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College Students and Recent Grads

The 2019 Guide to Student Loan Forgiveness

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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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.

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

Top Checking Accounts for College Grads

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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.

Account Name

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

Aspiration Spend and Save Account$0$0$10Unlimited2.00% APY on the balance of the save portion in your account.
Empower Checking Account$0$0$0One out-of-network ATM withdrawal per month1.90%
nbkc bank Personal Account$0$0$5$51.01% APY on all balances
Atlantic Stewardship Bank Cash Back Checking$0$0$1UnlimitedDoes not earn interest. But it does offer 0.50% cash back if you meet requirements
Radius Bank Radius Hybrid Checking$0$0$100Unlimited1.00% on balances from $2,500 to $99,000
One American Bank Kasasa Cash Account$0$0$0None, member of MoneyPass network3.50% APY if requirements are met

0.01% APY if requirements are not met
Orion Federal Credit Union Premium Checking$0, provided you meet qualifications. Otherwise $5$0$0$10 per month4.00% on balances up to $30,000, 0.05% on portion of balances greater than $30,000
TAB Bank Kasasa Cash Rewards Checking$0$0$0Up to $15 in ATM fees reimbursed if minimum account requirements are met4.00% APY on balances up to $50,000
La Capitol Federal Credit Union Choice Plus Checking$2, waived if you enroll in eStatements$0$50Up to $25 per month4.25% 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)

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, as 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 — although 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. 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 Spend and Save Account

The Aspiration Spend and Save Account offers a wide range of benefits for account holders and has few fees. The $10 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. Keep in mind that you earn the 2.00% APY on the funds you move to savings side of your account.

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 Spend and Save Account is a solid choice.

LEARN MORE Secured

on Aspiration’s secure website

2. Empower Checking Account

Empower is the mobile banking division of Evolve Bank & Trust. The Empower Checking Account currently offers a very attractive 1.90% APY on your full checking account balance, with neither a minimum deposit to open nor any need to maintain a minimum balance. Empower gives you access to over 25,000 fee-free ATMs nationwide, however you’ll only get one out-of-network ATM fee reimbursed per month. One other drawback: There are no check-writing capabilities with this account.

LEARN MORE Secured

on Empower’s secure website

Member FDIC

3. nbkc bank Personal Account

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 32,000+ MoneyPass® ATMs in the U.S. for free, and if you use out-of-network ATMs you’ll be reimbursed up to $12 a month. This account is a good choice if you want a checking account that has minimal fees and earns interest.

LEARN MORE Secured

on nbkc bank’s secure website

Member FDIC

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

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

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. One American Bank Kasasa Cash Account

One American Bank may be a tiny community bank based in Sioux Falls, SD, but its Kasasa Cash Account packs a big punch. Available nationwide, this checking account earns an impressive 3.50% APY on balances up to $10,000. Best of all, the account is totally free, and as a member of the MoneyPass ATM network, One American Bank gives you fee-free access to thousands of ATMs nationwide. Kasasa accounts are a special class of bank product that help smaller banks compete against larger rivals by providing high-yielding rates and other features desired by consumers.

To earn your Kasasa reward APY, for each monthly qualification cycle simply do the following: Make at least 12 debit card purchase transactions of at least $5.00 each that post and settle to your account; receive electronic bank statements, account notices and disclosures; and log in to online banking at least one time.

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on One American Bank’s secure website

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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. Orion Federal Credit Union Premium Checking

An excellent choice for recent graduates looking for a high-yield checking account is Orion Federal Credit Union’s Premium Checking account, which promises customers 4.00% APY on balances up to $30,000.

You also need to keep in mind that because Orion FCU is a credit union, you have to jump through some additional hoops to access the high APY:

  • Pay $10 to one of five organizations approved by Orion to become eligible for membership in the credit union
  • Deposit $25 in a special savings account with Orion to officially become a member
  • Make an electronic deposit of at least $500 every month into your Premium Checking account
  • Make at least 8 signature based debit card transactions — not PIN-code based debit transactions — each month.

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on Orion Federal Credit Union’s secure website

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2. TAB Bank Kasasa Cash Rewards Checking Account

Based in Ogden, UT, TAB Bank’s Kasasa Cash Checking account is a great choice for recent graduates. You can earn a very competitive 4.00% APY by meeting a few simple requirements: Have at least one direct deposit, ACH payment, or bill pay transaction posted to the account during each billing cycle; and make at least 15 debit card purchases. Even better, the bank will reimburse up to $15 in ATM fees per month from making withdrawals outside their ATM network.

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on TAB Bank’s secure website

Member FDIC

3. La Capitol Federal Credit Union Choice Plus Checking

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.

James Ellis
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James Ellis is a writer at MagnifyMoney. You can email James here

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College Students and Recent Grads

Guide to Paying for College in 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Tuition rates have been steadily rising over the years, and the cost of college has never been so high. According to College Board, the cost of tuition and fees at public four-year colleges is more than three times what it was 30 years ago. At private four-year colleges, the cost has more than doubled since 1988.

But even though higher education is expensive, a college degree remains valuable. In fact, those who hold a bachelor’s degree make an average of $1 million more over the course of their lives than those who don’t, according to the Department of Education. So a degree can still worth investing in — but first you need to know how to pay for it.

To that end, we’ll explore the costs of college and how you can piece together scholarships, grants, savings and student loans to fund your education.

Part I: How Much Does College Cost?

When you first look at the cost of tuition and fees, room and board and meal plans, most colleges appear oppressively expensive. But appearances can be deceiving. The first number you see is the “sticker price,” and it’s usually much more than you end up shelling out for your education.

The number you actually pay — the net price — is lower for most students. Net price is how much the school charges minus the amount of financial aid you’re awarded.

Net price vs. sticker price

If you already know how much financial aid you’ll be receiving, you can subtract that number from your school’s nominal cost of attendance. The difference will be your net price.

Colleges are required to have a net price calculator on their websites to help you estimate costs. Before using one of these calculators, however, keep these points in mind:

  • The numbers they produce will be estimates only and aren’t guaranteed.
  • Some calculators base their calculations on in-state tuition. If you’re an out-of-state student, your costs could be higher.
  • Some calculators also factor in financial aid opportunities available to first-year students. There’s usually more funding for freshmen, so you can expect your subsequent three years to be more expensive than your first one.

Nonprofit vs. for-profit schools

For-profit schools tend to cost a good deal more than non-profit schools, even private non-profit schools. This is partly because for-profit schools offer less institutional aid (financial aid given through the college itself). Instead, they rely heavily on federal financial aid for the funding of their students’ education.

As a result, students who attend for-profit schools generally wind up with more student loan debt after graduation. At for-profit schools, 88% of graduates had loans, and the average debt burden was $39,950. At private nonprofit schools, those numbers were lower, with 75% of graduates having loans, and at an average total debt of $32,300.

Before going into debt for a for-profit school, be careful to weigh net prices at nonprofit institutions. Remember, the sticker price won’t necessarily be what you end up paying. Also note that nonprofit institutions will usually offer more scholarships and grants, reducing the number of loans — and therefore debt — you have to take on.

Public vs. private school tuition

Undoubtedly, the sticker prices for public colleges tend to be lower than that of private institutions. However, some private schools also have large endowments providing substantial student aid at the institutional level.

For example, Cornell University offers significant grants to students from low-income families. In an example generated by the university, a traditional student from a household with under $40,000 in annual income could receive a Cornell grant of $41,911.

In this example, the student’s net price is only $2,700 for one year at this Ivy League university.

Also note that private college institutional aid can also be extended to students from middle-income families as well, even if they don’t qualify for a large amount of aid through federal programs.

Part II: How to Pay for College

There are several different ways to find money for college expenses. If you stay on top of financial aid application deadlines and have a high GPA and strong test scores, you may be able to shave many thousands of dollars off your cost of attendance.

In this section, we’ll cover the most common sources of college funding.

Understanding the FAFSA: The key to financial aid

Paying for College
Source: iStock

The Free Application for Federal Student Aid (FAFSA) is likely the single most important document you’ll fill out as a college student.

Why? Because you need to submit the FAFSA to access the majority of financial aid options we’re going to cover in this guide. These include:

  • Grants
  • Work-study opportunities
  • Federal student loans
  • Direct PLUS Loans for parents

Not only will the FAFSA tell you how much aid you’re eligible for through the federal government, but it’s also usually a required step to getting institutional financial aid from your college or university.

How to fill out the FAFSA

It’s important to remember that you don’t have to pay to file the FAFSA — it’s entirely free. Go to https://fafsa.gov/ to create a Federal Student Aid account and start your application.

Important: You must fill out a FAFSA every year you attend college in order to receive aid.

Learn more with our in-depth FAFSA Guide >

Expected Family Contribution

The Expected Family Contribution (EFC) is how much the federal government determines you or your parents should be able to contribute to your education costs. This number is then used to figure out how much aid the government is willing to extend to you.

For example, to qualify for a full Pell Grant in the 2019-20 school year, your family’s Expected Family Contribution can’t be higher than $5,576.

FAFSA deadlines

Filing for aid for the 2019-2020 school year began in Oct. 1, 2018 but remains open until June 30, 2020. For the 2020-2021 year, you can file anytime after Oct. 1, 2019.

Ideally, you should apply as soon as possible, as the aid is doled out on a first-come, first-served basis, and some awards can in fact run out of funds.

You should also note that some states have stricter deadlines than the federal government; be sure to check your state’s deadline to be sure you get your application in on time.

Student Loans: Explained

Paying for College
Source: iStock

Another form of aid distributed by the federal government is student loans. You will know which federal student loans you qualify for after you fill out your FAFSA.

Because student loans have to be repaid with interest, they should only be pursued after you’ve exhausted all grant, scholarship and work-study options.

Types of federal student loans

As an undergraduate student, there are a variety of federal student loans you may be offered.

Direct Loans, both subsidized and unsubsidized, come with the advantage of income-driven repayment options, as well as deferment, forgiveness and cancellation programs.

Try to max out your federal student loan eligibility before turning to private loans. Federal student debt typically has better rates than private loans, as well as those flexible repayment options.

Private student loans

If federal student loans aren’t enough, you can turn to private student loans for college financing. These loans from banks, credit unions and online marketplace lenders might not have the same generous repayment programs, though some do have deferment options in certain situations, such as unemployment.

Private loans come with variable or fixed interest rates. If you take out a variable interest rate loan, the rate could go up over the course of your loan. Fixed interest rates, meanwhile, remain stable throughout the course of repayment.

Should I get a cosigner?

If you haven’t established credit yet, you’ll likely need a cosigner to qualify for private student loans. If you’re a non-traditional student and have a less-than-stellar credit history, you’ll also probably benefit from having a cosigner.

Borrowers with very good credit scores can skip the cosigner, but if you do decide you need some help, look for loan options with a cosigner release. This lets the cosigner off the hook after a certain period of time — generally once your payment history has allowed you to establish a better credit history yourself.

How much should I borrow?

You don’t want to borrow more than you can reasonably afford to pay back. Certain professions that require extensive education, like law and medicine, will have considerably more student loan debt than other professions. But while these kinds of professions are likely to garner higher incomes, there is no guarantee — recent reports show stagnation in doctors’ salaries and a difficulty in finding employment amongst lawyers.

Others, such as teaching, might require a master’s degree but won’t necessarily lead to an entry-level salary that makes up for all your educational expenses.

Before taking on a lot of debt, talk to professionals in your target field to get a sense of the entry-level pay and rate of salary growth over the course of a career. While using online sources to find this information is great, it’s not going to replace the knowledge of a professional working in the field.

You can then plug that number into CollegeBoard’s Student Loan Calculator, along with how much money you intend to borrow. It will analyze the figures and tell you if your monthly payments will exceed 10% to 15% of your income — which is generally considered to be the maximum you should allot to student loan payments.

If you take out federal student loans, you may be able to borrow more, as most loan options allow you to pay based on your income level. Just be careful not to bury yourself in debt — you don’t want to be paying student loans into your 70s.

Scholarships

Scholarships are among the most valuable forms of financial aid, since they give you free money for school that you never have to pay back. They’re a little different from grants (see below) and come in various forms. Here are features to look for:

Merit-based vs. need-based scholarships

While the majority of grants are need-based, most scholarships are merit-based. There may be maximum income levels or priority given to those in dire financial straits, but for most scholarships, you’ll be judged based on your achievements.

Many of these awards require you to maintain a certain GPA, and almost all will involve some type of essay, portfolio or video submission.

If your family’s income doesn’t help you establish a strong financial need, don’t lose hope. There are plenty of scholarships out there that have no financial requirements and are completely based on your essay — on rare occasion, they won’t even ask about grades.

Recurring vs. one-time scholarships

Most scholarships only last one semester or one school year. However, there are some you can apply for that will cover your entire tenure as an undergrad. Keep in mind, though, that these options are likely to require you to maintain a certain GPA throughout your studies.

How do I find scholarships?

The first place you can look is your financial aid office. Many schools have endowments, not just for grants, but for scholarships as well.

After you’ve exhausted scholarship options at your school, look in other places, such as:

  • Professional organizations in the field you want to enter
  • Professional organizations or unions your parents may belong to
  • National student organizations related to your major
  • Potential future employers — especially if they’re a larger company
  • Groups within the community you grew up in
  • Organizations based on your ethnicity or heritage
  • Religious organizations
  • Organizations related to any extracurricular activities or hobbies

You can look for scholarships on specialty search engines, like Fastweb, CollegeBoard and Scholarships.com, but you’ll find a ton of competition. On the other hand, if you search for scholarships focused on what makes you unique, you might find a dramatically smaller applicant pool, boosting your chances of winning an award.

How soon should I start applying?

Start applying for scholarships as soon as possible. It is even possible to fund your entire education this way, though you would have to fill out a lot of applications and write a lot of essays. The sooner you get started, the better.

Each scholarship has a window, which is typically opened annually or once a semester, during which you can file an application. While high school sophomores will be able to apply for some scholarships, opportunities really start opening up in your junior year.

Beware of scholarship displacement

Although scholarships can be a great tool for paying for college, you also need to be careful about scholarship displacement. Some colleges will take away some need-based aid if you have a lot of outside scholarship help. Before applying far and wide to scholarships, it could be worth checking with your financial aid office to see if it engages in this practice.

Grants

A grant, like a scholarship, is money you never have to pay back, unless you drop out of school or violate the terms of the agreement some other way. For undergraduates, grants are typically need-based.

In order to qualify for federal grant programs, you must fill out the FAFSA and meet eligibility requirements. Here are some types of federal grants, along with other opportunities from your state or school:

Pell Grants

Federal Pell Grants are distributed based on income-eligibility only. They can be awarded regardless of whether you’re in school full-time, half-time or less than half-time.

For the 2019-20 school year, the maximum Pell Grant award is $6,195 for full-time students. Pell Grant awards are distributed in two parts over two semesters.

Students taking summer courses might also receive a summer Pell Grant, which is an additional 50% of your full award to spend on summer studies. This extra grant money can be particularly helpful for community college students whose course of study typically runs through the summer.

Federal Supplemental Educational Opportunity Grants

Federal Supplemental Educational Opportunity Grants (FSEOGs) are available to students with financial needs in excess of what the Pell Grant can address. These funds are distributed to schools upfront and then awarded on a first-come, first-served basis. Notably, not all schools participate, so you would need to consult your school’s financial aid office.

The maximum award is between $100 and $4,000, depending on your personal financial situation.

Iraq and Afghanistan Service Grants

If you lost a parent or guardian while they were serving in the military in Iraq or Afghanistan after 9/11, you may qualify for the Iraq and Afghanistan Service Grant — which offers funds almost equal to that of a full Pell Grant — regardless of your family income.

To qualify, you must:

  • Meet all Pell Grant requirements, except for the EFC requirements.
  • Have been 24 years old or younger and enrolled in college at least part-time at the time of your parent or guardian’s death.

TEACH Grants

If you’re planning on becoming a teacher, you may be interested in a Teacher Education Assistance for College and Higher Education (TEACH) Grant.

In order to qualify, you must be enrolled in a TEACH-eligible program. Not all schools participate, and the ones that do determine which of their programs qualify for TEACH Grants, so be sure to sit down with your financial aid counselor to determine your eligibility.

When you accept a TEACH Grant, you’re agreeing to serve four out of your first eight years in the workforce in a high-need specialization in a low-income area. You can also meet this obligation by teaching at a Bureau of Indian Education school.

High-need specializations include:

If you do not keep your promise to serve in this capacity, your grant will turn into a Direct Unsubsidized Loan, which will have to be repaid.

The maximum grant amount is $3,752 if disbursed after Oct. 1, 2018 and before Oct. 1, 2019. For grants paid out after Oct. 1, 2019 and before Oct. 1, 2020, the maximum award is $3,764.

State grants

Your state government may also issue need-based grants. Generally, you will be redirected to your state’s application page at the end of your FAFSA application, but if you want to check out your options beforehand, you can find information from your state’s department of higher education here.

Institutional grants

Your college or university may also issue need-based grants. While your EFC is not likely to be measured in the same way, a FAFSA application is still required.

Some colleges, though typically not Ivy League schools, will also offer merit-based grants. Your grades will likely be a factor here.

Work-Study Programs

Work-study programs are another form of aid that will not be accessible unless you complete your FAFSA.

Many schools participate in federally backed work-study programs for students with financial need. With work-study, you’re assigned a set amount of hours working for the school, in a community service role, or in a field relevant to your course of study.

You should get a paycheck at least once per month, and you can often choose whether to receive the funds directly or to have it applied against any money you owe the school.

529 college savings plans

529 accounts are tax-advantaged accounts to help you save for future college expenses. Contributions go in after you’ve paid taxes on your income. That money is invested and grows tax-free — as long as you spend the money on qualified educational expenses.

Types of 529 accounts

Not all 529 accounts are created equal. They are issued under state law, and each state has its own specific rules on how 529 accounts can be used. However, some states will let you purchase their 529 accounts even if you aren’t a state resident.

There are two basic kinds of 529 accounts:

College Savings Plans

The College Savings Plan structure allows your money to grow in traditional investments, as made available by your state. You can use this money to pay for school at almost any U.S. institution — and even at some schools abroad.

With a College Savings Plan, whatever you have saved can be applied toward any allowable educational expenses, though you’ll have to cover the remaining costs after exhausting the money from your 529.

A good example of a College Savings Plan is Utah’s 529 plan, which even offers a few investment options insured by the Federal Deposit Insurance Corporation.

Prepaid Tuition Plans

Prepaid Tuition Plans allow you to save for tomorrow’s college at today’s rates. There may be different tiers of saving for different types of schools.

For example, Pennsylvania’s Guaranteed Savings Plan 529 option currently allows you to buy credits at today’s rates. These credits will be valid when your child goes to school in the future — even if tuition rates have skyrocketed.

One thing to be careful of with Prepaid Tuition Plans is that if you save at the state school level, and your child ends up not wanting to attend a state school when they graduate from high school, you could run into some funding problems. Pennsylvania allows you to change your investment tier at any time, but this is a potential point of friction you should consider if you decide to go with this type of 529.

You’ll also notice that price per credit is quite high at Ivy League schools. As discussed earlier with the example of Cornell, Ivy League schools tend to have extensive grants. If you’re making a median income, saving in this manner may reduce your child’s future institutional aid, costing you more money than you would have had to pay without the dramatic savings.

What can I use my 529 account for?

You can only use the money in your 529 account for qualified educational expenses. If you use the money for anything else, you will have to pay taxes on the withdrawal.

Qualified educational expenses include:

  • Tuition and fees*
  • Room and board — though you must be enrolled at least half-time to claim this expense
  • Books
  • Technology required for school — including internet access
  • Other required equipment and materials, as assigned by your instructor

*Some Prepaid Tuition Plans cover tuition and fees only.

How to make a 529 withdrawal

Most programs allow you to make a withdrawal online or via postal mail. Your 529 account issuer will not keep records of how that money was spent. Producing documentation to show that the money was spent on educational expenses falls squarely on your shoulders.

Pros of 529 accounts:

  • Studies show that regardless of how much you save, the fact that you are saving for college makes your child more likely to attend college.
  • If you have a high enough income level, your child might not qualify for need-based financial aid. Saving in a 529 plan is a generous investment in their future, given that they won’t have as many funding opportunities available to them.
  • Because you are investing, your money is likely to grow — and it will grow federally tax-free. This means you won’t have to save as much in a College Savings Plan in order to meet your goals.

Cons of 529 accounts:

  • The amount you have saved could reduce institutional aid — especially if you open the account in your child’s name. Open the account in your name and list your child as a beneficiary instead.
  • When saving in a Prepaid Tuition Plan, do your best to ensure you’re saving at a level your child will actually be able to use. If they don’t end up going to school in state, you could hit a bump in the road if you’ve been saving at state school tuition levels.
  • Because you are investing, there’s no guarantee of growth. You could conceivably lose money in a 529 account.

FAQ

To see if your college degree is worth the cost, you need to figure out the net price of your education and your expected salary. A good tool to crunch these numbers is the College Scorecard, provided by the Department of Education, which shows data on net cost of attendance, alumni salaries and debt upon graduation.

Be wary of relying too heavily on the data here, though. Your future salary, for instance, likely depends more on your major and profession than on the undergraduate institution you attended. Often, an even better way to figure out potential future earnings is by talking with someone who is already working in your field.

Technically, you’re only allowed to spend federal student loans on educational expenses. These can include:

  • Tuition and fees
  • Room and board
  • Books, supplies and equipment
  • Transportation while at school
  • Dependent child care expenses

Unlike with 529 funds, no one will be monitoring how you spend your federal loan money. However, if you end up having the money to go on shopping sprees after you’ve paid for all of the above expenses, you’re probably borrowing too much. Consider returning the money rather than paying interest on it after you graduate.

If you’re borrowing from a private lender, check your loan agreement for any restrictions on how you can spend your private student loans.

Most of the time, you don’t have to live in on-campus housing. Some colleges and universities require their traditional freshmen to live on campus, but even these stipulations can sometimes be worked around if you’re commuting from your parents’ home.

If at all possible, yes, try to make student loan payments while you’re still in school. Make an effort to pay the interest at least, so it won’t accrue while you’re in school (or during your grace period or deferment) and cost you more money in the long run.

The only time when in-school payments don’t matter is when you have Direct Subsidized Loans — those loans won’t accrue interest while you’re in school. Even then, making principal payments early isn’t a bad thing if you can swing it.

If you take out a Direct Loan, you’ll be assigned one of nine loan servicers and will make payments through that assigned servicer.

Those who have taken out Perkins Loans may repay them directly through their school or via a loan servicer designated by their school.

Likewise, you can repay private loans directly to your lender or assigned servicer.

If you miss one payment on your federal student loans, you will have to make it up within 90 days — otherwise you’ll get reported to the credit bureaus.

If you miss several payments on your Direct Loans and don’t make payments for 270 days, you will be in default, which puts you at risk of not only being reported to the credit bureaus, but also losing all benefits of federal student loans, such as income-driven repayment options. You could also end up in court.

The consequences for missing payments on Perkins Loans and private student loans depend on the agreement you signed prior to disbursement. Private lenders can report you to the credit bureaus as soon as you’re 30 days late with a payment.

If you can’t afford your Direct Loans, apply for an income-driven repayment plan. These plans cap your maximum payment at a percentage of your disposable income to ensure that they are affordable.

If you have a private loan, you may want to look into refinancing for lower monthly payments.
And if you have a Perkins Loan, set up an appointment with your financial aid office or loan servicer to discuss your options.

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.

Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne here

Rebecca Safier
Rebecca Safier |

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

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