west of the Mississippi River. Four are on the West Coast and two are in Texas.
  • Virginia Beach came last on our list, mostly due to its shrinking millennial labor force and lackluster unemployment numbers. It had a final score of 9.7.
  • Providence, R.I., and Philadelphia rounded out the bottom three with scores of 13.3 and 21.7, respectively. Providence actually lost almost 3% of its millennial population, and wages for millennials in Philly only rose by 2.4%.
  • Oklahoma City saw the biggest wage increase: Millennials in 2016 enjoyed 33.6% more in median earnings than they did in 2011, although that still leaves them behind 32 other metro areas in terms of absolute dollars.
  • Unemployment among millennials was nearly cut in half in Nashville, where the rate dropped from 10.3% to 5.3% (a 48.1% change).

The scope of our research

Using the Pew Research Center’s definition of millennials (those born between 1981 and 1996) means that a portion of millennials would have been minors or pursuing an education or job training in 2011. To avoid including the working statistics of high schoolers, we limited this study to people born between 1981 and 1991, meaning people who would be between the approximate ages of 20 and 30 years old in 2011.

Even with that restriction, it’s important to remember that in general, people enjoy better employment opportunities and see higher wages as they gain experience, skills and workplace sophistication. Also, more people enter the workforce as they complete their educations, which often happens in their early 20s. Therefore, at least some of the increases in workforce participation and earnings are due to the natural age progression of this cohort.

Even so, we find that the millennial population is growing – and prospering – more in some places than in others. Millennials who live in the metros at the bottom of our list may be at risk for accruing more debt and less wealth over their lifetimes, thanks to opportunity losses. Those who move to the cities at the top of the list may find that they’re better equipped to pay down debt and gain assets at a faster rate as they gain toeholds in more lucrative job paths.

The elements of a millennial boomtown

More millennials

We tracked the five-year (2011-2016) population changes of those born between 1981 and 1991. Interestingly, millennial populations actually decreased in nine of the 50 metros we analyzed, which demonstrates that many millennials are actively migrating.

Labor force participation

It’s a truism in economics that when local working conditions and opportunities improve, many people who don’t participate in the workforce will decide that it’s a good time to pursue outside employment. Therefore, we wanted to see not just the change in overall population, but the change in the number of people who work or are actively seeking work. The size of the labor force generally increased, even in places where the millennial population shrank, except in Providence and Virginia Beach.

Unemployment

How much has the unemployment rate declined for millennials over that five-year period? Unemployment for the nation as a whole has dropped significantly since 2011, but there’s a big difference between the 19.6% drop for millennials in Las Vegas and the 48.1% drop in Nashville.

Median wages

We calculated the change in median wages for those born between 1981 and 1996. As discussed above, we would expect wages to go up for this group, generally, simply because they aged and gained worked experience during the intervening years. However, we found that median wages actually dropped a smidge in Richmond, Va., and Washington, D.C.

The biggest millennial boomtowns

1. San Francisco

Final score: 89.0
Housing is a struggle in San Francisco, but that isn’t deterring millennials. While the overall population of millennials increased by 16.2%, the millennial workforce jumped by 31.1%. To put that into context, the workforce increase represents about 5,000 more people than the population increase. That could be because so many people in the Bay Area have secondary and advanced degrees, meaning they may not have entered the workforce until they were well into their 20s, or may have dipped out of the workforce to further their education.

The unemployment rate for millennials dropped 40.3%, which is fairly impressive. That still only put San Francisco at No. 15 for highest unemployment rate drop among millennials. Fourteen other metros had bigger drops, including Detroit (42.9%), Minneapolis (44.4%), and Columbus, Ohio (45.7%).

But for millennials who are working, median wages have skyrocketed 32.4%, to $40,304. That’s the second highest wage on our list after neighboring city San Jose, and the second largest wage increase after Oklahoma City.

2. Denver

Final score: 80.6
Denver boasts the biggest increase of the millennial population between 2011 and 2016, at 18.7%.

Its 27.9% increase in labor force is second to San Francisco. But about 13,000 of the new arrivals aren’t working or are looking for work. That may be because despite the second sharpest drop in millennial unemployment (46.3%), median millennial wages have only increased 13.1%, to $32,243. That increase is the 15th smallest jump on our list.

3. Austin, Texas

Final score: 80.0
Austin has changed immensely in recent years. It has seen a population explosion over the last few years, and millennials were certainly part of that burst. Their numbers increased by 17.5%, the second biggest gain on our list behind Denver.

Despite an impressive workforce gain of 22.6% (5th highest), more millennials simply moved to Austin over joining the workforce. However, that’s not surprising for a major university town with extensive graduate and undergraduate programs.

Further, unemployment dropped 45.1% for millennials — the fourth biggest decline on our list — and median wages increased 21.7%, to $30,228.

4. Nashville, Tenn.

Final score: 76.4
Nashville seems eager for new millennial employees, as demonstrated by the biggest drop in unemployment of any metro on our list (48.1%). The city also has the 6th lowest millennial unemployment rate (5.3%). Overall, the millennial population increased by 11.4% (9th highest), and the labor force rose by 16.7% (15th highest).

Although Nashville also saw the third highest median wage increase (30.4%), that still only increased median wages up to $29,220. That median wage puts Nashville in the middle of the pack in terms of absolute dollars.

5. San Jose, Calif.

Final score: 74.7
The seat of Silicon Valley is the first place on our list where more millennials entered the labor force than actually moving into the metro. The millennial population increased by 13.3%, and 27.5% more are working or looking for work. That comes out to a difference about 4,000 people.

That’s somewhat surprising considering the relatively mediocre millennial unemployment rate of 6.7% (18th lowest) and comparatively modest median earnings increase of 25.9% (10th highest on the list). Of course, millennials in this city see the highest earnings of any metro on our list, with a median wage of $42,319.

The most sluggish cities for millennials

50. Virginia Beach, Va.

Final score: 9.7
Virginia Beach came in last on our list by performing dismally across all four metrics. The metro did enjoy a small bump (3.2%) of millennials between 2011 and 2016, but 2% fewer millennials were engaged in the labor force, the worst showing on our list. That could be because while the 7% unemployment rate isn’t the highest on our list (Riverside, Calif., takes home that honor), the 20.3% reduction was actually the smallest across the 50 metros.

Median wages for millennials have only increased 6.6%, which is 7th lowest among metros we reviewed, to $28,212. That median is distinctly middle of the pack, but the growth rate suggests there may be wage stagnation, as we would expect this age group to see wage gains just by moving from entry-level to more experienced levels over that five-year period.

49. Providence, R.I.

Final score: 13.3
Providence saw its millennial population drop by 2.8%. Part of this may be attributed to the fact that Providence is a college town. Thus, this drop may represent millennial students who have moved on after completing their undergraduate and graduate degrees. However, we did find that this metro area had one of the smallest population increases in our previous study.

Similarly, the millennial labor force shrank by 0.3%. The high millennial unemployment rate of 8.5% (8th worst) may have something to do with that, along with the 11th lowest income increase (9.9%).

48. Philadelphia

Final score: 21.7
Perhaps it’s no surprise that the millennial population of Philly only increased by 0.7%. Unemployment for that age group is 8.8% and median earnings only increased by 2.4%. That earnings increase represents a paltry five-year cost of living raise for most people.

The millennial workforce did rise by 10.6% during that period, however. It seems that local residents are picking up whatever new jobs are becoming available.

47. Richmond, Va.

Final score: 26.3
Richmond has the ignominy of the worst wage change for millennials. Median earnings went down by 2.1%. Washington, D.C., was the only other metro to see a negative earnings change, at 1%, but still managed to rank 18th overall, thanks to strong showings in other categories.

Although Richmond has a respectable millennial unemployment rate of 7.6%, an unemployment decrease of 32.3% was 12th lowest on our list and thus didn’t earn many points. A workforce increase of 12.4% was dead center of the pack, and the millennial population growth of 3.9% ranked 32 out of 50.

46. St. Louis

Final score: 26.8
St. Louis saw its millennial population shrink by 1.1%. Workforce participation was up by 6% (40th out of 50), but some or all that can probably be attributed to young adults entering the workforce after school or training, rather than attractive economic conditions.

Even though median earnings in 2016 were the 16th highest at $30,228, the earnings increase of 14.2% ranked 33rd highest on the list of 50. Despite these findings, a March 2018 study we conducted found that St. Louis was one of the best places for working women.

Top 5 and bottom 5 cities in each metric

Top 50 metro areas in the U.S.

Methodology

Using data from the U.S. Census American Community Survey, hosted on American FactFinder and by IPUMS USA, we tracked the five-year change between 2011 and 2016 (the last year for which all data was available) for those born between 1981 and 1991. This represents a subset of millennials, who are generally defined as those born between 1981 and 1996 (the reason for limiting the population to this subset is described above). These millennials would have been between the approximate ages of 20 and 30 in 2011 and 25 and 35 in 2016.

We limited the review to the 50 largest metropolitan statistical areas (“MSAs”) due to limited data availability.

The analyzed metrics were:

  • Population data included the age groupings of 20-24 and 25-29 for 2011; and 25-29 and 30-34 for 2016.
  • Labor force data included the age groupings of 20-21, 22-24 and 25-29 for 2011; and 25-29 and 30-34 for 2016.
  • Employment data included the age groupings of 20-21, 22-24 and 25-29 for 2011; and 25-29 and 30-34 for 2016.
  • Median wage data is for those born between 1981 and 1991.

Because the U.S. Census has changed the boundaries of some MSAs in the intervening years, we collected the data from FactFinder at the county level and then mapped it to the current MSA borders.

Each data series was scored relative to the other metros so that the biggest positive change received a score of 100 and any 0 or negative changes received a score of 0 (except for unemployment rate, where this was reversed). The highest possible score for each metric was 100 and the lowest was 0. The four metric scores were then summed and divided by four for a final score. The highest possible final score was 100 and the lowest was 0.

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.

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Kali McFadden is a writer at MagnifyMoney. You can email Kali at kali.mcfadden@magnifymoney.com

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3 Strategies to Get a Lower Student Loan Interest Rate

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Interest charges can be a huge cost for student loan borrowers. Of course, they’re especially painful for borrowers who have high interest rates or large student loan balances. But even an average borrower might want to know how to lower student loan interest so that their debt costs them less.

A lower student loan interest rate is key to your finances. A high interest rate can cost you thousands of additional dollars over the life of your loan, while a lower rate can mean not just smaller monthly payments, but also a quicker route out of debt.

How student loan interest works

When you borrow with student loans, as with most other credit, what you repay will be more than the amount lent to you — the principal — since interest accrues on whatever you haven’t yet repaid. How much student loan interest you pay is based on how much you still owe — your loan balance — as well as the actual interest rate itself.

How your student loan rate is set

For federal student loans, your rate will be set by Congress for the academic year in which you borrowed them. And not all federal student loan interest rates are created equal. For example, PLUS loans carry rates 2.55 percentage points higher than those for undergraduate student loans.

Private student loan lenders, meanwhile, set interest rates differently. Each has its own formula, but most will tie offered rates to your credit history, giving lower rates to borrowers who have higher credit scores.

How student loan interest rates affect your payment

Most student loan rates are annual, which means they reflect how much interest you’d be charged on the loan within a year. So on a $10,000 student loan with a 5% rate, you’d pay $500 in interest per year if you didn’t repay any of the loan during that time.

But your loan doesn’t accrue interest just once a year. Student loan interest is typically assessed and charged daily. So your annual interest rate is divided by 365 days, and you’re charged that amount of your outstanding balance each day.

As you make payments on student loans, the principal will go down a bit at a time, slowly lowering how much interest you’re being charged each month.

Ultimately, one of the smartest ways to pay less interest is to figure out how to get a lower interest rate on student loans. With a lower rate, you will save money and get out of debt faster.

How to get a lower student loan interest rate

The student loan rates you’re paying now were set when you were first offered the loan, and they are outlined in your loan agreement or promissory note.

But you’re not stuck with what’s in your agreement if you know how to get a lower interest rate on student loans. Here are a few ways you might be able to slash your loan rates.

1. Choose your student lender wisely

As mentioned above, the rate you pay will depend on the type of student loan you choose and from whom you borrow. If you’re taking out federal student loans, for example, it’s wise to borrow with subsidized loans first (no interest while you’re in school), and then unsubsidized loans (interest accrues while in school), before turning to PLUS loans with higher rates.

It’s more important to get picky when looking for the best private student loans. Each lender has its own formula for setting rates, and advertised rates don’t always reflect what a lender will offer you. It’s important to comparison shop to find the best private student loan rates you can.

You could save even more by seeking a student loan from a bank or lender with whom you already have a relationship. Citizens Bank offers a 0.25% percentage point loyalty discount for borrowers with an existing account, for instance.

2. Sign up for automatic payments

On top of loyalty discounts, some lenders will provide you with a rate discount for making on-time payments. One of the most common ways to reduce a student loan interest rate is to sign up for automatic payments.

When you enroll in autopay, you let your lender automatically debit a connected account to collect your student loan payment each month. In return, you get a rate discount — typically 0.25% off your rate.

3. Refinance student loans with a private lender

Another option to lower your student loan rate involves refinancing with a private lender. Refinancing student loans gives you the option to replace your old loans (and their high interest rates) with a new loan. This is your opportunity to choose a new lender with lower student loan interest rates, and even adjust your loan term or monthly payment.

The lowest student loan refinance rates start around 2.50%. To get these rates you’ll need an above-average income and a good-to-excellent credit score, or else you’ll need a cosigner who meets those requirements. Student loan refinance rates can also vary by the terms you choose, such as loan length and whether you take a variable or fixed rate.

Still, you don’t need perfect credit to benefit from student loan refinancing. If you have interest rates in the range of 6.00% to 7.00% or higher — maybe from a private student loan, or even a grad PLUS or parent PLUS loan — you could be a good candidate for refinancing.

In this case, you might want to start exploring your options to refinance student loans by comparing lender requirements and collecting some rate quotes. Try out our student loan refinancing calculator to see what your savings could look like with a lower interest rate.

Other ways to lower student loan interest costs

After considering the options above, you might be wondering how else you can lower your interest costs.

While figuring out how to get a lower interest rate on student loans can be a good place to start, it’s not the only way to pay less. Here are some other strategies you can use to lower student loan interest charges.

Make extra student loan payments

Besides lowering your interest rate, one of the surest ways to pay less student loan interest is to lower your balance. After all, the interest you’re charged is based on the amount of student debt you owe. If you pay off student loans faster, your balance will also decrease more quickly — resulting in big interest savings.

Lowering your student loan balances is as easy as sending in more than your student loan payment each month. You can round up a payment to the nearest hundred. Or you might set up automatic extra payments deducted each time your paycheck hits your bank account.

Setting up an extra $25 payment from every biweekly paycheck, for example, would be $650 per year. Doing so for a $15,000 loan with a 5.00% rate just entering a 10-year repayment would shave off three years from repayment and save more than $1,300 in interest.

It might not seem like much at first, but after a few months you’ll start seeing results. Student Loan Hero has a student loan prepayment calculator to help you preview your savings and decide how much extra you want to pay on your student debt each month. (Note: Student Loan Hero and MagnifyMoney are both owned by LendingTree)

If you go this route, however, make sure that your extra payment is applied to the principal, rather than as an early payment. Contact your lender to be certain.

Target high-interest loans first

Sending extra student loan payments is a great start, but you can add a level of strategy to make it even more effective. You can do this through the debt avalanche method. Here’s how it works:

  • List all your student loans, including balances, interest rates and monthly payment amounts.
  • Order your student loans from the highest to lowest interest rate.
  • Apply any extra payments to one loan at a time, starting with the highest-interest loan.
  • As you pay off one loan, roll over the amount you were paying on that debt — both the monthly and extra payments — and apply them to the student loan with the next highest rate.
  • Repeat this until all your student debt is gone.

Following the debt avalanche method helps you quickly lower the balances that are costing you the most. By paying off high-interest debt first, you’ll pay less in interest and get out of debt faster.

Take advantage of interest subsidies

One of the smartest ways to save on interest is to get someone else to pay for it. That’s exactly what happens if you’re lucky enough to get a federal student loan with an interest subsidy.

For the direct subsidized loan, for example, any interest that is assessed and charge while the student loan is in deferment is paid by the U.S. Department of Education. The most common situation where this applies is an in-school deferment for students who are still in college. But this interest subsidy will also apply anytime a borrower defers a subsidized student loan, even if they’ve already started repaying this debt.

So if you have subsidized student loans and can qualify for student loan deferment, it might be worth pausing payments on those. It will save you interest for the months they are deferred, and this can free up funds you could use to make extra payments on your more expensive or unsubsidized loans.

Avoid extending repayment

While deferring subsidized loans can be smart, you should avoid pausing or extending repayment for unsubsidized or private student loans.

Getting a deferment, forbearance or income-driven repayment plan is better than worse alternatives such as missing student loan payments or even defaulting. But you should know for all these options that while they will provide temporary relief, they might also increase your student loan costs over the life of the loan.

That’s because student loan interest still accrues on private or unsubsidized federal loans, even if you pause payments through deferment or forbearance, or lower payments through an income-driven repayment plan. In fact, because you’re paying less toward these loans, your balance will go down more slowly (if at all). And a higher balance means higher student loan interest, too, unless you can get the remaining amount forgiven. So it’s worth sticking to making monthly payments under the standard repayment plan if at all possible.

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.

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Credit Union Student Loan Refinance: These Are Your Options

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Refinancing student loans can help you crush your college debt in many ways, from lowering monthly payments to getting a better interest rate. But before you can enjoy the benefits of refinancing student debt, you’ll first need to find the lender that can offer you the best deal to make it happen.

Maybe you’ve already started checking out student loan refinance providers, but are credit unions on your list? Along with traditional banks and online lenders, many credit unions are offering student loan consolidation and refinancing, sometimes with very competitive terms.

Unlike other banks and lenders, credit unions are structured in a way that can provide unique value to members. So if you want to be sure you’re getting the best deal on refinancing student loans, it’s wise to consider credit unions among the lenders you compare. Here’s what you need to know.

Should you refinance student loans with a credit union?

Credit unions are cooperatives — not-for-profit financial institutions — which means that any money they bring in gets re-invested in order to offer the best products and lowest costs to their members.

This is often reflected in their student loan refinance options, which often have low rates and are open to borrowers with a wide range of credit and financial qualifications.

Here’s an overview of some of the pros and cons to choosing a credit union to refinance student loans. All rates and terms quoted below are accurate as of October 9, 2018.

Pros of refinancing with a credit union

Choosing to borrow from a credit union can come with some major upsides. Here are some of the benefits you might come across by including credit unions in your search for a student loan refinancing lender.

Because credit unions aren’t structured like traditional banks, they often have the flexibility to offer financing to a wider range of borrowers. This can be helpful for applicants with less-than-perfect credit, who might be more likely to get approved or be offered a better student loan refinance rate if they apply with a credit union.

Some credit unions also provide unique options on their student loan consolidation products that would be hard to find elsewhere. PenFed Credit Union, for example, allows borrowers to combine their student loans with those of their spouse through its spouse loan refinancing option.

As mentioned, credit unions’ not-for-profit designation means that they’re not as focused on making a profit off of every single product. This allows them to offer student loan refinancing with lower rates and fees.

LendKey, for example, is a network that connects student loan borrowers with credit unions and community banks that offer student loan consolidation. It advertises student loan refinance rates through its network lenders as low as 2.47% APR on variable-rate loans, or 3.49% APR for fixed-rate loans. These community lenders also charge no origination fees to refinance student loans.

Credit unions generally offer a member-centered experience, often going above and beyond to provide you with the help you need when you need it. Some of the most convenient credit unions provide unique features such as 24-hour phone assistance, extended hours in branches, and mobile apps to stay on top of your student loans and other accounts.

Cons of credit union student loan consolidation

Refinancing student loans with a credit union won’t be right for every borrower, however. Here are some potential downsides to watch out for when comparing credit unions to other student lenders.

Credit union products, like student loan refinancing, are typically only extended to credit union members. While some credit unions are open to anyone, each of these financial institutions will have some requirements for who can and can’t join.

You won’t be eligible to join every credit union, so make sure that membership is open to you at whichever credit unions you’re considering as a potential refinancing lender.

While credit unions have competitive student loan consolidation rates, that doesn’t mean they will always beat other lenders.

It’s possible that another student loan lender, maybe a large bank or online financial institution, can beat the credit union’s student loan refinance rate. That makes it all the more important to hunt around and compare refinancing rate quotes so you know how credit unions stack up.

For some borrowers, student loan refinancing won’t make sense no matter who their lender is. Refinancing comes with some drawbacks that every borrower should weigh before moving forward with this step.

Consolidating student loans with a private lender will mean giving up federal student loan benefits, for example. This could include losing access to income-driven repayment plans and federal student loan forgiveness, as well as options like deferment or forbearance that pause payments and can be tough to get from private lenders.

On top of this, many federal student loan rates are already fairly low, so they could be hard for a student loan refinance lender to beat. And since getting a lower interest rate is one of the most common reasons to refinance student loans, you’ll need to do the math before taking this step. You can use our student loan refinance calculator to get a sense of what you might (or might not) save.

Finding a credit union to refinance student loans

If you’re starting your search for the best student loan refinance lender for your needs, you might not know what your options are when it comes to credit unions. After all, you not only have to find credit unions you’re eligible to join, but also to judge whether their products are the best deal for your specific situation.

Here are a few good options to consider as you start your search:

LendKey

As mentioned above, LendKey isn’t a credit union itself, but rather a network of over 300 credit unions and community banks. It can quickly match you with credit unions willing to refinance your student loans. LendKey does this through its rate quote tool, which uses a soft credit check to get the financial information needed to find you potential lenders — without affecting your credit score.

You will need to complete a brief form providing some general information, including your name and contact information, income, citizenship status, the amount of student loans you wish to refinance, the degree you completed and the college you attended.

Once that’s provided, you can submit the form, and LendKey’s rate tool will automatically match you to credit unions. It will often bring up several student loan refinance offers at once, allowing you to compare multiple options at once.

LendKey

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Credit Union Student Choice Refinancing

Another tool for quickly connecting with credit union student loan refinancing is Credit Union Student Choice. Founded by several credit unions as a solution for student loan borrowers, Student Choice works with credit unions throughout the U.S. to provide the Student Choice Refinance Loan.

The Student Choice credit union locator tool uses your zip code, the college you attended, or your state of residence to return credit unions that match your criteria. From there, you can view the specific student loan refinance rates and terms available.

Once you’ve selected a credit union you’re interested in, you can apply right on the site through Student Choice. You don’t always need to be a member of the credit union just to apply, but it can make the process a little easier, and you’ll typically need to join the credit union before signing the final loan agreement and getting your refinanced student loan disbursed.

Alliant Credit Union

The first two options power student loan refinance offerings at hundreds of credit unions. But they aren’t your only option.

Alliant Credit Union, for example, has a flexible membership eligibility policy, which includes one option almost anyone can satisfy: supporting its partner charity, Foster Care to Success. With a $5 donation to this organization, you can become eligible to join Alliant Credit Union.

If you do, you will get access to Alliant’s student loan refinance option. Here are some additional details:

  • Refinance up to $100,000 in private and federal student loans
  • Choose from repayment terms of 5, 10, 15 or 20 years
  • Select a variable rate (starting at 4.25% APR) or a fixed rate (as low as 3.75% APR)
Alliant Credit Union

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PenFed Credit Union

As mentioned, PenFed Credit Union offers some unique student loan refinancing options in partnership with lender Purefy. It offers student loan refinancing with variable rates starting at 2.85% APR, or fixed rates as low as 3.75% APR.

PenFed Credit Union’s student loan refinancing is most notable for its flexibility, including such options as refinancing parent student loans or, as mentioned, consolidating student debt with a spouse.

As with other credit unions, you’ll need to join PenFed in order to refinance your student loans there. U.S. federal employees, military members, and their family are all eligible to join PenFed Credit Union. Beyond that, nearly anyone can join the National Military Family Association or Voices for America’s Troops to become eligible for PenFed Credit Union Membership.

PenFed Credit Union

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Find your own credit union

The credit unions and networks we highlighted here are a great place to start your search for a student loan refinance lender. But you can also search on your own for a credit union to refinance student loans.

You might already be a member of a credit union — if so, check to see if it offers refinancing. You can also search in your community, or use this credit union locator tool from DepositAccounts, another LendingTree-owned company, to find other institutions that you are eligible to join.

Including credit unions among the lenders you consider for student loan refinancing is a smart move. Even so, you should be critical and choosy when evaluating student loan refinance offers, including those from credit unions. With some investigating, you can find enough options to be sure that the final student loan refinancing offer you select will be the best.

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

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

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College Students and Recent Grads

How to Consolidate or Refinance Navient Student Loans

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.

Do you have Navient student loans? Are you looking into options to pay those loans off more quickly or cheaply? Is consolidation or refinancing a good way to do this?

Navient is one of a small number of companies that services federal student loans for the Department of Education. It also services private loans. As your loan servicer, Navient handles your customer service and takes your payments.

While many borrowers stay with Navient until their loans are repaid in full, others decide to consolidate student loans that Navient is servicing or look into Navient student loan refinance options. Consolidation and refinancing work differently, but both can sometimes make paying off student debt easier.

There are pros and cons to refinancing or consolidating Navient student loans, so if you’re thinking about doing either, make certain this is the best course of action for you. You’ll also need to go through the proper process to arrange these options.

To help you out, here are the specific steps you should take — and the factors you might want to consider — if you’re thinking about consolidating or refinancing loans serviced by Navient.

1. Understand the differences between refinancing and consolidating Navient student loans

First things first: It’s important to understand that consolidating loans and refinancing loans are not the same processes.

What does consolidation mean?

Consolidation refers to a direct consolidation loan. Direct consolidation loans make it possible to get one big loan to repay existing federal student loans. You could consolidate multiple federal loans serviced by Navient or, for that matter, federal loans serviced by other companies. Either way, the consolidation loan is obtained through the Department of Education.

With consolidation, you end up with one single payment for your federal loans, instead of potentially dealing with multiple payments. You can also have access to more repayment plan options with consolidation, and may become eligible for Public Service Loan Forgiveness if you weren’t already.

But you will not lower your interest rate when you consolidate because your new loan will charge interest based on a weighted average of the rates on your existing debt, rounded up to the nearest one-eighth of a percentage point.

What does refinancing mean?

If you refinance student loans that Navient is servicing, the process is different. Your refinanced loan isn’t obtained through the federal government since the Department of Education doesn’t offer a refinancing option. Instead, you’ll need to find a private lender.

Unlike with consolidation, you can refinance federal or private student loans, or a combination of both. The goal of refinancing is not only to get one big loan to repay existing debt, but also to reduce the interest you pay by qualifying for a new loan with more favorable repayment terms.

Refinancing could save you money, but there are some significant downsides associated with refinancing federal student loans that you need to consider before moving forward.

2. Determine if consolidation or refinancing is right for you

Now let’s look at the advantages and disadvantages of refinancing and consolidation to see if either is right for you.

Pros and cons of consolidation

One of the biggest benefits of consolidation is that you can simplify the loan repayment process. If you have multiple loan servicers, it can be much easier to consolidate and have just one servicer with which to deal. You’ll only have one monthly bill when you’re done with the process.

And, if you aren’t happy with Navient, consolidating allows you to switch who you’re dealing with for the rest of your student loan repayment.

Because consolidation can allow more options for repayment plans, including some lasting as long as 30 years, you can also reduce monthly payments. But if you stretch out your payments over a long time, you’ll pay more in interest.

As mentioned above, consolidation also opens up new options for income-driven repayment and loan forgiveness.

There are big downsides too, though. If you’re eligible for borrower benefits on your Navient loans, such as interest rate discounts, you may lose access to this benefit.
And if you’ve been making payments to qualify for Public Service Loan Forgiveness or have been working on paying loans on an income-driven plan, you’ll lose credit for payments you’ve already made and will have to start over.

Pros and cons of refinancing

Opting to refinance Navient student loans also has some pros and cons to consider.

If you refinance, you may be able to reduce your interest rate. This can lower your monthly payment and reduce the total amount you end up paying on your debt. This refinancing calculator can help you to estimate your savings.

You can also refinance multiple federal and private loans so that you end up with just one big loan and one payment instead of owing Navient and other servicers.

The major disadvantage, however, is that you lose borrower protections if you refinance federal student loans. If Navient is servicing your direct loans and you refinance them into a private loan, you’ll no longer be eligible for loan forgiveness for public service work, nor will you qualify for income-based repayment.

You also won’t necessarily be able to put loans into deferment or forbearance to pause payments as you can with federal student loans. Some private lenders do provide limited options for loan forbearance post-graduation if you experience financial hardship, but you’ll need to check with your new lender. And, generally speaking, private options are often far more restrictive than with federal loans.

3. Complete the consolidation or refinance process

If you’ve decided to consolidate or refinance Navient loans, you’ll need to complete some specific steps. Here’s what to do next.

The consolidation process

To consolidate loans, you’ll first have to complete the direct consolidation loan application available on the Department of Education website. If you apply online, the entire application will need to be completed in one sitting, and most people finish in less than 30 minutes, according to the department. Otherwise, the applicable forms can be downloaded for those who don’t want to use the electronic application.

When you fill out your application, you’ll need to provide information about the loans you wish to consolidate. You’ll also need to select your repayment plan and read the online terms before submitting your application.

Note that the application is free — and beware of anyone who tells you otherwise.

When the Department of Education receives the complete application, it’ll begin processing your request. You may receive a phone call asking for more information. Once your information has been reviewed, you’ll receive a notice before the consolidation is final. The notice will detail which loans you’re consolidating and the total payoff amounts verified by your loan servicer.

Your notice will give you a deadline, and you’ll need to act before then if you decide you want to cancel the consolidation or don’t want to consolidate all the listed loans. Unless you notify the Department of Education that you don’t want to continue, it will pay off your existing loans and you’ll have your new consolidated loan on which to start making payments.

During the interim period while you wait for the consolidation to go through, be sure to keep paying Navient and any other loan servicers.

The refinance process

The refinancing process works differently than consolidation for many reasons, including the fact you’ll have to shop around among different private student loan companies offering student loan refinancing.

As you look at different lenders, compare their offers for things such as:

  • Qualifying requirements
  • Interest rates
  • Repayment timelines
  • Whether you have the option for cosigner release if you need a cosigner
  • Loan company reputation
  • Origination or application fees, if any

It’s important to compare apples to apples when deciding between different student loan refinancing options. For example, most lenders offer both fixed- and variable-rate loans. Variable-rate loans might start out lower than fixed-rate loans, but they could go up over time because they’re tied to financial indexes that rise and fall with the market. If you compare two loans but one is a variable rate and the other is a fixed rate, you aren’t making a fair comparison.

When you’ve found a lender you think will offer you reasonable terms, submit an application to refinance your loans. You’ll need to provide details about your income and the loans you want to refinance. Private lenders consider your credit and income to determine if you’re eligible. If you can’t qualify on your own, it may be worth seeing if you can get a cosigner to help you.

When your application is approved, the private lender will repay your existing student loans and you’ll start making payments on your new refinanced loan.

Consolidating or refinancing can make repayment easier — but know what you’re getting into

For many borrowers, it could make sense to consolidate or refinance Navient student loans to streamline your repayment process.

Some borrowers may also wish to consolidate or refinance if they don’t feel they’re being treated fairly by Navient. Navient is facing multiple class-action lawsuits from borrowers who accuse the company of steering them to costlier repayment options.

You can contact the office of your state attorney general to report dishonest or abusive practices, and you can also consider looking into consolidation or refinancing to get a different loan servicer.

There are many reasons to consider consolidating or refinancing student loans, but be sure you know what borrower protections you may be giving up before you move forward.

This article contains a link to Student Loan Hero, which, like MagnifyMoney, is owned by LendingTree.

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.

Christy Rakoczy
Christy Rakoczy |

Christy Rakoczy is a writer at MagnifyMoney. You can email Christy 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.

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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

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College Students and Recent Grads

Understanding Your Student Loan Limits

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.

There’s a limit to how much you can borrow with federal student loans, and it can depend on your year at school, the degree you’re pursuing and the type of loan you want to use. Knowing which student loan limits apply to you can help you create an effective and workable plan for how you’ll pay for college.

Current students may be able to borrow several types of students loans from the U.S. Department of Education’s Direct Loan program. These include subsidized and unsubsidized direct loans for undergraduate students, and unsubsidized direct loans for graduate and professional students.

The subsidized and unsubsidized direct loans have annual and aggregate student loan limits.

These limits partially depend on your year in school, and they’re for each academic year rather than calendar year. If your program is shorter than a full academic year, your loan limit will be prorated.

The aggregate loan limits include the federal student loans taken out for undergraduate and graduate studies through the Direct Loan program and Federal Family Education Loan (FFEL) loan program. Once you reach your aggregate limit, you can’t take out additional subsidized or unsubsidized direct loans unless you pay down your outstanding federal student loan debt.

Annual and aggregate student loan limits for subsidized and unsubsidized direct loans

Year

Dependent students

Independent students

First-year undergraduates

$5,500 per academic year, including up to $3,500 in subsidized direct loans

$9,500 per academic year, including up to $3,500 in subsidized direct loans

Second-year undergraduates

$6,500 per academic year, including up to $4,500 in subsidized direct loans

$10,500 per academic year, including up to $4,500 in subsidized direct loans

Third-year undergraduates and beyond

$7,500 per academic year, including up to $5,500 in subsidized direct loans

$12,500 per academic year, including up to $5,500 in subsidized direct loans

Graduate students

N/A

$20,500 per academic year, only unsubsidized loans

Aggregate loan limits

$31,000 overall, including up to $23,000 in subsidized loans

$57,500 overall for undergraduates, including up to $23,000 in subsidized loans

$138,500 overall (including undergraduate loans) for graduate and professional students, including up to $65,000 in subsidized loans

A student’s dependency status isn’t the same as being a dependent on a parent’s tax return. It can depend on a variety of situations, including the type of degree the student is pursuing. You can follow the questionnaire on StudentAid.ed.gov to determine your dependency status.
If a dependent student’s parent isn’t able to take out a PLUS loan to pay for the student’s educational expenses, the student’s annual and aggregate loan limits increase to the independent student limits.

Time limits for subsidized direct loans

In addition to the annual and aggregate loan student loan limits for subsidized direct loans, there is a maximum time period for borrowers — 150 percent of your program’s published length. For example, if you’re in a four-year program, you can take out subsidized direct loans for up to six years.

Transferring to a program with a different published length could change your maximum eligibility period, and the subsidized direct loans you already took out will count toward your new limit.

Once you’re outside your eligibility period, the Department of Education will no longer pay the interest on your loans (i.e., you lose the subsidy). This applies even if you’re still in school and pursuing a degree.

Cost of attendance limits

Your specific loan limit may be lower than the maximum allowed student loan limits based on your school’s cost of attendance (COA) and your family’s finances.
Undergraduate subsidized direct loans are need-based loans, and your annual limit is capped base on your “financial need.” To determine your financial need for the year, subtract your expected family contribution (EFC), which is based on the information you submitted with your Free Application for Federal Student Aid (FAFSA), from your school’s COA.

Unsubsidized loans aren’t need-based, but your annual limit is still capped by your school’s COA minus the financial aid you’ve been awarded. The other aid could include scholarships, grants and other loans. The formula applies to unsubsidized direct loans for undergraduate and graduate students, as well as PLUS loans for graduate students and parents of undergraduates.

Increased student loan limits for health care degrees

Students pursuing select health profession degrees may be eligible for higher annual and aggregate unsubsidized direct student loans limits. To qualify, your program must be accredited by a specific accrediting agency — you can find the list on page 588 of the Federal Student Aid Handbook.

Increased unsubsidized loan limits for health care degrees

Program

For programs with a 9-month academic year

For programs with a 12-month academic year

Doctor of Allopathic Medicine
Doctor of Osteopathic Medicine
Doctor of Dentistry
Doctor of Veterinary Medicine
Doctor of Optometry
Doctor of Podiatric Medicine
Doctor of Naturopathic
Medicine, Doctor of Naturopathic

Additional $20,000 per year ($40,500 total)

Additional $26,667 per year ($47,167 total)

Doctor of Pharmacy
Graduate in Public Health
Doctor of Chiropractic
Doctoral Degree in Clinical Psychology
Masters or Doctoral Degree in Health Administration

Additional $12,500 per year ($33,000 total)

Additional $16,667 per year ($37,167 total)

The aggregate loan limit for students pursuing one of these health care degrees is increased to $224,000 in combined unsubsidized and subsidized loans.

If your program doesn’t have an academic year with nine or 12 months, your additional loan limit will be prorated to align with your program’s length.

PLUS loan limits

PLUS loans are a type of direct loan available to graduate and professional students, and to parents of undergraduate students. The PLUS loans differ from unsubsidized and subsidized direct loans in a few ways:

  • There’s a credit check. Borrowers with an adverse credit history may not qualify for a PLUS loan. An adverse credit history doesn’t have refer to a specific credit score but may include defaulting on a loan or having a vehicle repossessed within the last five years. Subsidized and unsubsidized direct loans don’t require a credit check.
  • There’s no specific annual loan limit. You can borrow up to your school’s COA minus the financial aid you already received.
  • There’s no aggregate loan limit. Eligibility for PLUS loans isn’t limited by your current student loan balances.
  • The costs are higher. PLUS loans have a higher disbursement fee and interest rate than subsidized and unsubsidized direct loans.

How to handle the cost of college with student loan limits

Although you can borrow up to the maximum loan limits with federal student loans, you may want to start your college funding by looking for ways to pay for school without borrowing money. If that’s not possible, and you reach your federal student loan limits, there may be additional options to consider.

1.Look at the cost and student loan limits when deciding on a school

If you’re still thinking about where you might apply, or you’re comparing financial aid award letters from different schools, you may want to consider your overall cost when deciding which school to attend.

Each school has a net price calculator you can use to see the estimated cost to attend the school after your potential scholarships or grants are taken into account. The net price may include estimated costs for room and board, personal expense and travel.

These ancillary costs could add up. For example, a college in New York City may be much more expensive than one in a smaller city or town due to the difference in living expenses. Likewise, attending college close to home could help you save money each time you want to travel home to visit friends or family.

If you’ve already received financial award letters, the letters will list the school’s cost of attendance, your expected family contribution and your loan offers. It will also show you which grants or scholarships you’ll receive this year, which could make an otherwise too expensive school a good option. However, keep the potential long-term costs in mind as you may not receive the same grants or scholarships next year.

2.Apply for grants and scholarships

Grants and scholarships can be one of the best ways to pay for school since you generally won’t need to repay the money you receive. You must fill out and submit a FAFSA each year to be eligible for federal grant and scholarship programs. However, you can also apply for additional opportunities on your own.

You can find scholarships and grants online or by asking high school or college counselors. Some employers also offer scholarships to their employees (or employees’ children), and you may be eligible for opportunities based on all sorts of affiliations, including where you live, what you want to study, your religion, ethnicity or heritage.

While some scholarship or grant applications can be difficult and time-consuming, remember that the work you’re putting in now could save you a lot of money later. Also, don’t give up on applying. Scholarships and grants are available to a variety of applicants, and you may qualify whether you’re in high school or in a Ph.D. program and regardless of your income.

3. Consider a PLUS loan

A parent of an undergraduate student may want to take out a federal PLUS loan to help pay for the student’s educational costs. As the borrower, the parent is fully responsible for repaying the loan and can’t transfer the federal loan to the student. If the student leaves school, builds credit and is able to qualify for private student loan refinancing, some lenders will let the student include a parent PLUS loan into the refinancing to transfer the debt obligation.

If the parent isn’t eligible for PLUS loans, or applies and gets denied, the student may be eligible for additional unsubsidized student loans for the year.

Graduate and professional students who can’t meet their funding needs with unsubsidized students loan may want to consider PLUS loans as well. However, because PLUS loans have a higher disbursement fee and interest rate than unsubsidized direct loans, you may want to maximize your unsubsidized direct loan borrowing before taking out a PLUS loan. In some cases, a private student loan may also be less expensive than a federal PLUS loan.

4. Explore private student loan options

The federal government isn’t the only student loan lender. Private lenders, including banks, schools, states and online lenders offer private student loans to students and parents of students.

Private lenders may allow you to borrow up to your school’s cost of attendance, which could help cover a funding gap. However, private student loans are credit-based loans, and your eligibility, terms and loan limits can depend on a variety of factors, including your credit history, credit score, income and other outstanding debts.

Because federal student loans may offer more favorable rates, terms, repayment options and access to forgiveness programs, you may want to maximize your federal borrowing before turning to private loans. If you do decide to take out private student loans, compare your loan offers from different lenders as each may give you different rates, terms and benefits.

5. Earn money to pay for school

Finding a part-time job during the school year, and continue with part-time or full-time work during the summer and holidays, could help you tackle some of your educational expenses without borrowing money.

If you receive a work-study award as part of your financial aid, you may be able to find a job on campus, with a local nonprofit or at an organization that works in a field that’s related to your major. A work-study award can give you a leg up, as the award will cover part of your paycheck, but you’ll still need to apply and interview for the job.

6. Find ways to cut costs

Your tuition and fees may be fixed costs for the year, but other expenses are variable and looking for money-saving options could limit how much you need to borrow.

For example, moving off campus might save you money compared with on-campus housing, especially if you also start making your own meals and don’t have to pay for a meal plan. Other expenses may not be as significant, but the savings from using student discounts, looking for free entertainment and buying used textbooks can still add up over the years.

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.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at louis@magnifymoney.com

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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: October 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% - 7.80%


Fixed Rate*

2.48% - 6.99%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
Learn more Secured
EarnestA+

20


Years

3.89% - 6.97%


Fixed Rate

2.47% - 6.23%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
CommonBondA+

20


Years

3.20% - 7.25%


Fixed Rate

2.72% - 7.25%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
LendKeyA+

20


Years

3.49% - 8.72%


Fixed Rate

2.47% - 8.05%


Variable Rate

$125k / $175k


Undergrad/Grad
Max Loan
Learn more Secured
Laurel Road BankA+

20


Years

3.50% - 7.02%


Fixed Rate

2.95% - 6.37%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
Citizens BankA+

20


Years

3.75% - 8.69%


Fixed Rate

2.72% - 8.32%


Variable Rate

$90k / $350k


Undergraduate /
Graduate
Learn more Secured
Discover Student LoansA+

20


Years

5.24% - 8.24%


Fixed Rate

4.87% - 8.12%


Variable Rate

$150k


Undergraduate /
Graduate
Learn more Secured

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
Earnest

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured
CommonBond

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured
LendKey

680

Undergraduate
& Graduate

Private & Federal

$24K

Yes

Learn more Secured
Laurel Road Bank

Not published

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured
Citizens Bank

680

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

$24K

Yes

Learn more Secured
Discover Student Loans

Not published

Undergraduate
& Graduate

Private & Federal

None

Yes

Learn more Secured

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

LEARN MORE Secured

on SoFi’s secure website

Read Full Review

SoFi : Variable rates from 2.48% and Fixed Rates from 3.90% (with AutoPay)*

SoFi was 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 2.72% 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 2.47% 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 2.95% 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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Citizens Bank (RI) : Variable Rates from 2.72% 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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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 4.20% – 7.80% 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%-8.32% APR and fixed interest rates ranging from 3.25% – 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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Best of, College Students and Recent Grads, Credit Cards

Best Student Credit Cards October 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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Rates & Fees

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Discover it® Student Cash Back

Annual fee
$0
Rewards Rate
5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs up to the quarterly maximum each time you activate. 1% unlimited cash back automatically on all other purchases.
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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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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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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Rates & Fees

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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

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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:

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Lindsay VanSomeren
Lindsay VanSomeren |

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

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