Advertiser Disclosure

College Students and Recent Grads, Pay Down My Debt

How To Tell If Your Student Loans Are Private or Federal

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

How To Tell If Your Student Loans Are Private or Federal

Do you know if your student loans are private or federal? It’s an unfortunate fact that many college graduates don’t completely understand their student loans. You might not know who your student loan servicer is, or why the difference between private and federal student loans matters.

Let’s review a few methods you can use to determine if your student loans are private or federal, what makes each different, and why knowing what type of loan you have is important.

What Makes Federal and Private Student Loans Different?

In case you’re not sure why you should know whether your student loans are federal or private, let’s briefly go over the differences between the two.

Federal student loans are offered through programs funded by the federal government to those that demonstrate a need for financial aid. Typically, these loans are easy to qualify for – in most cases, your credit isn’t even checked.

There are two different federal student loan programs available:

The William D. Ford Federal Direct Loan Program: The lender under this program is the U.S. Department of Education. This program consists of 4 loan types – Direct Subsidized, Direct Unsubsidized, Direct PLUS, and Direct Consolidation. If you’re an undergraduate, you’ll only have Direct Subsidized or Unsubsidized loans.

The Federal Perkins Loan Program: The lender under this program is actually your school, and this is for students with an exceptional need for aid.

Individual banks or credit unions, such as Chase, Wells Fargo, Sallie Mae, Discover, Citizens Bank, etc, make private student loans. There are many lenders that offer private student loans, but the terms aren’t as favorable as those for federal loans. Private loans also require a credit check and may be harder to qualify for.

Additionally, federal student loans come with guaranteed benefits, such as being able to enter a period of forbearance or deferment with your loans (temporarily stops payments), income-based repayment plans, and loan forgiveness. Private loans don’t guarantee these benefits, and different lenders offer different benefits.

How To Determine if Your Loans Are Federal

The first thing you should do to see if you have federal loans is log onto the National Student Loan Data System. The only loans listed here are federal.

If you’ve never used the NSLDS before, you’ll want to click the “Financial Review” button on the homepage, hit “Accept,” and then enter your credentials.

If you have an FSA ID, you can enter it here. If not, there’s an option to create one. In May of 2015, the government redesigned its student loan system. You can use your FSA ID to log into multiple government sites now. However, if you haven’t logged on in quite a while, you might need to create one.

In the event you forgot your credentials, you can click on the “Forgot my username/password” button and have the information emailed to you, or answer a challenge question. You’ll just be required to enter your Social Security Number, last name, and date of birth.

I had to go through this process myself and create a new ID as it had been a few years since I had last applied for FAFSA. The process is very simple. After entering your information to create an ID, you just need to link your PIN to your FSA account (you should have a PIN if you applied for FAFSA). If you’ve forgotten it, you can answer a challenge question to have it imported. You also need to confirm your email by entering in a secured code that’s sent to you.

Once you log on, you’ll see a list of all the student loans that were disbursed to you.

This page will also show you what your original loan amount was, and how much you currently owe.

Click on the numbered box to the left of your loan to determine your loan servicer. This will display all the information about that particular loan. Your loan servicer will be listed under the “Servicer/Lender/Guaranty Agency/ED Servicer Information” section. The name, address, phone number, and website should be displayed.

Additionally, this page will also inform you of your loan terms. Along with your original loan balance and current outstanding balance, it will tell you what type of interest rate you have (fixed or variable), your interest rate, and the current status of the loan.

[How to Set Up Income-Driven Repayment Programs]

How To Determine If Your Student Loan is Private

Private student loans are loans not made by the government – banking institutions such as Sallie Mae, Wells Fargo, Chase, Citizens Bank, etc make them.

As a result, there are more lenders to look out for when it comes to private loans. Unfortunately, there’s no central reporting system for private loans like there is for federal loans, which makes them tricky to track down.

Your first stop should be the NSLD to at least see if you have any federal loans. In 2012, only 20% of graduates had private loans, so chances are good at least some of your loans are federal.

Another way to check is to take a look at your credit report. You don’t have to pay for one if you haven’t ordered your three free reports from www.annualcreditreport.com. You can get your credit score within minutes of filling out your information on there.

Some lenders may not look familiar to you. Just conduct a Google search and see what comes up. Further investigation via phone may be necessary to obtain your loan information if you don’t remember making a login for your lenders website.

If you see “Federal Direct Loan,” “Federal Perkins,” “Direct Loan Consolidation,” or “Stafford” on your report, ensure it matches up with what’s on your NSLD account. These are federal loans.

You might also be able to call your school’s financial aid office to see if they have any records of your loans. Otherwise, hopefully you have your own records of the loans you took out.

What Should You Do Once You Find Out?

Knowing whether your student loans are private or federal will help if you ever decide to refinance or consolidate your student loans. The process is slightly different if you want to consolidate your federal loans under a Direct Consolidation Loan (through the federal government), or if you want to refinance through a private lender.

Additionally, if you have federal student loans and you’re experiencing difficulty in making payments, you might be eligible for one of the income-based repayment plans offered. Not knowing what type of loan you have means not knowing the repayment assistance options available to you. You can learn more about the three types of income-based repayment plans here.

Customize Student Loan Offers with Magnifymoney tools

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.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

Refinancing Student Loans and Credit Scores: What You Need to Know

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

You probably know by now that a minimum credit score is required for refinancing student loan debt.

But did you know that your score could rise or fall while you apply to refinance, or even while your repay your new, refinanced debt?

Here’s everything you need to know about how student loan refinance and credit scores can affect each other.

What’s the credit score needed to refinance student loans?

Each lender has underwriting criteria to determine if you’re eligible for refinancing. They’re concerned with your debt-to-income ratio, employment history and other factors, but chief among these is your credit score. In fact, your score could make or break your application.

Most reputable lenders prefer borrowers who have at least good credit scores. Experian, one of the three major credit bureaus, defines a good score as any mark at or above 670.

Here are some examples of lenders’ current minimums:

Other lenders feature different credit score minimums for different types of applicants. Splash Financial, for example, currently requires a 670 score for applicants with cosigners, but a 700 for solo applicants.

To unlock the lowest refinancing interest rates available, meanwhile, you’re better off waiting until your score climbs into the 700s and beyond.

Every percentage point matters. Repaying $20,000 over 10 years at a 6% rate, for example, would cost in $6,645 of interest. Paying back the same amount over the same timespan at 5% would carry just $5,456 of interest.

How does applying to refinance your student loans affect your credit?

Many lenders offer the ability to prequalify in minutes for a refinanced loan without affecting your credit. You’ll provide some basic information about yourself and your debt, and the lender will perform a “soft” credit pull to vet you as a borrower.

Submitting a formal application for a loan, however, will result in a “hard” check on your credit report. This hard check could diminish your credit score by as much as five points, so it’s generally recommended to only submit a formal application with the lender with the best offer.

However, another strategy is to apply to different lenders but to do so in a short timespan, say one week, as this will minimize the impact on your score.

How does refinancing student loans affect your credit score?

When you put pen to paper and refinance your federal or private student loans, you consolidate your original loans into one new loan. Your credit report will show the older loans as being paid off and the new loan as being recently opened.

These transactions could ding your report. That’s because a 35% chunk of your FICO score, the most popular of credit scores, is determined by your payment history. With no payment history attached to your new account, your credit score could drop.

Say, for example, that you’re looking to refinance parent PLUS loans. Perhaps you made timely payments for years on those loans, and your credit score had steadily increased. With these loans falling off your report as a result of refinancing, you’ll no longer receive credit for the strong, continuing payment history — and your new, refinanced loan will lack a payment history altogether.

Despite all this, the pros of refinancing usually outweigh the temporary and slight harm to your credit.

By refinancing your PLUS loans, for example, you could lower your interest rate and potentially save money during repayment. Or maybe you could consolidate your debt on a more conservative repayment plan, reducing your monthly payments. However, by extending your payments you may pay more in interest over the life of your loan.

It’s unlikely that you would trade benefits like these for a few points on your credit score.

How does making loan payments affect your credit score?

With your new, refinanced loan, your credit score could creep upward or fall off, depending on the success of your repayment.

As you make timely payments — and your payment history lengthens — your score should increase. After all, you’re proving that you have the ability to repay what you borrow.

On the flip side, if you become delinquent (or worse, default) on your refinanced loan, your score will reflect it. In fact, a 30-day delinquency could drop your score by as much as 100 points, depending on your original credit score level, according to FICO.

You’re better off choosing a conservative repayment plan and making extra — or extra large — payments to your lender. Reputable refinancing companies don’t impose prepayment penalties if you pay off your debt faster than planned.

If you still struggle to keep pace with your repayment plan, you can protect your credit score by exploring options for loan deferment or forbearance. These measures could allow you to pause your repayment in the event of a job loss or other major life event.

While they’ll be noted on your credit report, rest assured that neither deferment nor forbearance will affect your credit score.

How does paying off your loan affect your credit score?

Once you pay off your refinanced loan, you’ll likely be over the moon (and you should be). From a practical standpoint, however, closing the loan on your credit report might decrease your credit score.

The drop occurs because the closure affects your credit mix, which represents 10% of your FICO score. Removing the refinanced loan, which is a type of installment loan, from your credit report might leave you only repaying revolving credit, such as your standard credit card debt.

Your score could also experience a dip because your amounts owed, which is 30% of FICO’s scoring formula, have decreased.

That’s not to say that paying off your refinanced loan is a bad idea. Of course, it’s the opposite!

Still, be aware that your credit score could take a temporary hit. Keep this in mind especially if you’ve been protecting your score for future borrowing purposes, such as taking out a mortgage for a home. (Like student loan refinancing companies, however, mortgage lenders will also take into account your improved debt-to-income ratio.)

Check your credit before applying to refinance your student loans

Student loan refinancing isn’t always the right step for every borrower. You won’t be able to reap the benefits of refinancing your education debt, for example, if you have a subpar credit score.

Take the time you need to improve your score before you begin the process of completing refinancing applications. To get started, access your full credit report free of charge via AnnualCreditReport.com and track your three-digit score using one of the free services available online.

If your score is poor, and there’s a long road to recovery ahead, take a break from your refinancing research. Instead, you might examine your student loan forgiveness options.

On the other hand, if your score is already good to great, now could be the right time to refinance. Take the next step by reviewing the rates and offerings of the best student loan refinancing companies.

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

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

How to Combine Your Student Loan Debt With Your Spouse’s

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

While marriage is a union between two people, it can also become a union between two financial situations, as the couple shares expenses and typically opens joint bank accounts and credit cards together. Many newlyweds (and many of those soon-to-be-wedded) also wonder: Can they combine student loans with their spouse?

It might sound attractive to consolidate student loans with your loved one and combine all educational debt. In reality, combining student debt with your spouse might not be that easy or simple.

Here’s what you need to know about how marriage affects student debt and whether combining student loans is possible.

Dealing with student debt after marriage

Starting a marriage with student debt is common enough these days, given that about 44 million Americans have a student loan. But how you and your partner choose to handle any student loans is up to you — mostly.

There are a few legal changes to student debt that kick in as soon as you say “I do.” Here are some of the ways that getting married can affect student debt.

Student debt from before the wedding: Usually, any debt that predates your marriage will be individually owned, and repaying it remains the sole responsibility of the person who holds it.

Student loans borrowed while married: In most states, student loans taken out after the wedding day would still be the sole responsibility of the one borrowing them. However, in states with community property laws for married couples, student loans borrowed during a marriage might be considered shared property, for which the couple is collectively responsible.

Student loans enrolled in income-driven repayment: These repayment plans use your income to set affordable monthly payments for your federal student loans. If you get married, this could change what you pay — depending on how you choose to file your taxes.

File jointly, and your payments will be based on your joint incomes and how much you owe together on federal student loans. File separately, and payments will be based on your individual income and student loan balance.

Student loan interest deduction: Spouses who file taxes separately will be ineligible to claim the student loan interest deduction (as well as some other tax benefits), which allows you to reduce your taxable income by interest paid on student debt.

On top of these formal changes to your student loans, payments and tax situation, you and your spouse will also want to discuss whether you’ll share responsibility for repaying student debt, and if so, how.

Start the conversation well before your wedding day, and keep communication open throughout your marriage, to make sure you’re on the same page about student loans. Talking about these issues can help them from causing or contributing to marital conflicts.

Can you consolidate student loans with a spouse?

If you decide to tackle your college debt together, you might want to consolidate student loans with your spouse. Student loan consolidation is any process that combines multiple student loans into a single, new student loan.

The two main options for consolidating student loans are a direct consolidation loan, which combines federal student loans, or private student loan refinancing, which can consolidate private or federal student debt.

Here’s a look at each option, with an eye toward which one is best to combine student loans with a spouse.

Not a solution: Couples can’t use direct consolidation loans to combine student loans

Previously, the Federal Student Aid Office did offer a way for spouses to combine student loans: the federal joint or spousal consolidation loan. This program ended in 2006, since then there has been no federal option for married couples to jointly consolidate their federal student loans.

Still, while you can’t use a direct consolidation loan to formally combine student debt with a spouse, it could still be worth considering as an option to simplify your own student loans.

Potential solution: Some private lenders can consolidate spouse student loans

While a federal direct consolidation loan is out of the question, it is possible to combine student loans with a spouse by refinancing with a private lender. Such joint student loan refinancing loans are very rare, however.

One major lender that does offer this option is PenFed Credit Union, where couple can apply together to have their combined student loans refinanced. The application is processed using your and your spouse’s combined income, and rates are set by whichever credit score is higher. Refinance rates started at 2.91% APR for variable-rate loans or 3.75% APR for fixed-rate loans.

Most likely solution: Consider cosigning a spouse’s student loan refinance

A more accessible option might be to refinance one person’s student loans and add the spouse as a cosigner. This move won’t combine your student debt with your spouse’s, but it provides some other benefits.

The lender will consider both your income and your spouse’s income when processing your application. This can improve your chances of getting approved if you earn far less than your spouse or have no income — for example, if you’re a stay-at-home parent.

If you have poor credit but your spouse has a higher credit score, adding them as a cosigner can also help you qualify to refinance student loans. In fact, lenders like Citizens Bank will not only allow you to add a cosigner, but will set your student loan refinance rate based on whoever’s credit score is higher.

If you’re interested in this option, make sure to shop around to find good rates and terms for your student refinance loan. And be careful when refinancing federal debt, as you will lose access to certain government programs, such as income-driven repayment and Public Service Loan Forgiveness.

Is combining student loans with your spouse a good idea?

Married couples do have a few options to legally share responsibility for their student loans, but they should carefully evaluate whether it’s a good idea.

It might be smart to refinance student loans together, for example, if it could mean getting a much lower student loan rate — which could save hundreds or even thousands in interest charges over the life of the loan. Consolidating debt with a spouse might also seem like a smart way to simplify your student debt and manage it more easily.

However, there are some potential drawbacks to weigh. The first is whether it’s wise to mix responsibility for student loans, especially if they were taken out before you got married. If you consolidate student loans together or cosign to refinance your spouse’s student loans, both parties then become equally responsible for repaying this debt — no matter what. Even in the case of divorce, you’ll still be on the hook for any student loan you consolidated or cosigned with your former spouse.

In fact, you could be liable for repaying any student loans taken out after you get married. This could include any refinance student loan or direct consolidation loan that originates after your wedding date. Since these are new student loans that replace the old student loans, they could be considered community property — and you might be responsible for repaying a portion of them whether your name is on them or not.

Ultimately, though, combining student debt with a spouse doesn’t have to require more than an informal agreement between the two of you. Any couple can discuss their student debt repayment goals and how they can work together to achieve those. You don’t have to officially meld your student loans into one or have both your names on a loan in order to work as a team to manage and pay off this debt.

You and your spouse’s student loans are already part of your joint financial situation, both in the present and in the future. If you can handle your other financial issues together, the student debt shouldn’t be a problem, regardless of whose name or names are on which loans.

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

Elyssa Kirkham
Elyssa Kirkham |

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

TAGS:

Advertiser Disclosure

College Students and Recent Grads

Seeking Private Student Loan Forgiveness? Here’s How to Get Help

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

iStock

Student loans can feel like a financial burden that’s always weighing on you and will never go away. If you’ve felt that, you might find yourself daydreaming some way to snap your fingers and make your student debt disappear.

Getting student loan forgiveness isn’t quite that easy, however, and it can be even trickier for borrowers with private student loans. While student loan forgiveness can provide important relief to borrowers who qualify, private student loans are ineligible for some of the most common and popular options for student loan forgiveness.

The good news is that there are still some student loan assistance programs beyond the options reserved only for federal student loans. Find out if you can get funds to repay your private student loans or qualify for other forms of private student loan help.

How to get private student loan forgiveness and assistance

Even though many of the best-known forgiveness programs don’t include private student loans, you definitely do have some options.

For example, some state and local programs provide repayment assistance that can be used to repay private student loans. Some companies are also jumping in to help their employees pay off student debt.

Here are a few potential sources of private student loan help that are worth exploring.

Loan repayment assistance programs for private student loans

Many federal, state and local government agencies provide or participate in student loan repayment assistance programs (LRAPs) that offer funds to help pay off student debt. Some limit these funds to federal student loans, but others allow you to apply them to private student loans, too.

Check for LRAPs that are offered for residents of your state, members of your profession or alumni of the college you graduated from, and you could find an opportunity to get private student loan forgiveness. You can search for such options with this student LRAP tool from Student Loan Hero, which filters programs by location, occupation, award type and amount. (Note: Student Loan Hero, like MagnifyMoney, is a subsidiary LendingTree.)

As you seek out these programs, make sure you double-check that your private student loans are eligible to be repaid.

Here are some examples of a few such LRAPs that can offer help with private student loans:

  • The National Health Service Corps Loan Repayment Program offers repayment assistance to health professionals as nontaxable funds, which may be applied to either federal or private student loans. The program awards up to $50,000 for a two-year, full-time commitment ($25,000 for part-time) providing physical or mental health services in designated high-need areas.
  • The Teach Iowa Scholar Program provides $4,000 per year for up to five years (for a $20,000 total) to teachers working in Iowa’s designated shortage areas. These funds can either be applied to a federal student loan or paid out to the recipient, after which they could be used toward private student loan repayment.
  • The Alfond Leaders student debt reduction program helps science, technology, engineering and math (STEM) professionals in Maine. Qualifying STEM workers can apply to get up to half their student loans repaid, including private student loans, up to a total of $60,000.
  • The Teach NYC Loan Forgiveness Program offers to repay up to $24,000 over six years for teachers who work in one of New York’s assigned shortage areas. The program repays the lesser of $4,000 or one-sixth of the recipient’s total outstanding student loans, including private student loans, for each year of service.
  • The University of Colorado offers student loan assistance or forgiveness for graduates of these law schools who work in public service. Awards are calculated on an individual basis and can range from 15%-75% of your monthly student loan payments, for up to five years.

Employment benefits for student loans

These student LRAPs are not the only options to get help with your private student loans. Even if you don’t qualify for private student loan forgiveness, you might still be able to find extra funding to repay your college debt faster.

One way to do this is by working in an occupation that comes with its own LRAPs. A sizeable number of LRAPs are tied to specific types of employment, so if you’re in a field where participating in those is possible, explore that option.

But even if an LRAP isn’t a possibility, you can still seek out employers that offer benefits or compensation that will help you tackle your student debt.

Here are some key benefits to look for that can help you repay private student loans:

  • Student loan repayment plans are becoming a more common and popular benefit in employers’ compensation packages. These student loan benefits usually match student loan payments made by the worker, capped at a certain dollar amount each year or month. The matched funds might be paid directly to the lender, or provided to the employee as additional compensation.
  • Higher base pay will also help you repay student debt faster. If you’re bringing home more money each month, you might have extra funds available to repay your private student loans. That’s why it’s vital for job seekers with student debt to apply to high-paying positions and negotiate for a higher salary if they receive an offer. If you’re already employed, you can speak with your supervisor about how you can earn a pay raise in the next year.
  • Sign-on bonuses can also be a great source of funds to make an extra, lump-sum payment toward private student loans. Depending on the industry you work in and the demand for workers with your skills, you might be able to get a signing bonus when starting a new job. This is a common perk for doctors and lawyers, for example. But with 23% of employers offering sign-on bonuses in 2018, according to The Society for Human Resource Management, it’s worth considering negotiating such a bonus when you receive a job offer.

If you keep your private student loans in mind when evaluating your current job or a new job, you can target job growth opportunities that will get you benefits to help repay student debt.

Other ways to get private student loan assistance

Getting private student loan help from an employer or LRAP might not be an option for everyone. And if you’re struggling with payments on your private student loans, you may need help now — not when you satisfy an LRAP’s requirements or find a new job.

If you’re looking for more immediate help, there are some steps you can take to tackle your debt when private student loan forgiveness or LRAPs aren’t an option. Here are some other strategies to consider as you work to more effectively manage your private student loans.

1. Work with your private lender

Private lenders don’t have to offer the same protections and benefits that come with federal student loans — you won’t be able to get deferment under federal guidelines or enroll in an income-driven repayment plan, for instance.

However, many lenders will work with borrowers struggling with private student loans. Reach out to your lender to discuss your situation and see what your options are. You might be able to adjust your payment due date, for example. Skipping a payment or pausing payments might also be an option for borrowers who run into financial hardship, such as a job loss.

2. Use federal student loan benefits

If you have both private and federal student loans, make sure you don’t overlook the options available to help with the federal side of your student debt.

Federal student loans come with many benefits and protections designed to help borrowers keep their debt repayment on track — and out of default. You can switch to several different repayment plans, including income-driven repayment designed to be affordable based on your income, local costs and family size. You can also apply to forbear or defer federal student loans.

Lastly, don’t overlook student loan forgiveness programs that are offered specifically to repay federal debt. One can access federal student loan forgiveness through programs such as Public Service Loan Forgiveness (PSLF), the Teacher Loan Forgiveness program, and forgiveness granted through income-driven repayment plans.

3. Consider refinancing student loans

Borrowers don’t have to be stuck paying off a private student loan with unfavorable terms or from a lender they hate. You can refinance student loans with another private lender, instead, taking out a new loan to replace the previous private student loan.

Refinancing private student loans puts you back in control of your debt. You might be able to refinance to a lower student loan rate, which can cut interest costs and monthly payments. You can also choose a new loan term that better fits your needs, such as a longer repayment period that could help lower monthly payments.

Just keep in mind that you’ll need good-to-excellent credit — or a cosigner with excellent credit — to get approved to refinance student loans and receive favorable rates. It’s also wise to shop around and compare different student loan refinance offers, so you know your final pick offers the best deal.

4. Target private student loans first

Prepaying your student loans can be a smart move to get out of debt faster and save on interest charges. If you pay extra toward your student debt, beyond just the minimum, you’re likely better off targeting your private student loans first.

This is because private student loans offer fewer options and protections for borrowers than federal student loans do, making the former riskier to keep around. Plus, paying down private debt first could also produce bigger savings, since this type of student loan often (but not always) has higher interest rates than what you’d pay on federal student loans.

Take a look at your own collection of student loans and assess the costs and risks of each one. Then, you can make a plan to pay off those student loans one at a time, starting with your highest priority accounts, until you’re debt-free.

Whether you’re able to pay extra toward your debt or are struggling just to keep up with payments, take some time to investigate the many possible solutions and strategies for private student loans.

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

Elyssa Kirkham
Elyssa Kirkham |

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

TAGS: , , ,

Advertiser Disclosure

College Students and Recent Grads

Should You Refinance Federal Student Loans?

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

 

Photo by selimaksan via iStock

It’s a straightforward question: Should you refinance federal student loans?

The answer, though, might not be as straightforward. The truth is, it depends.

On the one hand, student loan refinancing can be a godsend to borrowers who feel crushed under the weight of student loan debt. Refinancing could get you a lower interest rate on your loans, plus it lets you choose new repayment terms that might be better suited to your situation.

But not everyone can qualify for student loan refinancing, and there could be significant downsides when refinancing federal student loans with a private lender.

If you’re wondering whether refinancing federal student loans is right for you, read on to learn about the pros and cons.

What is student loan refinancing, anyway?

Student loan refinancing has become more popular in recent years as student loan debt has grown to massive proportions. Currently, Americans owe more than $1.48 trillion in student loans, and the average Class of 2017 graduates left school with $39,400 in debt.

Refinancing providers can offer relief in the form of a lower interest rate and the opportunity to restructure your debt. Plus, refinancing lets you combine multiple loans into one, so you only have to keep track of a single payment each month.

Note that student loan refinancing is different than direct loan consolidation, which is a federal program that combines your federal student loans. Federal consolidation doesn’t lower your interest rate, but it could help simplify debt repayment.

Both private and federal student loans are eligible for refinancing, but first, you have to qualify. Private lenders, such as Citizens Bank, SoFi and Earnest, have underwriting requirements for credit and income, so you’ll have to meet their criteria, or else apply with a cosigner who can.

If you’re eligible, refinancing could be a strategic move for getting your student loans under control.

What are the benefits of refinancing federal student loans?

Refinancing federal student loans has three main potential benefits:

  1. Save money on your loans with a lower interest rate throughout the life of the loan.
  2. Choose new repayment terms better suited to your budget.
  3. Simplify your debt by combining multiple loans into one.

Let’s take a closer look at each of these. First, a major benefit of refinancing is qualifying for a lower interest rate. By getting a better rate, you could save lots of money on your debt.

Most lenders let you choose between a variable and fixed rate. Currently, variable rates tend to start out lower, but they could rise over time. If you’re confident you can pay back your loan quickly though, choosing a low variable rate could be worth the risk.

Second, refinancing also lets you choose new terms. If you can afford it, a shorter term could get you out of debt ahead of schedule. On the flip side, a longer term could lower your monthly bills, taking some of the pressure off your budget. Just remember that extending your terms could mean you pay more interest over the life of your loan.

Finally, refinancing lets you combine multiple loans into one new one. If you’re dealing with lots of different payments and loan servicers, this chance to consolidate could make it easier to monitor your debt and keep up with bills each month.

Plus, you’ll be dealing with a new loan servicer, which you might appreciate if you’ve had a bad experience with your old one. When choosing a refinancing provider, check out customer reviews to learn from other people’s experiences.

It’s also worth mentioning that some online lenders offer extra benefits to borrowers who refinance. SoFi, for instance, has a career coaching program, as well as community events that let you network with other professionals. Although these perks probably aren’t the primary reason to refinance student loans, they could be a nice addition.

And note that it’s not just students who can refinance. If you took out a parent PLUS loan, you could refinance to tap many of these same benefits.

What are the downsides of refinancing federal student loans?

Refinancing student loans might sound like the solution you’ve been looking for, but there could be disadvantages to it as well.

The main problem is that when you refinance federal student loans, you turn them into a private loan, and private lenders don’t offer the same programs and protections as the federal government. For instance, federal student loans are eligible for income-driven repayment plans, which adjust your monthly payments along with your income, while private loans don’t generally have this option.

Plus, your federal loans could qualify you for federal loan forgiveness programs, such as Public Service Loan Forgiveness or Teacher Loan Forgiveness. Here too, private loans are not eligible.

Also, your new lender might not be flexible if you run into financial hardship. Most private lenders don’t offer income-driven repayment, for instance, and only a few let you pause payments through forbearance if you lose your job or return to school.

So if you predict you’ll need any federal repayment plans — or are counting on federal loan forgiveness — refinancing wouldn’t be a good move for your federal student loans. In fact, although there are some very good private lenders out there, refinancing probably isn’t a good idea unless you’re fully confident you can pay back your loans on time without needing those federal programs.

Alternative options for managing your student loan debt

If you’re looking for strategies to manage your student loans, remember that refinancing isn’t the only choice.

For example, although most federal student loans automatically get placed on the standard 10-year plan, you can choose an alternative term, depending on your goals. You can also try to qualify for a forgiveness program that will wipe away the remainder of your debt.

Here are four options to consider:

  • Apply for an income-driven repayment plan. Federal Student Aid offers four income-driven plans: Income-Based Repayment, Income-Contingent Repayment, Pay As You Earn, and Revised Pay As You Earn. All these plans adjust your monthly payment to 10%, 15% or 20% of your discretionary income and extend your terms to 20 or 25 years. And if you still have a balance at the end of the term, it could be forgiven.
  • Get on graduated or extended repayment. Both these plans could lower your monthly payments to give you financial relief. Graduated repayment keeps your term at 10 years, but it offers low payments at the beginning which gradually rise over time. Extended repayment, meanwhile, lengthens your terms to 25 years.
  • Work toward federal student loan forgiveness. If you work in a qualifying organization or position, you could get student loan forgiveness through a federal program. You could also get student loan discharge for a qualifying reason, such as school closing or permanent disability, or get forgiveness at the end of an income-driven plan.
  • Prepay your loan ahead of schedule. If you can afford it, you can throw extra payments at your student loans without penalty. Extra payments will cut time off your term and save you money on interest. Just contact your loan servicer to make sure the extra payments are being applied correctly.

If you’re wary of turning your federal student loans private through refinancing, consider the alternative strategies above for reducing your monthly payments or for getting out of debt more quickly.

Should I refinance my student loans? Choosing the right strategy for your debt

Before making any changes to your student loans, make sure to educate yourself about your options. When dealing with a large amount of debt, you want to be fully informed before changing your repayment plan.

If you’re comfortable turning your federal loans private — and giving up federal loan protections — refinancing could be a savvy way to lower your rate and choose new terms upon qualifying. Before choosing a lender, shop around and compare offers to find the best rate.

But if you’re worried about falling behind on bills, wait to refinance until your finances are more stable. In this case, an income-driven plan or other federal option could give you financial relief and help you avoid default.

Whatever you choose, keep chipping away at your debt until you finally get your balance down to zero. By exploring your options for debt management, you can find an approach best suited to your unique financial situation.

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

TAGS: , , ,

Advertiser Disclosure

College Students and Recent Grads

5 Reasons Student Loan Forgiveness May Not Be Worth It

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

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

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

But is student loan forgiveness worth it?

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

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

1. You might wait 25 years for student loan forgiveness

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

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

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

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

2. You could wind up paying more

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

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

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

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

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

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

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

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

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

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

4. You can get taxed for forgiven student loans

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

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

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

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

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

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

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

5. You won’t have any guarantees

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

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

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

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

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

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

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

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

Elyssa Kirkham
Elyssa Kirkham |

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

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

How to Consolidate Student Loans: Your Complete Guide

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

iStock

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

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

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

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

Student loan consolidation vs. refinancing: The basics

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


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

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

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

What is federal student loan consolidation?

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

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

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

6 pros of consolidating student loans

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

1. Simplify repayment by combining multiple loans into one

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

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

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

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

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

3. Chance to choose a new loan servicer

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

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

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

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

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

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

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

5. Rehabilitate student loans that are in default

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

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

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

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

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

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

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

4 cons of consolidation

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

1. You could get a slightly higher interest rate

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

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

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

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

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

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

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

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

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

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

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

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

4. Private student loans aren’t eligible

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

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

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

Source: https://studentaid.ed.gov/sa/

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

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

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

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

Student loan refinancing can also combine multiple loans into one

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

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

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

3 pros of student loan refinancing

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

1. A single monthly payment is easier to track

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

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

2. You could secure a lower interest rate

If you qualify for a refinancing offer, you could snag a lower interest rate on your student loans. SoFi has variable rates starting at 2.25% and fixed rates from 3.67%, for example. These are significantly lower than the 5.05% attached to direct loans or the 7.6% on PLUS loans.

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

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

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

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

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

3 cons of refinancing

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

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

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

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

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

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

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

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

3. You might have to apply with a cosigner

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

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

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

How to refinance your student loans with a private lender

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

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

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

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

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

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

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

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

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

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

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

Rebecca Safier
Rebecca Safier |

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

TAGS: , , ,

Advertiser Disclosure

College Students and Recent Grads

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

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

iStock

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

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

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

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

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

Alaska

Overview of the law

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

Jobs affected

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

If you lost your license because of student loan debt

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

Arkansas

Overview of the law

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

Jobs affected

Physicians on Rural Medical Practice Student Loan and Scholarship contracts.

If you lost your license because of student loan debt

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

Florida

Overview of the law

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

Jobs affected

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

If you lost your license because of student loan debt

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

Georgia

Overview of the law

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

Jobs affected

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

If you lost your license because of student loan debt

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

Hawaii

Overview of the law

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

Jobs affected

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

If you lost your license because of student loan debt

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

Illinois

Overview of the law

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

Jobs affected

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

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

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

Iowa

Overview of the law

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

Licenses affected

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

If you lost your license because of student loan debt

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

Kentucky

Overview of the law

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

Jobs affected

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

If you lost your license because of student loan debt

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

Louisiana

Overview of the law

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

Jobs affected

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

If you lost your license because of student loan debt

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

Massachusetts

Overview of the law

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

Jobs affected

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

If your license is denied because of student loan debt

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

Minnesota

Overview of the law

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

Jobs affected

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

If your license application is denied because of student loan debt

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

Mississippi

Overview of the law

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

Jobs affected

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

If your license is revoked because of student loan debt

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

New Mexico

Overview of the law

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

Jobs affected

Barbers and cosmetologists.

If your license is denied renewal because of student loan debt

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

South Dakota

Overview of the law

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

Affected licenses

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

If you lost your license because of student loan debt

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

Tennessee

Overview of the law

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

Jobs affected

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

If you lost your license because of student loan debt

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

Texas

Overview of the law

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

Affected jobs

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

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

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

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

Shen Lu
Shen Lu |

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

TAGS: , ,

Advertiser Disclosure

Best of, College Students and Recent Grads, Credit Cards

Best Student Credit Cards November 2018

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

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

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

Our Top Pick

Discover it® Student Cash Back

APPLY NOW Secured

on Discover Bank’s secure website

Rates & Fees

Read Full Review

Discover it® Student Cash Back

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

Magnify Glass Pros

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

Cons Cons

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

Bottom line

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

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

Best for Commuter Students

Bank of America® Cash Rewards Credit Card for Students

APPLY NOW Secured

on Bank Of America’s secure website

Bank of America® Cash Rewards Credit Card for Students

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

Good

Magnify Glass Pros

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

Cons Cons

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

Bottom line

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

Best Flat-Rate Card

Journey® Student Rewards from Capital One®

APPLY NOW Secured

on Capital One’s secure website

Read Full Review

Journey® Student Rewards from Capital One®

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

Magnify Glass Pros

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

Cons Cons

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

Bottom line

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

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

Best Intro Bonus

Wells Fargo Cash Back CollegeSM Card

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

Magnify Glass Pros

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

Cons Cons

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

Bottom line

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

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

Altra Federal Credit Union Student Visa® Credit Card

APPLY NOW Secured

on Altra’s secure website

Read Full Review

Altra Federal Credit Union Student Visa® Credit Card

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

Magnify Glass Pros

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

Cons Cons

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

Bottom line

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

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

Best for Studying Abroad

Bank of America® Travel Rewards Credit Card for Students

APPLY NOW Secured

on Bank Of America’s secure website

Bank of America® Travel Rewards Credit Card for Students

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

Magnify Glass Pros

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

Cons Cons

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

Bottom line

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

Best Secured Card

Discover it® Secured

APPLY NOW Secured

on Discover Bank’s secure website

Rates & Fees

Read Full Review

Discover it® Secured

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

Magnify Glass Pros

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

Cons Cons

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

Bottom line

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

Read our full review of the Discover it® Secured

Best for No Credit History

Deserve® EDU Mastercard

APPLY NOW Secured

on Deserve’s secure website

Deserve® EDU Mastercard

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

Magnify Glass Pros

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

Cons Cons

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

Bottom line

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

Also ConsiderAlso Consider

Golden 1 Platinum Rewards for Students

Golden 1 Credit Union Platinum Rewards for Students:

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

What should I look for in a student credit card?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How did the CARD Act change student credit cards?

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

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

How can I protect myself from racking up debt?

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

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

How can I automate my credit card usage?

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

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

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

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

What happens to my student credit card when I graduate?

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

Here is a summary of our favorite cards:

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

Lindsay VanSomeren
Lindsay VanSomeren |

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

TAGS: , ,

Advertiser Disclosure

College Students and Recent Grads

Top Checking Accounts for College Grads

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

Top Checking Accounts for College Grads
iStock

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

So, where do you go from there?

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

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

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

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

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

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

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

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

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

Top overall checking accounts for college grads

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

1. Aspiration – The Aspiration Summit Account

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$10

Unlimited

0.25% APY on balances up to $2,499.99

1.00% APY on balances $2,500+

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

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

LEARN MORE Secured

on Aspiration’s secure website

Member FDIC

2. nbkc bank – Personal Account

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$5

Up to $12 a month

0.90% APY on all balances

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

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

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

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

LEARN MORE Secured

on nbkc bank’s secure website

Member FDIC

3. Ally Bank – Interest Checking Account

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$0

Up to $10 per statement cycle

0.10% on daily balances less than $15,000

0.60% on daily balances $15,000+

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

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

LEARN MORE Secured

on Ally Bank’s secure website

Member FDIC

Check out our full list of the best checking accounts.

Top free checking accounts for college grads

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

1. Atlantic Stewardship Bank – Cash Back Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$1

Unlimited

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

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

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

LEARN MORE Secured

on Atlantic Stewardship Bank’s secure website

Member FDIC

2. Radius Bank – Radius Hybrid Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$10

Unlimited

0.85% on balances $2,500+

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

LEARN MORE Secured

on Radius Bank’s secure website

Member FDIC

3. Bay State Savings Bank – Free Kasasa Cash®

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$0

Unlimited

0.05% if qualifications are not met

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

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

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

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

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

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

LEARN MORE Secured

on Bay State Savings Bank’s secure website

Member FDIC

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

Top high-yield checking accounts for college grads

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

1. First Financial Credit Union – High 5 Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$0

Up to $10 per statement cycle

5.00% APY on balances up to $2,500

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

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

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

LEARN MORE Secured

on First Financial CU (IL)’s secure website

NCUA Insured

2. America’s Credit Union – Affinity Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$0

$0

$0

None

5.00% APY on balances up to $1,000

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

0.25% APY on balances over $15,000

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

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

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

LEARN MORE Secured

on America's Credit Union’s secure website

NCUA Insured

3. La Capitol Federal Credit Union – Choice Plus Checking

Monthly Fee

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

$2, waived if you enroll in eStatements

$0*

$50

Up to $25 per month

4.25% APY on balances up to $3,000

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

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

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

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

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

LEARN MORE Secured

on La Capitol Federal Credit Union’s secure website

NCUA Insured

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

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

Alexandria White
Alexandria White |

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

TAGS: