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College Students and Recent Grads

The 2019 Guide to Student Loan Forgiveness

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements 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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The numbers are mind-boggling. In mid-2018, American collectively carried $1.53 trillion in outstanding student loan debt, according to the Federal Reserve Bank of New York. Even worse, one million Americans default on their student loans every year, and 40% of borrowers are expected to default by 2023.

If you’re paying off student loans, you know full well what the reality behind these statistics feels like. Repaying student debt is more than just a drag — it can put you in long-term financial jeopardy if things don’t turn out like you’d hoped after graduation.

But, there is a beacon of hope in the darkness. It might be possible for you to have your student loan balance partially or even completely forgiven. These programs aren’t necessarily easy to find or qualify for, and they generally come with strings attached. But if you can complete a student loan forgiveness program, you just might be able to move on with your life and leave the student loans behind.

Whether you have private or federal student loan debt, there are various programs in place to help struggling borrowers ease their debt burden.

Part I: Student loan forgiveness options

When your student loan debt is forgiven, cancelled or discharged, you are off the hook for that amount. Some loan forgiveness programs actually do wipe away your debt like a fairy debt godmother with a magic wand (though you might need to pay taxes on the forgiven amount).

Other programs, such as Loan Repayment Assistance Programs (LRAPs) or Loan Repayment Programs (LRPs), will make additional payments toward your student loan for you, thereby reducing your balance over time.

There is no one-size-fits-all rulebook that dictates how student loan forgiveness programs work. In some cases, you may need to follow strict reporting protocols throughout the program until you become eligible, while other programs may require you to work in a certain industry or live in a certain state.

Because the different student loan forgiveness options vary so much, you need to do extensive research so you know exactly what the requirements are. Some programs may have a big impact on your life, and you need to be prepared for the consequences and opportunity costs. In this guide, we’ll discuss which student loan forgiveness plans are available and the main details of each program.

At a glance: Student loan forgiveness programs

Forgiveness TypeWho is eligible?Amount that can be forgivenWhich loans are eligible?‘Time served’ RequirementTax implications
Public Service Loan Forgiveness*People who make a commitment to a public service career.No capFederal Direct loans and Federal Direct Consolidation loans. Only payments made after October 1, 2007 count toward the 120 payments needed for forgiveness.Make 120 payments (i.e. 10 years) while working full time for any level of government or in a 501(c)(3) nonprofit.Forgiven amount is not taxable
Teacher Loan ForgivenessFull-time teachers working in low-income schools.Up to $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford LoansFederal Direct loans, Federal Direct Consolidation and Federal Stafford loans.Must work full time for five years.Forgiven amount is not taxable
Perkins Loan CancellationTeachers and some other professionals, AmeriCorps VISTA or Peace Corps volunteers.Up to 100% of the loan balanceFederal Perkins loans.Must work full time for four to seven years if applying based on your occupation.Cancelled amount is not taxable.
Forgiveness for Income-Driven PlansGraduates who are enrolled in one of the four income-driven plans: PAYE, REPAYE, IBR, and ICR.No cap.Federal Direct loans, Federal Direct Consolidation loans, and Federal Direct PLUS loans made to students.Remaining loan balance is forgiven after 20-25 years.Forgiven amount is taxable.
Loan Forgiveness for NursesNurses who work in certain high-need areas.Up to 85% of your student loan balance.Federal Direct loans, Federal Direct Consolidation loans, Federal Stafford loans, and Federal Direct PLUS loans made to students.Must work full time for three years in a Critical Shortage Facility to receive forgiveness on up to 85% of your loans.Forgiven amount is taxable. However, the NURSE Corps will pay your federal taxes for you.
Loan Forgiveness for DoctorsDoctors who make a commitment to serving in a high-need area or in the military.Varies by program.Varies by program.Varies by program.Varies by program.
Loan Forgiveness for LawyersLawyers who have made a commitment to certain positions (e.g., public defenders, DOJ employees, etc.).Varies by program.Varies by program.Varies by program.Varies by program.
Military student loan forgivenessMembers of the military who have taken out student loan debt before enlisting.Up to 100% for Army service, up to $65,000 for Navy service, or up to $65,000 for Air Force JAG service.Federal student loans.Varies depending on which branch you enlist in.Forgiven amount may be taxable — check with a tax professional.
Segal AmeriCorps Education AwardAmeriCorps volunteersUp to $6,095Federal loans and loans issued by state agencies.Complete at least one term of service (this ranges from 10 months to one year).Forgiven amount is taxable.

Federal student loan repayment programs

Public Service Loan Forgiveness (PSLF)

This is one of the most popular programs. Before you get too excited though, there are a lot of hoops to jump through to apply for PSLF. Additionally, the future for this program is murky: In 2017, Republicans introduced the PROSPER Act that would eliminate PSLF. Although this proposal was never passed, the outlook for PSLF remains uncertain.

Only loans issued under the Federal Direct Loan program qualify.

You have to be up to date with your Federal Direct student loan payments and make at least 120 consecutive on-time payments.

Must have been paying on loans while working full time for the government or a 501(c)(3) nonprofit or another qualified employer. If you take a hiatus with a private-sector employer and switch back, the payments you’ve already made while previously employed still count. You also need to be enrolled in some sort of repayment plan. Luckily, income-driven repayment plans such as Pay As You Earn count.

If you meet all those criteria and submit an annual employment certification form, you could be eligible to have your remaining student loan balance forgiven after 120 payments (i.e., 10 years). To get that, you’ll have to fill out yet another PSLF forgiveness application form.

This means that if you’re on the default 10-year repayment plan and are able to keep up with it, you won’t really be able to take advantage of this program because you’ll already have paid off your loans after 10 years anyway.

Federal income-driven repayment plans

Income-driven repayment programs offer more than just student loan forgiveness. They’ll make your student loans more affordable in the short term as well by capping your monthly payments at 10% to 20% of your discretionary income.

The details of how the monthly income-driven payments work vary. Here, we’ll give a brief overview of how these programs work before focusing specifically on how you can get your student loan balance forgiven with each of the four plans.

Warning: With each of these federal income-driven repayment plans, any forgiven balance is considered taxable income in the year it’s forgiven. You’ll need to plan ahead accordingly.

Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE)

The PAYE and REPAYE programs each limit your monthly payment amount to 10% of your discretionary income and require you to certify your income and family size every year. The nitty-gritty details of who is eligible and how the PAYE and REPAYE programs work from there vary.

Here’s how you can get your student loans forgiven if you’re enrolled in these programs:
If you’re in the PAYE program, your Federal Direct or Consolidation loans will be forgiven after 20 years.

If you’re in the REPAYE program, it works a bit differently: Your student loans will be forgiven after 20 years, but only if all of your loans are from undergraduate study. If you went to grad school and took out any student loans, your remaining balance would instead be forgiven after 25 years.

Income-Based Repayment (IBR)

If you’re enrolled in the IBR plan, your monthly payment amount will be limited to 10% or 15% of your discretionary income, depending on if you’re a new borrower or not on or after July 1, 2014. You’ll also have to recertify your income and family size each year.

If you do those things and still have a remaining balance at the end of 20 or 25 years (again, depending on whether you were a new borrower on or after July 1, 2014), regardless of what type of federal student loans you have, you will be forgiven. The lone exception are Federal PLUS loans made to parents, which need to be on the ICR plan listed below.

Income-Contingent Repayment (ICR) plan

If you’re enrolled in ICR, you’ll potentially have the highest monthly payments of all: either 20% of your discretionary income or whatever the payment would be on a 12-year repayment plan (whichever is less). You’ll also need to recertify your income and family size with this plan as well.

ICR also has one of the longest repayment periods. If you have anything left on your student loan balance after 25 years, it’ll be forgiven.

Federal Perkins Loan cancellation

The Perkins Loan program expired in 2017, but many graduates still carry this type of debt. It works a bit differently than most other federal loans — rather than being doled out through the William D. Ford Direct Loan program as with most federal student loans, each loan is made directly to you from the school itself. That means that when it comes time to apply for forgiveness, you’ll need to contact the school itself for an application.

How you qualify for Federal Perkins loan cancellation and how much you’re eligible to have cancelled depends on your profession and time served in your position.

Teachers, nurses, medical technicians, firefighters, tribal college faculty, law enforcement officers and attorneys working in public positions may be eligible to have up to 100% of their remaining Perkins loans waived after five years of service.

Certain early childhood education professionals may be eligible for Perkins loan cancellation after seven years. If you were in the military and served in a dangerous location, you may be eligible to have your remaining Perkins loan balance waived after five to 10 years, depending on when your service ended.

Finally, if you are an AmeriCorps VISTA or Peace Corps volunteer, you might be able to have 70% of the remaining balance on your Perkins loans cancelled after four years.

At a glance: Student loan cancellation or discharge programs

Forgiveness TypeWho is eligible?Which loans are eligible?Tax implications
Closed school dischargePeople whose school closed while enrolled, or within 120 days of withdrawing from class.Federal Direct loans, FFEL loans and Federal Perkins loans.Forgiven amount may be taxable — check with a tax professional.
Total and permanent disability dischargePeople who become “totally and permanently disabled.”Federal Direct loans, FFEL loans and Federal Perkins loans.Forgiven amount is usually taxable.
Discharge due to deathPeople who die, and students whose deceased parents have taken out Federal Parent PLUS loans.Federal Direct loans, FFEL loans, Federal Perkins loans and Federal PLUS loan (including those taken out by parents).Forgiven amount is not taxable, unless a parent with a Federal Parent PLUS loan is claiming discharge for a deceased child.
False Certification of Student Eligibility or Unauthorized Payment DischargePeople whose school falsely certified their eligibility for loans (this also includes victims of identity theft).Federal Direct loans or FFEL loans.Forgiven amount may be taxable — check with a tax professional.
Unpaid Refund DischargeStudents who withdrew from school and whose schools did not issue a refund back to the lender.Federal Direct loans or FFEL loans.Forgiven amount may be taxable — check with a tax professional.
Borrower Defense to Repayment DischargeStudents whose schools “misled them or engaged in other misconduct.”All Federal student loans.Forgiven amount may be taxable — check with a tax professional.

Part II: Loan forgiveness programs by profession

Teacher loan forgiveness

Teachers have a lot of options for student loan forgiveness. Aside from the Perkins Loan cancellation discussed above, you may be eligible for teacher loan forgiveness for your Federal Direct/Federal Stafford loans.

Unfortunately, this loan program won’t cancel the full remainder of your balance. After spending five years teaching full-time in a low-income school, most teachers will only have $5,000 of their remaining loan balance forgiven.

If you’re a math, science or special education teacher, the deal is sweetened: You’ll have up to $17,500 of your student loan balance forgiven.

Teacher loan forgiveness might not fully cancel out your loans, but you may have another option: public service loan forgiveness. As a teacher, you’re also eligible for this program.

Sadly, you can’t use the same period of service to qualify for both programs simultaneously. That means you’ll need to teach for five years in a low-income school to qualify for the teacher loan forgiveness program, and then restart the clock for another 10 years to qualify for PSLF (though for the latter, it doesn’t have to be at a low-income school).

You may also be eligible for other student loan forgiveness or assistance programs depending on where you live. To find out more, check out the American Federation of Teachers online loan forgiveness database.

Loan forgiveness for nurses

One of the most well-established student loan forgiveness programs for nurses is the NURSE Corps Loan Repayment Program. If you agree to work in a facility with a critical nurse shortage, you can have up to 85% of your student loan balance paid off for you after three years.

Even better, the program will pay your federal taxes automatically for you so you don’t have to worry about the dreaded student loan forgiveness tax bombs (although you may be on the hook for state taxes). To earn these student loan payments, you first need to apply and be accepted into the program.

There are also many state loan repayment programs for nurses. To see if your state has one, simply do a Google search for “your state + nurse student loan forgiveness.” Or check out the full guide to nurse loan forgiveness programs here.

Loan forgiveness for doctors

There are numerous state-specific student loan repayment plans for doctors. The Association of American Medical Colleges maintains an excellent database of federal and state-run programs. Here are some others to consider:

IHS: If you agree to work in an IHS (Indian Health Service) facility for at least two years, this agency will agree to pay $40,000 toward your student loans. You can also agree to extend your employment beyond the two-year mark to earn even more student loan repayments, with no maximum cap. In other words, you could have your entire student loan balance paid off with this program if you stick around long enough. Another nice benefit of this program is that the IHS will pay 20% of the income taxes that result from their payments (but you’re still on the hook for the other 80%, and any other income tax).

Military doctors: There are several military-specific programs for doctors and dentists in particular. The Navy’s Health Professions Loan Repayment Program will pay up to $40,000 per year (minus about 25% for taxes) toward your student loans if you agree to enlist in a certain skill shortage area. The Army offers a smattering of student loan repayment programs offering up to $250,000 for a wide range of doctor specialties and higher-level medical personnel.

National Health Service Corps: Doctors and dentists who haven’t yet completed their final year of school may be eligible for the National Health Service Corps Students to Service Loan Repayment Program. In exchange for agreeing to provide health care in an NHSC-approved facility in need for at least three years, the NHSC will pay off up to $120,000 of your federal and private student loans. Even better, the award is not considered taxable income.

Repayment assistance for other health professionals

In addition to doctors and nurses, many other licensed professionals such as social workers, counselors and midwives may be eligible for up to $50,000 in student loan forgiveness under the National Health Service Corps (NHSC) Loan Repayment Program.

To qualify, you need to submit an application to be accepted into the program and agree to work at least two years in an NHSC-approved medically underserved location. This program is also tax-free.

The NHSC also grants money to certain states to run their own health care student loan repayment program. To see if your state participates and how the program works, visit their website.

If you are involved in medical or veterinary research, you may also qualify for up to $35,000 per year in student loan forgiveness through the National Institute of Health (NIH) Loan Repayment Program. There are currently eight different repayment programs available (the details of which vary), and you will have to enroll in an LRAP in advance.

Loan forgiveness for lawyers

Student loan forgiveness programs for lawyers are equally piecemeal. One of the most popular programs is run by the Department of Justice for its employees.

If you’re able to commit to a three-year term and have at least $10,000 in federal student loan debt, you can apply to this program. Applications are only accepted once per year by a certain due date. Once accepted into the program, the DOJ will match your student loan payments of up $6,000 per year toward your student loans, for a maximum of $60,000. This is also considered taxable income, although the DOJ will withhold a part of the money to pay your extra income taxes for you.

If you’re a public defender or a state prosecutor, you may also be eligible for the John R. Justice Student Loan Repayment Program. If you agree to remain in your position for at least three years, this program will help you pay back $10,000 in federal student loans per year, up to a maximum of $60,000. This program is run through state agencies. To learn more, you can find your state’s agency here.

There are also numerous student loan assistance programs for lawyers run by state agencies. To find these programs, simply Google “your state + lawyer student loan assistance program.” Your school may also offer a loan repayment program, so check with your financial aid office to find out.

Military student loan forgiveness

In addition to the student loan forgiveness programs available to military members and veterans under other umbrellas (such as the Perkins Loan cancellation or PSLF), several branches of the military offer their own loan repayment programs (LRPs) as enlistment incentives.

Army: The Army offers LRPs for regular Army, Army Reserve, and Army National Guard soldiers. The details of these programs vary depending on your current job status, but in general, these programs all require a few common things to earn payment toward your federal loans. First, you need to get your LRP guaranteed in writing in your enlistment contract (very important!), decline G.I. Bill benefits, be a high school graduate with a minimum 50 score on your ASVAB test and agree to enlist in a critical military occupational specialty for a certain period of time. If you meet these qualifications, you could have up to 100% of your federal student loan balance forgiven.

Navy: If you’re drawn to a life at sea, the Navy offers a single LRP for incoming sailors. If eligible for this program, the Navy will pay up to $65,000 toward your student loans and your income tax liability. This program is currently only offered to sailors with certain eligibility ratings as they are going through the enrollment process.

Air Force: The Air Force also offers an LRP, but it’s much less comprehensive than the Army and the Navy’s LRP and only applies to those with a legal bent. You can apply for up to $65,000 in student loan repayment assistance by joining the Air Force’s JAG Corps. You become eligible for this award after serving for at least one year as a JAG officer.

Student loan forgiveness for volunteers

AmeriCorps volunteers are eligible for the Segal AmeriCorps Education Award after they’ve completed at least one term of service. The amount of the award is pegged to the value of the Federal Pell Grant each year (currently $6,095 for 2019), and volunteers can’t earn more than two full-time awards (even if they serve more than two full-time terms).

The forgiven amount is also considered taxable income, so plan accordingly.

Part III: Learn more

It can be tough to sort out the requirements for a student loan forgiveness program, assuming that you qualify for one. You may even have to commit to making a life-changing decision by accepting a job in a location you otherwise wouldn’t have chosen, or by taking a lower salary while in public service, for example.

Which student loan forgiveness program is right for you?

Making a decision based on these factors isn’t easy. You will have to do a lot of research and reading of the fine print to understand whether a particular student loan forgiveness program will work for you or not.

If you need help, look for a fee-only Certified Financial Planner who specializes in student loan forgiveness. Believe it or not, CFPs do not receive student loan training as part of the requirements to pass the CFP exam, so you should really interview several planners beforehand to test their knowledge.

Then there’s the uncertainty of whether these programs will even be around in the future, given the current political environment. Mark Kantrowitz, a nationally-recognized student loan expert, believes it’s very likely that the popular Public Service Loan Forgiveness program will eventually be phased out, for example.

But if you’re currently deciding whether or not to take a job based on being eligible for a federal student loan forgiveness program, take heart — applying now could get you in the door permanently.

“In general, when there is a change in federal law, existing borrowers tend to be grandfathered in,” said Kantrowitz. There are no promises, of course, but you may be a bit safer if you start a student loan forgiveness program now rather than waiting.

Pitfalls of student loan forgiveness

One of the biggest disadvantages of student loan forgiveness programs is that in many cases, the forgiven amount is considered taxable income. This means you could owe taxes on the forgiven amount just as if you’d been cut a check.

For example, if you have $25,000 worth of student loan debt forgiven and you’re in the 22% tax bracket (earning between $39,475 and $84,200 for a single person in 2019), that means you’ll get a whopping tax bill at the end of the year for $5,500.

“You’re substituting a tax debt for education debt,” said Kantrowitz, even if the tax debt is lower.
If you absolutely cannot pay the tax bill, however, Kantrowitz says all hope is not lost. “The IRS, in many cases, is actually quite reasonable. They realize that you can’t squeeze blood from a stone.”

You may be able to negotiate a lower lump-sum payment, or may even have the debt discharged if you’re financially insolvent (which the IRS defines as having a net worth of $0 or less).

Becoming financially insolvent as a way to escape your tax bill is never a good idea, so you need to plan ahead for the outrageous tax bill. Again, this is another good time to consult with a fee-only Certified Financial Planner.

Alternatives to student loan forgiveness

If you don’t qualify for one of these student loan forgiveness programs, there may be two last cards you can play.

1. Your employer

“About four percent of employers now offer student loan repayment assistance, or LRAP programs, for their employees,” said Kantrowitz. PricewaterhouseCoopers and Fidelity Investments have established programs, for example.

Finding a private-sector employer who offers an LRAP may be your best bet if you don’t qualify for forgiveness under another program.

2. Speed up your repayment

How? Simply make extra payments toward your student loans on your own.

This is especially important to consider when evaluating job offers. Let’s say one company pays less but offers an LRAP. The other company pays way more, but maybe doesn’t offer an LRAP. Tally up the value of the program: You very might well be able to get out of debt faster with the higher-earning job by making extra payments yourself, rather than relying on a potential employer’s LRAP.

Student loan forgiveness and repayment programs can help unshackle you from a mountain of debt. But you don’t have to wait for the ability or permission from someone else to start paying your loans off early yourself.

Looking to refinance your student loans to a lower rate? Check out our top picks for student loan refinancing.

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

Lindsay VanSomeren
Lindsay VanSomeren |

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

Rebecca Safier
Rebecca Safier |

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

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College Students and Recent Grads, Student Loan ReFi

Best Private Student Loan Companies in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements 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.

private student loans
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Taking out private student loans can be a relatively expensive ways to borrow for school, yet many college students make the mistake of turning to private loans too quickly. From 2015 to 2016, more than half (53%) of undergraduates borrowed from private lenders before maximizing their federal loan allotment, according to the Institute for College Access and Success.

On the other hand, federal loans can only go so far, especially if you are pursuing a postgraduate degree that requires more schooling. Once you’ve tapped out your federal aid, a private student loan could help you fill the gap.

While federal loans offer a relatively uniform application process and loan terms, private lenders’ terms can vary widely. If you’re thinking about paying for school with a private student loan, it’s vital to compare lenders’ offerings to find the one that’s best for you.

How we ranked the best private student loans

There’s a lot to review when you’re shopping around with private lenders. Your annual percentage rate (APR), fees and loan repayment term could impact how much you pay in interest over the lifetime of the loan. Other features — such as a straightforward application process and the option to request that a cosigner be removed from the loan — could also affect your repayment.

We started the search for the best private student loan companies by identifying the 10 largest national private lenders. Each lender’s undergraduate student loan was graded on eight critical factors:

  • Private lenders offer loans with varying interest rates depending on the applicant’s creditworthiness — or that of the applicant’s cosigner. Lenders advertise an interest-rate range that you can use to compare one with another.
  • In this case, each lender was assigned grades based on its lowest and highest APRs compared with the average lowest and highest APRs for all 10 lenders. Each lender received four scores (as they all offer variable-rate and fixed-rate loans), and the lenders with below-average APRs received top marks.
  • Lenders could charge application, origination and prepayment fees based on your loan balance.
  • Although fees are becoming a thing of the past, one of these 10 lenders (CommonBond) still charges a federal-like origination fee when the loan is disbursed.
  • All of the top 10 lenders offer an online application, but the clarity and ease of use can vary. The lenders with intuitive processes, plus pre-qualification offers, got the best grades.
  • Many private student lenders, including all 10 of the lenders we compared, offer a 0.25% interest rate discount if you enroll in autopay. A few lenders earned extra points for also extending a 0.25% interest rate discount to borrowers with a related bank account.
  • Most of the private student loans we compared offered several repayment terms with a maximum of 15 or 20 years. Lenders that feature fewer loan-term options didn’t score as well because they offer less flexibility to borrowers.
  • Most undergraduate students qualify for private loans thanks to a creditworthy cosigner, who can also help reduce the interest rate. Some private student loan lenders let you apply to release your cosigner after you make a given number of consecutive, on-time full principal and interest payments and pass a credit check. Setting the bar for a top score of only 12 payments was the shortest option available among the lenders we compared.
  • You may be able to choose from different repayment plans, such as making interest-only payments while you’re in school or fully deferring payments until your post-school grace period ends. Lenders that offer full interest and principal deferment received top marks.
  • A few lenders earned extra credit because they offer unique perks, such as a principal rate reduction or cash back when you graduate.

After assigning each lender a grade, we ranked them and selected the top five for our “Best Private Student Loan Companies” list.

Our top picks for private student loan companies

 

Sallie Mae

CommonBond

College Ave

Citizens Bank

Wells Fargo

Ranking12345
Variable APR4.62% to 11.47%3.95% to 9.81%4.20% to 11.44%4.47% to 12.34%5.25% to 10.24%
Fixed APR5.74% to 11.85%5.29% to 9.83%5.29% to 12.78%5.74% to 12.19%5.24% to 9.99%
Rate discount0.25% for autopay0.25% for autopay0.25% for autopay0.25% for autopay, 0.25% for having a Citizens Bank account 0.25% for autopay, 0.25 to 0.50% for having a Wells Fargo banking or investment account
Origination feeNo Origination FeesYesNo Origination FeesNo Origination FeesNo Origination Fees
Repayment terms5 to 15 years5, 10 or 15 years5, 8, 10 or 15 years5, 10 or 15 years15 years
Cosigner releaseAfter 12 months of timely paymentsAfter 24 months of timely paymentsAfter half your term has elapsed and after 24 months of timely paymentsAfter 36 months of timely paymentsAfter 24 months of timely payments
PerkReceive study support, plus credit score trackingPause your repayment for up to 12 months after leaving school via economic hardship forbearanceReceive $150 bonus upon graduationReceive approval for multiple years of loans at onceN/A

Learn More Secured

on Sallie Mae Bank’s secure website

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on CommonBond’s secure website

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on College AVE’s secure website

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on Citizens Bank (RI)’s secure website

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on Wells Fargo Bank’s secure website

*Rates are current as of Jan. 24, 2019, and may include a 0.25% autopay discount.

#1 Sallie MaeSmart Option Student Loan

Sallie Mae offers a wide range of student loans to undergraduate, graduate and professional students, as well as their parents. That may not come as a surprise though, since Sallie Mae is one of the most widely known private student loan companies. It opened its doors in 1972 as a government-sponsored company before privatizing in 2004.

  • Why it’s our top pick:
    • The undergraduate Smart Option Student Loan has a few standout benefits, such as the option to release a cosigner after making 12 consecutive monthly payments.
    • You can also choose from three in-school repayment plans: full deferment, $25 monthly payments or interest-only payments. And if you’re having trouble making payments after graduation, you can also request to make 12 interest-only payments.
    • Borrowers also get non-loan-related perks, such as quarterly access to one of their FICO credit scores, plus four months of academic support from Chegg.
  • Room for improvement:
    • Overall, Sallie Mae serves borrowers a variety of choices and benefits. However, it doesn’t offer as many potential discounts as some of the other top lenders. Still, if you find you qualify for a lower pre-discount rate with Sallie Mae than another lender, Sallie Mae could indeed be a smart option.
  • Fine print to watch out for:
    • Sallie Mae says it offers repayment terms between 5 and 15 years, but your repayment term depends on a variety of factors, including your loan amount. Unlike with other lenders, you can’t independently choose your repayment term.

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on Sallie Mae Bank’s secure website

#2 CommonBond

Founded in 2012, the student loan refinancing and lending firm CommonBond is perhaps the most giving among competitors. For every loan it funds, it pays for the education of a child abroad. That could among a number of factors that push CommonBond over the top when you’re considering where to borrow for college.

  • Why we like it:
    • Aside from its do-good ways, CommonBond also saves money for its borrowers. It offers for the most part, the lowest rates of any lender under consideration, plus the benefits found at most online-only lenders: a straightforward loan application, flexible repayment terms and responsive customer service.
    • Although it’s not the only lender to offer you the ability to pause your payments once you leave school, it’s also worth noting that CommonBond gives its members up to 12 months of forbearance. That could come in handy if you lose your job or fall on hard times once you’re out in the real world.
  • Room for improvement:
    • CommonBond offers low rates, but it also charges a 2% origination fee. Aside from matching Sallie Mae’s 12-month path to cosigner release, eliminating the fee is CommonBond’s biggest bugaboo. If you decide the lender is right for you, ensure you calculate the added cost of this 2% fee, which is a one-time charge based on your loan amount.
  • Fine print to watch out for:
    • Unlike federal student loan options for deferment and forbearance, CommonBond (like other private lenders) isn’t mandated to grant you a pause on your repayment. You would need to prove that your circumstances are dire enough to be considered.

LEARN MORE Secured

on CommonBond’s secure website

#3 College Ave

Founded by former Sallie Mae executives, College Ave is another online-only lender looking to disrupt the student loan industry. It lends to undergraduates, graduate students and parents, plus students attending career schools.

  • Why we like it:
    • College Ave is the only lender among the 10 we surveyed that offers four repayment term options (5, 8, 10 and 15 years). Interestingly, the company says 79% of its borrowers choose plans of 10 years or less, keeping additional interest from accruing during the life of repayment.
  • Room for improvement:
    • We penalized College Ave in our rankings for its slow path to cosigner release. If you agree to borrow on a 10-year term with the lender, you won’t be eligible to apply to remove your cosigner until after the five-year mark. All the other lenders we reviewed offer release within 12 to 48 months.
  • Fine print to watch out for:
    • College Ave contends it takes just three minutes to apply for a loan, but that merely determines whether or not you (and/or your cosigner) are eligible. After prequalifying, you could proceed to the more detailed application process.

LEARN MORE Secured

on College AVE’s secure website

#4 Citizens Bank

Citizens Bank is a large traditional bank with over 1,100 branches across 11 states. It offers student loans to undergraduates, graduate students and parents, as well as student loan refinancing.

  • Why we like it:
    • You might need to apply for a student loan at the start of each term. With Citizen Bank’s multi-year approval, however, you could choose to borrow additional money for another term without having to fill out a new application.
    • Also, if you or your cosigner have a qualifying bank account or loan from Citizens Bank, you could be eligible for a permanent 0.25% interest rate reduction on your student loan.
  • Room for improvement:
    • The primary drawback is the 36-payment requirement to apply to release a cosigner. Aside from that, Citizens Bank offers competitive rates, a variety of loan terms and interest-rate discounts that are in line or possibly better than many of the other private student loan companies.
  • Fine print to watch out for:
    • To qualify for cosigner release, you must also submit income statements to prove you can handle repayment on your own.

LEARN MORE Secured

on Citizens Bank (RI)’s secure website

#5 Wells Fargo

You’ll likely recognize Wells Fargo, as it’s one of the largest banks in the U.S., but you may not have realized that it offers student loans. It has several different programs, with offerings for community college students, undergraduates, graduates and professional school students.

  • Why we like it:
    • Like many other lenders, Wells Fargo offers a 0.25% interest rate discount if you enroll in autopay. Also, you can get a permanent 0.25% to 0.50% interest rate reduction if you or your cosigner have an eligible Wells Fargo student loan, consumer checking account or Portfolio by Wells Fargo relationship.
  • Room for improvement:
    • Put simply: You’re put in a box. You have to choose a 15-year term for your student loan. If you stick to making your required payment amount, you could wind up paying more in interest than if you took out a shorter loan elsewhere.
  • Fine print to watch out for:
    • Be sure that you make your first full payment on time. If it’s late, you’ll need to make 48 consecutive full payments (rather than 24) before you can apply to release a cosigner.

LEARN MORE Secured

on Wells Fargo Bank’s secure website

Determine if a private student loan is right for you

Using our rankings, you might be able to identify the private lender that offers you the best overall loan. However, it’s worth taking a step back to consider all your options before committing.

To do this objectively, come up with the list of criteria that matter most to you. They could vary from the eight criteria that we employed above — your list might emphasize a lender’s customer service, for instance.

When you’re comparing lenders with your criteria in mind, be prepared to weigh them as you see fit. You might not have a cosigner and therefore don’t care if a lender offers a fast path to cosigner release. In that case, you might look past top-ranked Sallie Mae — and its industry-best 12-month policy — to prioritize a lender that offers the lowest rates to independent borrowers.

Finally, confirm that you’re eligible to borrow from most private student loans banks, credit unions and online companies. You might find yourself disqualified, for example, if you’re an international student without a U.S. permanent resident cosigner. Lenders also generally require undergraduates to be 18, to attend school at least half-time and to have solid to strong credit — or to apply a cosigner who does.

Alternatives to private student loans

Almost always, federal student loans should be a borrower’s first choice if he or she has to borrow money. In part, this is because federal loans give you access to forgiveness programs, special repayment plans and guaranteed options to defer payments or put your loans in forbearance.

Also, if you haven’t built credit of your own and don’t have a creditworthy cosigner, federal student loans could be your only option. Most don’t have a credit requirement, and the federal loans for graduate or professional students and parents that do have a credit check don’t vary their interest rate based on your credit.

By contrast, even with a creditworthy cosigner, you may wind up with a higher interest rate if you take out a private student loan. Advertised interest rates can climb into the double digits, while 2018-2019 undergrads could access federal direct subsidized and unsubsidized student loans at 5.05%.

However, there may be times when a private student loan makes sense or could be a necessity. For example, undergraduate federal student loans have annual ($5,500 to $12,500) and aggregate (up to $57,500) borrowing limits that may not be enough to cover all your educational expenses.

Even if your unsure about whether you’re going to take out federal or private loans, complete the Free Application for Federal Student Aid (FAFSA) annually. In addition to being a requirement for federal loans and work-study aid, you may need to submit the FAFSA to qualify for some grants and scholarships.

Secure as much gift aid as you can before resorting to loans of any kind. After all, grants and scholarships don’t need to be repaid.

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

Guide to Graduate Student Loans & Grants in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements 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.

Source: iStock

Graduate school funding is a bit trickier than undergrad funding. Your options for loans and grants become more limited. And while work-study opportunities may be attainable and provide great experience, they often eat up a lot of time and offer low compensation.You do have options, though — whether you’re a grad student or a parent. This guide will take you through them all in detail.

Part I: Financing Options for Grad School

As far as federal options, there are two types of graduate student loans: Direct Unsubsidized Loans and Direct PLUS Loans. Each financing option looks different, and you may need a combination of both loans to fully fund your education.

Federal graduate student loan options and programs

Loan TypeHow much can I borrow?What are current rates?Origination FeeRepayment OptionsWhere can I apply?
Direct Unsubsidized LoansUp to $20,500. Medical students may be able to borrow more if they ask their school.6.60%1.066% if you take your first disbursement prior to Oct. 1, 2018.
1.062% if you take your first disbursement between Oct. 1, 2018 and Oct. 1, 2019.
Standard,Graduated,Extended,IBR,PAYE,REPAYE,ICR,PSLFIf you are eligible, Direct Loans are typically included in your financial aid package after you fill out the FAFSA.
Direct PLUS LoansCost of attendance after any other financial assitance has been applied.7.60%4.264% if you take your first disbursement prior to Oct. 1, 2018.
4.248% if you take your first disbursement between Oct. 1, 2018 and Oct. 1, 2019.
Standard,Graduated,Extended,IBR*,PAYE*,REPAYE*,ICR*,PSLF*

*Does not apply to Direct PLUS Loans issued to parents.
After you have filled out the FAFSA, you can apply here

Eligibility requirements

In order to qualify for any federal student aid, you need to meet certain requirements. Specifically, you must…

  • Have a high school diploma, home-school high school education, GED or other certification of equivalency.
  • Be a U.S. citizen or permanent resident.
  • Have a Social Security number. This requirement is waived if you are from the Marshall Islands, Palau or Micronesia.
  • Register with the Selective Service, if you’re a male age 18-25. If you do not do so during this time frame, it can impact your ability to access federal financial aid later in life.
  • Be enrolled or accepted into a school with the aim of obtaining a degree, certificate or other recognized educational credential.
  • Maintain good grades. Standards for this requirement vary from school to school.
  • Certify that you aren’t currently in default on any federal student loans, that you owe money back on a grant, and that you will only use the money for educational endeavors. This certification happens on the FAFSA application.

If you meet all of these requirements, you now have to look at specific qualifications for each type of student loan.

Direct Unsubsidized Loans

In order to qualify for a Direct Unsubsidized Loan, you must be attending a participating educational institution and be enrolled at least half-time in a program that will lead to a degree or certificate. There is no need to demonstrate financial need in order to qualify for a Direct Unsubsidized Loan.

Direct PLUS Loans

Direct PLUS Loans have very specific credit standards. Qualification requirements include:

  • Must be pursuing a degree or certificate at the graduate or professional level and be attending school at least half-time — or be the parent of a student who is doing so.
  • Cannot have a debt that is currently 90 days delinquent with a balance of over $2,085.
  • Cannot have an item worth over $2,085 sent to collections or written off in the two years prior to your application.
  • Cannot have any of the following appear on your credit report in the past five years: default determination, bankruptcy, foreclosure, tax lien, repossession, wage garnishment or a write-off of other student loan debt.

These standards apply to both student and parent borrowers. If you cannot meet them, you can still borrow money by finding a cosigner who does meet these standards.

You may also be able to qualify if you can prove the blip on your credit report was caused by extenuating circumstances. In order to do this, you’ll need to complete credit counseling to the satisfaction of the PLUS program.

Pros and cons of federal grad school loans

There are times when taking out federal loans will be advantageous to you as a grad student and times when other options may make more sense. Let’s drill down into the pros and cons.

Pros:

  • Federal graduate student loans give you access to a number of repayment options, including some that adjust your monthly payments based on your current income.
  • Some debt forgiveness programs, such as Public Service Loan Forgiveness, only apply to federal loans
  • Credit requirements are typically more lenient than they are in the private sector.

Cons:

  • The fact that there are origination fees on Direct Unsubsidized Loans and Direct PLUS Loans is a major negative, as it will cost you money to borrow the money in the first place.
  • Interest rates on Direct PLUS Loans could be bested by private loan rates if you have a good credit history. You may be able to save money by going to a private lender in specific circumstances.
  • Direct Unsubsidized Loans and Direct PLUS Loans require at least half-time enrollment. If you are pursuing a graduate-level degree while working a day job, this may present a problem, depending on how many credits you are able to take on.

Federal grants and programs for grad school

While loans are money you will have to pay back, grants and work-study programs are sources of funding that you won’t need to repay. It’s essentially free money, and at the graduate level, you have a few federal options.

TEACH Grants

The Teacher Education Assistance for College and Higher Education (TEACH) Grant is a program that pays for part of your education as long as you promise to use your degree in a high-need, low-income area for four of the eight years following the completion of your education. You can also teach at a Bureau of Indian Education school during this time period to qualify.

High-need fields include:

  • Bilingual education
  • English language acquisition
  • Foreign languages
  • Math
  • Science
  • Special education
  • Reading specialists
  • Regional needs, which are updated annually

If your grant were disbursed today (or anytime between Oct. 1, 2018, and Oct. 1, 2019), the maximum amount you could qualify for would be $3,752.

If your school participates in the TEACH program, it will have specified which programs qualify for the grant. Get in touch with your financial aid office to find out if your program is eligible.

While you’re there, make sure you are eligible by checking your school’s academic requirements for qualification.

If you do not teach in a high-need field in a low-income or Bureau of Indian Education school for four of the first eight years after your graduation, your grant will turn into a Direct Unsubsidized Loan, which will have to be repaid.

After you have confirmed with your school that you are enrolled in an eligible program, you will need to fill out the FAFSA. You will also need to sign a letter of agreement and complete program-specific counseling.

Pell Grants

It is extremely rare for a grad student to qualify for a Pell Grant. In fact, for eligibility purposes, you’re not allowed to be pursuing a graduate degree.

The only time Pell Grants are available after undergrad work is when you are pursuing a post-baccalaureate teaching certificate. Even then, your certificate program must meet the following requirements:

  • It does not lead to a degree.
  • It is a prerequisite in your state in order to work as a primary or secondary school teacher.
  • It comes from a school that does not offer a bachelor’s degree in education.
  • It must be a post-baccalaureate program.

And as a student, you must also be enrolled at least half-time, pursuing your initial teacher certification/licensure within your state.

For the 2018-2019 school year, the maximum award you can receive is $6,095. The amount you get will be based on financial need.

To apply for a Pell Grant, all you have to do is fill out the FAFSA.

If a financial need is demonstrated when you fill out the FAFSA, you may be offered a work-study position. If your school participates, you’ll be given an hourly or salaried job where you are paid at least monthly. Your financial need will determine the number of hours you receive.

The kind of job you are assigned will depend largely on your school. You may find yourself in one of these fields:

  • Community service
  • Positions at your school
  • Fields relevant to your course of study

If you end up with a position on campus, you’ll likely be working for the school. If you are working off-campus, you’re more likely to be assigned to a position serving the public good or working in a position relevant to your future career.

You’ll make at least minimum wage, though as a grad student you may have some desirable skills that could land you a position with a pay boost.

Your school is obligated to issue you a paycheck at least once per month. The money will be paid directly to you unless you set up direct deposit payments, or you are applying your earnings toward tuition, fees or room and board.

Grants are a form of financial aid that you don’t have to pay back under most circumstances. However, if you don’t hold up your end of the educational bargain, you may have to return money that was paid to your school, or money you received as a refund check from your school.

You could end up owing money back for your federal grant if:

  • You don’t meet TEACH program guidelines as outlined above.
  • You drop out of school partway through the semester.
  • You reduce the amount of credits you are taking after the grant has been issued.

If you are disappointed by your FAFSA options, you should know that there are other ways to find funding for your graduate-level education. Be sure to review these resources prior to taking out loans.

Federal grants at the graduate level are admittedly thin. If you’re looking for other ways to pay for school that don’t involve student loans, here are some additional federal agencies outside the Department of Education that may be able to help.

ROTC scholarships

ROTC scholarships will pay for your education. You’ll also get a stipend for the time you spend at drill on weekends and may have your books covered as well.

In exchange for all of this money, you will be obligated to serve either on active duty or in the reserves after you have completed your education. Because you have a college education, you will enter the military as an officer.

Post-9/11 GI Bill

If you served in the military for at least 90 days after Sept. 10, 2001, and remain on active duty, or were honorably discharged due to disability after serving 30 consecutive days after the same date, the Post-9/11 GI Bill may cover your tuition and fees.

If a smaller portion of your service happened after Sept. 10, 2001, you may be eligible for prorated benefits.

All in-state tuition and fees will be paid at public schools, and up to $23,671.94 will be paid at private schools. This number changes annually.

If you still have a gap between how much the school charges and how much the Department of Veterans Affairs (VA) will pay under the latest version of the GI Bill, check to see if your school has opted into the Yellow Ribbon Program. Schools that do so reduce the tuition of veterans to meet the maximum VA payout, leaving you with no additional money to pay.

Yellow Ribbon schools may also provide funding equivalent to a Basic Allowance for Housing in addition to a stipend for books.

In certain cases, benefits may be transferable to minors, so if you are a parent who has unused GI Bill benefits, you may be able to give them to your child as they enter grad school.

AmeriCorps

AmeriCorps is a volunteer opportunity with some perks for college students. When you volunteer, you earn money for school through the Segal AmeriCorps Education Award. The amount of money you earn depends on how time-intensive your service is.

For example, currently, if you volunteer in an approved position for more than 1,700 hours over 12 months, you would qualify for an education credit worth $6,095 for the 2018-19 school year. You can only earn up to two full-time education credits. You can find further examples of how much you can earn on the Segal Award Eligibility page.

As a member of AmeriCorps, you may find yourself in one of the following positions or something similar:

  • Relief efforts after a natural disaster
  • Tutoring K-12 students
  • Building affordable housing
  • Working with local nonprofits and community groups

If you have served as an AmeriCorps member after Oct. 1, 2009, and are age 55 or older, you may have accrued educational benefits that you can pass on to your child, stepchild or grandchild. You can learn more program specifics here.

Other sources of federal grants for grad school

Higher education agencies in your state

Another great place to look for funding is the agency that handles higher education in your state. These state-level organizations typically offer grants. You’ll likely be prompted to visit your state’s website at the end of your FAFSA application, but if you want to learn more about available programs now, you can find yours here.

Your school’s financial aid office

Your school likely has endowments and partner employers — both of which might offer scholarship and grant opportunities. To find out what’s available at your school, schedule an appointment with the financial aid office.

Industry and professional organizations

Many industry and professional organizations offer some type of scholarship program for those studying in the field. Applying for these scholarships won’t just help you pay for school if you’re awarded — if you win one, it will look phenomenal on your resume.

Some of these organizations will require membership prior to application. While membership fees can be expensive, many such groups provide student-level memberships at a steep discount.

Private graduate student loans: A last resort?

Private graduate student loans are issued directly by lending institutions without the backing of the U.S. Department of Education. You can look to banks, credit unions or online marketplace lenders to access these loans.

Pros:

  • If you have a good credit history, you may be able to obtain a loan with lower rates than those currently offered through federal programs.
  • You may be able to access more capital than you would with federal loans, depending on your credit history and the type of federal loan.
  • You can shop around for different options. Some lenders don’t charge origination fees, and some are willing to work with you in cases of hardship.

Cons:

  • You will not have access to advantaged repayment programs like PAYE, REPAYE, IBR, ICR and PSLF (which are all covered in sections below).
  • If you do not have a good credit score, interest rates may be higher than federal loans, or you might not be able to get a private loan at all, depending on your credit report.
  • You have to shop around for different options. Some lenders will not work with you in cases of hardship, and factors like variable versus fixed interest rates may throw you for a loop if you’re not careful.

Questions to ask before you borrow private loans for grad school

Before you take out any graduate student loans, you’ll want to get answers to these questions:

This may vary, depending on your income and credit history.

This will typically be a range. If you have good credit, you may qualify for the best rates. If you don’t, you’ll be looking at the higher end of the spectrum.

Variable interest rates currently tend to start out lower. They may even stay lower for a set amount of time, but eventually they will move in accordance with the market. You may get lucky and have rates go down, but rates have been on the increase in recent years and are expected to continue to rise in the near term.

Fixed rates start out higher than variable rates but stay unchanged throughout the course of your loan term.

Shorter loan terms sometimes mean higher monthly payments, but you’ll usually end up paying less in the long term because of the way interest accrues over time.

If you can’t afford the monthly payments, though, you could end up paying late fees or damaging your credit. Longer loan terms may mean paying more interest by the time you’re through, but they also have the potential to lower your monthly payments.

Some lenders provide payment plans that allow you to defer payments until after graduation. Other payment plans start your payments immediately. Still others require interest-only payments while you’re in school, with principal payments being added after graduation.

Common fees to take note of are:

  • Application fees
  • Origination fees
  • Late fees
  • Prepayment penalty fees

Eligibility requirements to inquire about include credit requirements, citizenship/naturalization requirements and income requirements.

You’ll want to know if your lender offers any type of deferment in times of financial hardship. Some lenders will even work with you to help you find a new job or temporarily reduce monthly payments while you are in specific employment conundrums.

Compare private sector graduate school loan options here. >

Private LoansFederal Loans
Not eligible for advantaged repayment options (REPAYE, PAYE, ICR, IBR, etc.)Eligibile for advantaged repayment options
May or may not have origination fees Have origination fees
Potentially stricter credit requiremntsPotentially looser credit requirements : (depending on which private lender you're coparing them to) No credit requirements if we leave out PLUS loans
Interest rates potentially lower for those with good credit — can be much higher for those with bad creditInterest rates likely higher for those with good credit (with the possible exception of Perkins Loans)
Often offer an option of variable or fixed ratesOnly fixed rates for the products we are discussing
May require half-time enrollmentDefinitely require half-time enrollment
Will probably need a co-signer if you're a young borrower — especially wihtout a jobTypically won't need a co-signer

Part II: Repaying Grad School Debt

There is a slew of different repayment options, depending on which type of loan you take out. Whether you start repayment during your studies or after, here are some things you can do to prepare:

Federal grad school debt

Students are not required to make payments until six months after their graduation — or nine months if you have a loan from the now-expired Perkins Loan program. But just because you don’t have to make payments during this time period doesn’t mean you shouldn’t.

When to start repaying your federal grad school loan debt

The types of federal loans available to you as a graduate student accrue interest while you’re in school and during your grace period/deferment. You are not required to pay that interest immediately, but the unpaid interest will be added to your principal balance.

By making interest-only payments while you’re in school, you prevent the interest costs from multiplying upon themselves, saving you money.

You can pay toward the principal while you are in school as well, if you so choose, as there is no prepayment penalty on federal student loans.

Parents who have PLUS loans are typically required to start repaying immediately after the loan is disbursed. You can, however, request a deferment for the period during which your child is in school. It would be wise to at least make interest-only payments during this period if you choose to go this route.

Federal loan forgiveness and repayment assistance programs

Federal loans give you access to many advantaged repayment and forgiveness programs. Keep in mind that while many of these repayment plans are designed to make your monthly payment lower, they have the potential to cost you more over the course of your loan — especially if they don’t end in forgiveness — as interest will be charged over a longer period.

Income-Based Repayment (IBR)

If you took out your first student loan prior to July 1, 2014, and your student loan payments are more than 15% of your discretionary income, this program allows you to pay a maximum of 15% of your discretionary income for 25 years. After that point, your remaining debt is forgiven.

If you took out your first student loan after July 1, 2014, the capped percentage is 10%, and you will only have to pay it for 20 years.

Learn more about IBR here.

Income-Contingent Repayment (ICR)

If you opt into the ICR plan, you would make payments for 25 years. After 25 years, your remaining debt would be forgiven.

Your monthly payments would be the lesser of these two options:

  • 20% of your discretionary income
  • What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income

Learn more about ICR here.

Pay As You Earn (PAYE)

Take your income and subtract 150% of the poverty level in your state. If your monthly student loan debt payments are more than 10% of the difference, you may qualify for PAYE. Use this calculator to see if you qualify.

Your monthly payments will be limited to 10% of your income and will never exceed what you would pay on a 10-year Standard Plan. After 20 years, the remainder of your debt will be forgiven.

You only qualify for this plan if your first student loan was disbursed after Oct. 1, 2007, and you have received at least one disbursement since Oct. 1, 2011.

Learn more about PAYE here.

Revised Pay As You Earn (REPAYE)

REPAYE does not have the same timing restrictions of PAYE. In fact, the date you took out your loans is irrelevant. There are also no income restrictions.

However, while you will only have to pay 10% of your discretionary income, there is no protection stating that your payments will not exceed those of a 10-year Standard Plan. You could end up paying more with this program — especially with a higher income.

Remaining balances on graduate school loans will be forgiven after 25 years.

Learn more about REPAYE here.

Public Service Loan Forgiveness (PSLF)

The future of this program is uncertain, but it is currently still open.

Under PSLF, you make payments for 10 years while you’re working 30-plus hours per week and considered a full-time employee by your employer. This job must be in a position of service (see list below), and the remainder of your loan balance will be forgiven. Your 10 years of payments should be made under IBR, ICR, PAYE or REPAYE.

Qualifying public service jobs include positions at:

  • Governmental organizations
  • 501(c)(3) organizations
  • Non-501(c)(3) organizations providing one of these services:
    • Public or school library services
    • Emergency management
    • Service on behalf of the U.S. military
    • Public education
    • Early childhood education
    • Law enforcement
    • Public interest legal services
    • Public services for the disabled or elderly
    • Public health

Learn more about PSLF here.

State programs

States have regional needs in a number of different fields, including medicine, education, social work, veterinary sciences, law and more. Across the country, there are programs offering to pay off portions of your debt if you agree to live and work in high-need communities.

Repaying private grad school debt

Different lenders will require different repayment terms from their borrowers. Be sure to understand what is expected of you before signing on the dotted line. Ask questions like:

  • Will I be required to make payments while I am in school?
  • If so, are they interest-only payments?
  • Will there be a grace period after graduation?
  • Do you have any deferment options in case of economic hardship?
  • What is the maximum time allowed for deferment?

When you should start repaying private grad school debt

The sooner you can pay off debt, the better. If your loan requires you to make principal and interest payments, make them without delinquency.

If your lender gives you the option of making interest-only payments while you’re in school and/or in a grace period, it’s a smart financial move to to save you significant interest.

Before you make any payments prior to your due date, make sure there is no prepayment penalty. Otherwise, a good portion of the money you think you’re throwing at your debt could end up going toward fees instead.

Learn more: Refinancing grad school debt

If you can get a lower interest rate on your student loans by refinancing, you may be able to save money as long as you pay off your debt in the same amount of time.

In order to avoid ruining your credit score, you may also want to refinance if you can’t afford your monthly payments. Find out more about potential advantages to refinancing here.

Type of LoanFederal Private
Pros
  • May be able to secure a lower Interest rate
  • Lowering monthly payments may help keep you from defaulting on your loans — but be sure to check all available repayment and deferment programs before refinancing in the private sector
  • May be able to secure a lower interest rate
  • Lowering monthly patments may help keep you from defaulting on your loans
Cons
  • You lose all potential access to advantage repayment programs and forgiveness
  • May have to pay application or origination fees
  • If you refinance for lower payments over a longer term, you will likely pay more in interest over the course of your loan
  • May have to pay application or origination fees
  • If you refinance for lower payments over a longer term, you will likely pay more in interest over the course of your loan
The rates and fees mentioned in this article are accurate as of the date of publishing.

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.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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