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College Students and Recent Grads

The Ultimate Guide to Paying off Medical School Debt

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Part I: Is Medical School Worth It?

Getting accepted to medical school is a major accomplishment, but graduating from medical school can be life-changing for your finances. According to The College Payoff, a collaborative study conducted by the Georgetown University Center on Education and the Workforce, individuals with a doctoral-level degree enjoyed median lifetime earnings of $3,252,000 in 2009 dollars. This figure compares favorably to degrees that require a smaller commitment of time and resources, showing that pursuing a medical degree can pay off.

Now on to the bad news. While earning more money over a lifetime is advantageous, there’s a notable downside to going to medical school. While doctoral-level degrees can pay off with a lifetime of higher wages, the costs of pursuing this degree can be astronomical.

As the Association of American Medical Colleges notes, the average indebted 2017 medical school graduate left college with a median medical school debt of $192,000. No matter how you cut it, that’s a lot of money to borrow and spend.

Are you currently suffering from high-interest rates on your medical school loans? Jump down to our top picks for refinancing med school debt in 2018.

Medical school debt in the U.S.

The Association of American Medical Colleges shares statistics on average medical school debt. As of 2017, indebted medical school graduates left school with a median debt loan of $192,000. At public schools, the median debt load worked out to $180,000. Private medical schools, on the other hand, reported a slightly higher level of debt with a median debt load of $202,000.

The high levels of debt many medical school graduates endure are caused by myriad factors, including the rising costs of tuition. While average medical school tuition hasn’t been tracked since 2009, the price tag of a medical education was $29,890 that year.

In addition to the price of tuition, medical students need to pay for countless other expenses, some of which only apply to those in the medical field:

  • Room and board
  • Rent and utilities
  • Food
  • Travel and transportation
  • Health care
  • Instruments and supplies
  • Textbooks
  • Lab fees
  • Test fees
  • Relocation for residency

Lifetime earnings for a doctor

While the costs of medical school are high, doctors’ higher salaries can take the sting out of the long-term costs. In 2016, for example, family and general practitioners earned an annual mean wage of $200,810, while physicians and surgeons earned $210,170, on average. Several medical specialties earned even more.

The following table highlights profitable medical careers alongside careers that require only a bachelor’s degree:

Careers & Degree Requirements

Annual Mean Wage in 2016 (National)

Medical Careers:

Family and general practitioners

$200,810

Physicians and surgeons

$210,170

Anesthesiologists

$269,600

Surgeons

$252,910

Bachelor’s Degree Careers:

Petroleum engineers

$147,030

Biomedical engineers

$89,970

Registered nurses

$72,180

Market research analysts

$70,620

Elementary school teachers

$59,020

Is medical school worth the cost?

If you’re trying to decide between degree programs with varying costs and educational outcomes, it’s important to consider the ROI, or return on investment, for your education. While there’s no hard and fast rule to help you decide, figuring out your post-education monthly payment for medical school debt and comparing it to your potential salary can help.

As an example, the average medical school graduate with $192,000 in debt with a 6% interest rate would need to pay $2,131.59 per month toward their loans if they chose standard, 10-year repayment. According to the Bureau of Labor Statistics, however, the median weekly earnings for someone with a doctoral degree worked out to $1,664 in 2016.

During a month with four weeks of paydays, a doctoral graduate would bring in $6,656 before taxes and $4,659.20 after taxes, considering a 30% tax rate. While a $2,131.59 payment represents nearly half of this person’s income, it’s only for 10 years. Further, the percentage of income will only decrease as their income grows. And if they choose a higher paying medical specialty, the difference could be even greater.

Also keep in mind that doctors don’t have to choose 10-year, standard repayment as there are plenty of other options available, including repayment plans that span up to 25 years. If the graduate with the same level of debt as above chose to repay their loan over 25 years at the same interest rate, for example, they would pay only $1,237.06 per month.

Part II: Paying for Medical School

Federal student loans are usually the first source of funding medical students turn to as they seek to finance their education. Several different types of federal student loans are available, and each has their own benefits, drawbacks and practical limitations. Federal student loans tend to be a good option for medical students since they offer relatively low, fixed interest rates and help students qualify for federal perks like income-driven repayment, student loan forgiveness programs, deferment and forbearance.

Pros of federal student loans:

  • Fixed interest rates that can be competitive
  • Access to federal loan repayment and student loan forgiveness programs
  • Qualifying for subsidized loans means the government may pay the interest on your loans during school
  • Access to student loan forbearance and deferment (if you qualify)
  • No credit check

Cons of federal student loans:

  • Caps on how much you can borrow
  • You may need to take out private loans once you exhaust federal loans
 

Interest Rates

Maximum Annual
Borrowing Amount

Perkins Loans

5%

Up to $5,500 per year for
undergraduate students, depending
on financial need and other aid
received; up to $8,000 per year
for graduate students

Direct Subsidized Loans

4.45% for undergraduate
loans first disbursed on or
after July 1, 2017,
and before July 1, 2018

$3,500 to $5,500 per year for
undergraduate only

Direct Unsubsidized Loans

4.45% for undergraduate
loans first disbursed on or
after July 1, 2017, and before
July 1, 2018; 6% for graduate
loans

$5,500 to $12,500 per year for
undergraduate students;
up to $20,500 per year for
graduate students

Direct PLUS Loans

For Direct PLUS Loans first
disbursed on or after July 1, 2017,
and before July 1, 2018,
the interest rate is 7%

Maximum loan amounts
are limited to the cost of
attendance in school minus
financial aid received

Direct Consolidation Loans

Weighted average of the
loans being consolidated

No minimum or maximum
loan limits

Private student loan debt for medical school

Private student loans are commonly used once medical students max out the amount of federal money they can borrow for school. These loans are offered through private lenders, which means their rates and repayment terms are not fixed by the government. As a result, they can vary greatly but may be lower than rates offered through government programs.

Pros of private student loans:

  • Interest rates may be lower than federal student loans
  • Loan limits can be high enough to cover the entire cost of medical school
  • Loan disbursement may be faster
  • You can shop around among lenders to find the best deal

Cons of private student loans:

  • You need good or excellent credit to qualify on your own
  • Without good credit, you may need a co-signer
  • Interest rates can be fixed or variable
  • Private loans do not offer federal student loan forgiveness, income-driven repayment, or federally sponsored deferment or forbearance
  • You may need to make payments or pay interest while still in school

When to consider private student loans:

  • You’ve maxed out on federal student loan amounts
  • Private loans offer a better interest rate
  • You don’t plan to take advantage of government programs when it comes to repaying your loans

Private student loan lenders to consider

 

Interest Rates*


Borrowing Limits


Credit Requirement


Discover
Student Loans

Variable rates from 4.62%
to 8.62% APR; fixed rates
from 6.49% to 9.99% APR

Limited to 100% of the
cost of attendance minus
other aid

You may need a co-signer
to qualify if you don’t
have excellent credit


Sallie Mae
Student Loans

Variable rates available
from 3.62% to 8.36% APR;
fixed rates from
5.74% to 8.36% APR

Borrow up to 100% of
the cost of attendance

You need good or
excellent credit to qualify
without a co-signer


Wells Fargo
Student Loans

Variable rates available
from 4.59% to 9.10% APR;
fixed rates available from
6.66% to 10.18% APR

The lifetime limit for this
loan and all other
education-related debt,
including federal loans,
is $250,000 for allopathic
(M.D.) or osteopathic
(D.O.) medicine; $120,000
for all other disciplines

You have a better
chance to qualify if you
have a co-signer;
excellent credit required


Citizens Bank
Student Loans

Variable rates available
from 3.53% to 9.69% APR;
fixed rates available from
5.26% to 10.24% APR

Lifetime limit is $225,000
for medical school loans

Good or excellent credit
required without a
co-signer


College Avenue
Student Loans

Variable rates available
from 4.07% to 9.60% APR;
fixed rates available from
6.22% to 10.66% APR

Borrow up to 100% of the
cost of attendance

Good or excellent credit
required without a
co-signer

Grants for medical students

Grants for medical school students are offered through the government, research facilities, corporations and institutions of higher education. Students can seek out information on available grants by asking their school’s financial aid office, searching the internet, or checking government resources that cover the medical field.

Here are some popular grants available to medical students:

This Medical Scientist Training Program grant was created to assist students pursuing degrees in clinical and biomedical research. This program is offered at over 47 universities that help facilitate the grant.

  • Award amount: Amounts vary
  • Qualifications: Available to qualified M.D.-Ph.D. dual-degree students with a GPA of 3.0 or higher
  • Deadline to apply in 2018: Depends on the participating institution

The Ford Foundation Fellowship Program seeks to increase diversity and offers grants to medical students pursuing a Ph.D. with the goal of participating in medical research or teaching. Other Ph.D. students are considered as well.

  • Award amount: $20,000 to $45,000, depending on the specific program
  • Qualifications: Medical students in pursuit of a Ph.D. can apply
  • Deadline to apply in 2018: Applications closed January 9, 2018 at 5 PM EST

This American Medical Women’s Association grant awards four AWMA student members every year. This two-year fellowship focuses on global health and includes a trip to Uganda.

  • Award amount: $1,000 to fund local project planning and subsidize experiential education in Uganda
  • Qualifications: Must be AWMA member pursuing a medical education
  • Deadline to apply in 2018: The next application cycle is Aug. 1, 2018, to Oct. 30, 2018

This grant, which is offered through the Radiological Society of North America, was created for medical students considering academic radiology.

  • Award amount: $3,000 to be matched by a sponsoring department for a total of $6,000
  • Qualifications: Must be a full-time medical student and RSNA member
  • Deadline to apply: Feb. 1, 2018

This program, which is offered through the American Medical Women’s Association, is available to medical students and residents working in clinics around the world.

  • Award amount: Up to $1,000 in transportation assistance costs
  • Qualifications: Students must work in an off-campus clinic where the medically neglected will benefit, be an AMWA member in at least their second year of school, and must spend four weeks to one year serving the medically underserved
  • Deadline to apply in 2018: The next application deadline available is July 5, 2018

Scholarships for medical students

Scholarships are available to medical students from all walks of life and all backgrounds, although requirements vary based on the program. Medical students can seek out merit-based scholarships, institution-based scholarships and various other scholarships offered through research facilities and corporations.

Here are a handful of popular scholarship options for medical students:

This grant, offered through the American Medical Association, doles out scholarships to medical students who meet certain criteria. The goal of this program is to reduce the debt burden on medical school students across the country.

  • Award amount: $10,000
  • Qualifications: Must be a medical student who is nominated by their school dean and approaching their last year of medical school
  • Deadline to apply in 2018: Nomination applications are available every fall

The Herbert W. Nickens Award is available to third-year medical students who have shown proven leadership in the area of medical equality for all.

  • Award amount: $10,000
  • Qualifications: Must be a medical student who is nominated for excellence in leadership; checklist is available here
  • Deadline to apply in 2018: Applications due in April each year

This scholarship is open to all students pursuing a service career in health care, including medical students considering any medical field.

  • Award amount: $5,000 to $10,000
  • Qualifications: Must be a medical student with at least one year of medical school remaining
  • Deadline to apply in 2018: Application opens at the beginning of May each year and closes at the end of June

This scholarship is available to all medical students with financial need regardless of their gender, race or ethnicity. Applicants are judged on financial need, achievements, essays and community service records.

  • Award amount: $2,000 to $5,000
  • Qualifications: Must be a medical student who can demonstrate financial need and complete the application process
  • Deadline to apply in 2018: Applications are due by April 1, 2018

The Harvey Fellows Program was created for Christian students pursuing higher education in important fields such as medicine.

  • Award amount: $16,000
  • Qualifications: Must be a student who identifies as Christian and attends service regularly
  • Deadline to apply in 2018: Application deadline is Nov. 1 of each year

Part III: Medical School Loan Repayment Programs

Income-driven repayment (for federal student loan debt)

Income-driven repayment programs allow medical students to pay only a percentage of their income toward their federal student loans for 20 to 25 years no matter how much they owe. These programs can be advantageous since they let medical students with large debt loads pay a smaller percentage of their income every month than they would with standard, 10-year repayment. Several different income-driven repayment programs are available, each with their own rules and benefits. The following table highlights each program and how it works:

 

Payment Amount

Repayment Period

Eligibility

Pay As You Earn
Repayment Plan
(PAYE Plan)

10% of your
discretionary income,
but never more than your
payment on 10-year
Standard Repayment

20 years

Your payment must be
less than what you would
pay under standard,
10-year repayment

Revised Pay As You
Earn Repayment
Plan (REPAYE Plan)

10% of your
discretionary income

20 years for
undergraduate loans
and 25 years “if any
loans you’re repaying
under the plan were
received for graduate
or professional study”

Any borrower with
eligible federal student loans
can qualify

Income-Based
Repayment Plan
(IBR Plan)

10% of your
discretionary income
if your loan originated
after July 1, 2014,
but never more than
the 10-year Standard
Repayment Plan;
generally 15% of your
discretionary income
if you’re not a new
borrower on or after
July 1, 2014; either way,
you’ll never pay more
than the payment on a
standard, 10-year
repayment plan

20 years if you’re a
borrower on or after
July 1, 2014; 25 years
otherwise

To qualify, your
payment under this plan
must be less than what you
would pay under standard,
10-year repayment

Income-Contingent
Repayment Plan
(ICR Plan)

20% of your
discretionary income or
what you would pay over
the course of a fixed
12-year repayment plan

25 years

Any borrower with
eligible federal student loans
can qualify for the ICR Plan

Pros of income-driven repayment:

  • Pay a smaller amount of your income for up to 25 years
  • Have your student loan balance forgiven once you complete the program
  • Pay off your debts slowly and at your own pace

Cons of income-driven repayment:

  • You may have to pay income taxes on forgiven loan amounts
  • You may not qualify if you earn too much

Who is eligible?

These programs are available to graduates who have federal student loans and meet income requirements.

How to apply

You can apply for income-driven repayment programs using the U.S. Department of Education website.

Medical school loan forgiveness for doctors

There are numerous loan forgiveness programs available to doctors, each with their own criteria for applicants. Commonly, these programs offer loan forgiveness in exchange for service in a specific field or for a certain type of employer.

Some examples include:

Who is eligible?

Since loan forgiveness programs vary in their details and requirements, you’ll need to read terms and conditions of applicable programs to determine if you qualify.

Is this option right for you?

If you are willing to relocate or know that a loan forgiveness program is already available in your area, then loan forgiveness programs offer a great way to earn a living while having part of your debt forgiven. For this option to be right for you, however, you have to be willing to meet special program requirements such as working in an urban, rural or underserved community.

National Health Service Corps Loan Repayment Program

This program offers loan repayment assistance for individuals entering qualified healthcare careers in medical or dental fields. Licensed health care providers may earn up to $50,000 of tax-free loan forgiveness for a two-year commitment to NHSC-approved employment in a high-need area.

Who is eligible?

Medical graduates who agree to work in an NHSC-approved career for at least two years may qualify for this assistance.

How to apply

Contact the National Health Service Corps or visit the NHSC website for tips on the application process.

Is this option right for you?

If you’re willing to work in an area of high need after you graduate, this program may work well at the beginning of your medical career.

U.S. military loan repayment programs

United States Army

Army Student Loan Assistance offers up to $45,000 per year in loan assistance, along with a monthly stipend of up to $2,000. This assistance is available to U.S. residents working to complete an accredited residency.

The U.S. Army also offers up to $120,000 to pay down medical school debt in exchange for three years of service.

Lastly, the U.S. Army offers a Health Care Professionals Loan Repayment Program that provides up to $250,000 for repayment of “education loans for physicians in certain specialties who are serving in an Army Reserve Troop Program Units, AMEDD Professional Management Command, or the Individual Mobilization Program.”

How to apply

For additional information, contact your local Army recruiter, call 1-800-USA-Army, or visit Healthcare.GoArmy.com.

United States Navy

The Navy Student Loan Repayment Program offers up to $65,000 in repayment assistance, depending on your loan amount and year in school. Eligible applicants serve in the U.S. Navy and have federal student loans.

You may also qualify for the U.S. Navy’s loan forgiveness and repayment program, which offers up to $40,000 per year in loan assistance before taxes. You must be a final year medical student ready to join the U.S. Navy.

Lastly, the Navy Financial Assistance Program offers up to $275,000 in loan repayment assistance plus a monthly stipend to medical residents who agree to serve in the U.S. Navy. Physician sign-up bonuses may also be available.

How to apply

Contact your local Navy recruiter or visit the Navy Recruiting Command website.

United States Air Force

The Air Force Health Professions Scholarship Program offers up to $45,000 per year plus a monthly stipend up to $2,000 for medical students who join the U.S. Air Force and serve their country as a medical professional. Once you complete your residency, you’ll have a one-year obligation for each year you participate in the program plus one extra year.

How to apply

Contact a U.S. Air Force recruiter for more information, or visit the U.S. Air Force application page to apply.

State-level loan repayment programs for doctors

 

Program

Eligibility

Alaska


The SHARP Program offers new doctors
up to $35,000 in loan repayment
assistance per year.

Doctors must agree to work at least two
years in a high-need shortage area.

Arizona


The Arizona State Loan Repayment
Program
offers up to $65,000 per year in
repayment assistance for doctors for two
years, with lower repayment amounts
offered in subsequent years. You must
work in outpatient care to qualify.

The doctor must be a U.S. citizen who
agrees to work in a state-approved high
need position.

Arkansas


The Arkansas Department of Health
offers up to $50,000 in loan forgiveness
in exchange for a two-year contract.

You must agree to work in an
underserved area approved by the state.

California


The California State Loan Repayment
Program
offers doctors up to $50,000 in
loan forgiveness.

Applicants must be medical school
graduates and agree to at least a
two-year commitment in an eligible,
state-approved position.

Colorado


The Colorado Health Service Corps
offers up to $90,000 for doctors who
qualify.

Doctors must practice in a
state-approved shortage area that
accepts public insurance and offers
discounted services to the poor for three
years.

Delaware


The Delaware State Loan Repayment
Program
offers between $70,000 and
$100,000 in loan forgiveness for doctors
who qualify.

Doctors must agree to work in an area
with a substantial yet underserved
medical need for two years.

Georgia


The Georgia Physician Loan Repayment
Program
offers up to $25,000 per year
for two years.

Physicians must practice in a shortage
area and in one of the following medical
fields: family medicine, internal medicine,
pediatrics, OB/GYN, geriatrics or
psychiatry.

Hawaii


The Hawaii State Loan Repayment
Program
is a federal grant you can use
to pay off educational loans. Amounts
vary.

Applicants must agree to a two-year
commitment in a state-designated
shortage area.

Idaho


The Idaho State Loan Repayment
Program
offers doctors $2,000 to $25,000
per year in loan repayment assistance.

Doctors must agree to work in a health
care shortage area designed by the
state of Idaho.

Illinois


The Illinois National Health Service Corps
State Loan Repayment Program
offers up
to $50,000 in loan repayment assistance
for doctors who qualify.

Doctors must agree to a two-year
commitment in a health care shortage
area.

Iowa


Iowa’s Primary Care Recruitment and
Retention Endeavor
offers up to $50,000
for full-time doctors and up to $25,000 in
assistance for those who agree to work
part time.

Doctors must agree to work in a shortage
area approved by the state.

Kansas


The Kansas State Loan Repayment
Program
offers doctors up to $25,000 in
assistance per year.

Applicants must agree to a two-year
commitment in an eligible position.

Kentucky


The Kentucky State Loan Repayment
Program
awards up to $300,000 in loan
repayment assistance to up to 13
applicants who work in primary care.

You must agree to work in a designated
health care shortage area.

Louisiana


The Louisiana State Loan Repayment
Program
offers up to $30,000 annually for
up to a three-year commitment.

Applicants need to work in a traditionally
underserved health care shortage area.

Maryland


The Maryland Loan Repayment Assistance
Program
for Physicians offers up to
$50,000 per year for a two-year
commitment.

Applicants must be medical graduates
who are current on their student loans
and willing to work in a health care
shortage area.

Massachusetts


The Massachusetts Loan Repayment
Program
for Health Professionals offers
up to $50,000 for a two-year contract.

You must work in an area experiencing
exceptional medical need.

Michigan


Through the Michigan State Loan
Repayment Program
, doctors can receive
up to $200,000 in loan repayment
assistance.

Doctors must agree to a two-year,
full-time commitment in a health care
shortage area.

Minnesota


The Minnesota State Loan Repayment
Program
offers up to $20,000 in loan
assistance per year. Programs for rural
doctors
and urban physicians in
Minnesota also offer up to $25,000 per
year in assistance.

Dentists must agree to work in a
shortage area for at least two years to
qualify.

Missouri


The Missouri Health Professional State
Loan Repayment Program
offers up to
$50,000 in loan repayment assistance.

Doctors must agree to a two-year
commitment in a health care shortage
area.

Montana


The Montana Rural Physician Incentive
Program
offers up to $20,000 per year in
assistance for up to five years.

You must agree to work in a designated
rural or underserved community.

Nebraska


The Nebraska Loan Repayment Program
offers up to $60,000 per year in loan
repayment assistance.

Physicians must agree to work in
designated shortage areas for at least
three years.

Nevada


The Nevada Health Service Corps offers
varying amounts of loan repayment
assistance based on the term of service.

Doctors must agree to work in assigned
areas of need.

New Hampshire


This state program offers doctors up to
$75,000 in loan repayment for a full-time
commitment.

Applicants must agree to work in a
health care shortage area for at least
three years.

New Jersey


The Primary Care Practitioner Loan
Redemption Program
of New Jersey
helps doctors earn up to $120,000 in loan
repayment assistance.

Doctors must agree to a two- to
four-year commitment.

New Mexico


The Health Professional Loan Repayment
Program
of New Mexico offers up to
$25,000 in assistance per year.

Applicants must agree to a two-year
service agreement in a state-approved
position.

New York


Through Doctors Across New York, you
may qualify for up to $150,000 in
assistance over five years.

You need to work in a health care
shortage area for at least two years.

North Carolina


The state of North Carolina doles out
$100,000 in loan repayment assistance
for doctors who qualify.

Physicians must agree to work at least
four years in a health care shortage area.

North Dakota


North Dakota’s Federal State Loan
Repayment Program
offers up to $50,000
per year for up to two years.

Doctors must agree to work in a health
care shortage area for the duration of
the program.

Ohio


The Ohio Physician Loan Repayment
Program
offers $25,000 per year in
assistance for two years of service
followed by up to $35,000 per year for
third and fourth years.

You must agree to work in a health care
shortage area to qualify.

Oklahoma


The Oklahoma Medical Loan Repayment
Program
offers up to $160,000 for a
four-year commitment.

To qualify, physicians must work in a
rural or underserved area.

Oregon


The Oregon Partnership State Loan
Repayment program
offers tiered levels
of assistance based on a variety of
factors.

Applicants must agree to work in a
shortage area for at least two years.

Pennsylvania


The Pennsylvania Primary Health Care
Loan Repayment Program
offers up to
$100,000 in loan repayment assistance in
exchange for a full-time commitment.

Doctors need to agree to work in a
qualified position for at least two years.

Rhode Island


The Rhode Island Health Professionals
Loan Repayment Program
offers financial
assistance for doctors who qualify.

Doctors must agree to work in a shortage
area for at least two years.

South Carolina


South Carolina’s Rural Physician
Incentive Grant Program
offers $60,000
to $100,000 for a four-year contract.

Physicians must work in a rural or
underserved area of the state.

South Dakota


The South Dakota Recruitment Assistance
Program
offers up to $208,754 in
repayment assistance for doctors. The
benefit of the program changes annually.

Doctors must practice full time in a
health care shortage area for at least
three years.

Tennessee


The Tennessee State Loan Repayment
Program
offers up to $50,000 in
assistance for a two-year commitment.

Doctors must work in a designated
shortage area.

Texas


The state’s Physician Education Loan
Repayment Program
offers up to
$160,000 for a four-year commitment.

You must work in a designated
shortage area to qualify.

Utah


Utah’s Rural Physician Loan Repayment
Program
offers up to $15,000 per year in
assistance for doctors who qualify.

Doctors must work in a qualified rural
hospital.

Vermont


The Educational Loan Repayment for
Health Care Professionals program
of
Vermont gives out up to $20,000 in loan
repayment assistance per year.

Doctors in Vermont must work in
medically underserved communities for
at least 12 to 24 months.

Virginia


The Virginia Department of Health offers
loan repayment for doctors of up to
$140,000 for a four-year commitment or
up to $100,000 for a two-year
commitment.

Doctors must work in a state-approved
shortage area.

Washington


Washington’s Health Professional Loan
Repayment Program
offers a maximum
award of $75,000.

A commitment in a health care shortage
area is required.

Wisconsin


Wisconsin’s Health Professions Loan
Assistance Program
offers a maximum
award of $50,000 for doctors who qualify.

This program requires a three-year
commitment in a health care shortage
area.

Part IV: Paying Down Your Medical School Debt

While the very idea of medical school debt could have you feeling overwhelmed, it’s important to understand the many options available when it comes to paying off your loans sooner rather than later. In addition to paying off your loans faster, some strategies can help you save money on interest or secure a more manageable monthly payment.

Here are some tips that can help as you pay down medical school debt:

#1: Refinance your student loans to a lower rate.

Refinancing your student loans to a new loan product with a lower interest rate and better terms can help you save money and possibly even lower your monthly payment. With a lower interest rate, you’ll save money on interest each month, which could help you save money and pay off your loans faster, provided you keep making the same monthly payment.

Keep in mind, however, that there are notable disadvantages that come with refinancing federal loans with a private lender. When you refinance federal loans with a private lender, you lose out on special protections afforded to federal loan borrowers like deferment and forbearance. You also disqualify yourself from federally sponsored income-driven repayment and loan forgiveness programs.

Recommended lenders for refinancing your medical school loans

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

4.00% - 7.80%


Fixed Rate*

2.48% - 7.52%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
Learn more Secured
EarnestA+

20


Years

3.89% - 6.32%


Fixed Rate

2.57% - 5.87%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
CommonBondA+

20


Years

3.20% - 7.25%


Fixed Rate

2.72% - 7.25%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
LendKeyA+

20


Years

3.49% - 8.72%


Fixed Rate

2.47% - 7.99%


Variable Rate

$125k / $175k


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

20


Years

3.50% - 7.02%


Fixed Rate

2.80% - 6.38%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
Citizens BankA+

20


Years

3.50% - 8.69%


Fixed Rate

2.72% - 8.17%


Variable Rate

$90k / $350k


Undergraduate /
Graduate
Learn more Secured
Discover Student LoansA+

20


Years

5.24% - 8.24%


Fixed Rate

4.87% - 8.12%


Variable Rate

$150k


Undergraduate /
Graduate
Learn more Secured

#2: Find ways to save on monthly expenses.

While graduating from medical school can be a momentous occasion, you can put yourself in a better financial position by living a modest “student” lifestyle as long as you can. Ways to save money include, but aren’t limited to, finding a roommate to share living expenses, skipping pricey dinners out, living without cable television, driving your older car as long as you can, and preventing lifestyle inflation as you start earning more.

#3: Pay all of your monthly payments on time.

Federal Direct Loans and some private lenders offer interest rate discounts after you complete a specific number of on-time monthly payments. Check with your lender to see if they offer this option. If not, you should still make on-time monthly payments to avoid late fees and keep your loans in good standing.

#4: Pay extra toward the principal of your loans.

If you don’t want to go through the trouble of refinancing, you can still pay off your loans faster by paying more than the minimum payment on your student loans each month. Throwing extra money at the principal of your loans reduces the amount of interest you owe with each passing month, helping you save money while paying off your loans faster.

#5: Pay interest while in school.

Some medical student loans let interest accrue while you’re still in school. If you have the financial means to make interest-only payments while you’re still in school, doing so can help you prevent your student loan balance from ballooning before you graduate.

Frequently Asked Questions

Tuition at medical schools is not fixed, meaning it can pay to shop around before you choose an institution. Private schools tend to be more expensive than public schools as well, meaning you can usually save money if you decide on a public education for your medical degree.

The amount you can save depends on your current interest rate and your new loan rate and its terms. To find out how much you could potentially save by refinancing, enter your old loan and new loan information in a student loan calculator.

You can lower the payment on your student loans in a few different ways. First, you can refinance your student loans into a new loan product with a lower interest rate or longer repayment timeline. Second, you can choose an extended repayment plan or even income-driven repayment.

Federal student loans come with important federal benefits and protections such as deferment and forbearance. They also leave you eligible for income-driven repayment plans and federal loan forgiveness.

As you shop for student loans for medical school, remember that the terms of your loan can make a big difference in how much you’ll pay over time. Compare loans based on the interest rate, any applicable fees, and the monthly payment amount you’ll need to make. You can also check student loan providers’ profiles with the Better Business Bureau and read student loan reviews for even more insight.

According to the Association of American Medical Colleges, some of most popular pre-med majors include biological sciences, physical sciences, social sciences and humanities.

According to Swarthmore College, medical schools are interested in students with excellent academic ability, strong interpersonal skills, leadership skills, and demonstrated compassion and care for others.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Holly Johnson
Holly Johnson |

Holly Johnson is a writer at MagnifyMoney. You can email Holly here

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College Students and Recent Grads

Top Checking Accounts for College Grads

Editorial Note: The editorial content on this page is not provided by any financial institution and has not 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

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

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

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

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

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

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

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

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

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

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Alexandria White
Alexandria White |

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

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College Students and Recent Grads, Pay Down My Debt

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

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Updated: August 1, 2018

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

LenderTransparency ScoreMax TermFixed APRVariable APRMax Loan Amount 
SoFiA+

20


Years

4.00% - 7.80%


Fixed Rate*

2.48% - 7.52%


Variable Rate*

No Max


Undergrad/Grad
Max Loan
Learn more Secured
EarnestA+

20


Years

3.89% - 6.32%


Fixed Rate

2.57% - 5.87%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
CommonBondA+

20


Years

3.20% - 7.25%


Fixed Rate

2.72% - 7.25%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
LendKeyA+

20


Years

3.49% - 8.72%


Fixed Rate

2.47% - 7.99%


Variable Rate

$125k / $175k


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

20


Years

3.50% - 7.02%


Fixed Rate

2.80% - 6.38%


Variable Rate

No Max


Undergrad/Grad
Max Loan
Learn more Secured
Citizens BankA+

20


Years

3.50% - 8.69%


Fixed Rate

2.72% - 8.17%


Variable Rate

$90k / $350k


Undergraduate /
Graduate
Learn more Secured
Discover Student LoansA+

20


Years

5.24% - 8.24%


Fixed Rate

4.87% - 8.12%


Variable Rate

$150k


Undergraduate /
Graduate
Learn more Secured

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

We have also created:

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

Can I get approved?

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

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

Good or Excellent
score needed

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured
Earnest

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured
CommonBond

660

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured
LendKey

680

Undergraduate
& Graduate

Private & Federal

$24K

Yes

Learn more Secured
Laurel Road Bank

Not published

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

None

Yes


(or signed job offer)
Learn more Secured
Citizens Bank

680

Undergraduate
& Graduate

Private, Federal,
& Parent PLUS

$24K

Yes

Learn more Secured
Discover Student Loans

Not published

Undergraduate
& Graduate

Private & Federal

None

Yes

Learn more Secured

Diving Deeper: The best places to consider a refinance

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

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

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

1. SoFi

LEARN MORE Secured

on SoFi’s secure website

Read Full Review

SoFi : Variable rates from 2.48% and Fixed Rates from 4.00% (with AutoPay)*

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

Pros Pros

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

Cons Cons

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

Bottom line

Bottom line

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

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

2. Earnest

LEARN MORE Secured

on Earnest’s secure website

Read Full Review

Earnest : Variable Rates from 2.57% and Fixed Rates from 3.89% (with AutoPay)

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

Pros Pros

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

Cons Cons

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

Bottom line

Bottom line

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

3. CommonBond

LEARN MORE Secured

on CommonBond’s secure website

Read Full Review

CommonBond : Variable Rates from 2.72% and Fixed Rates from 3.20% (with AutoPay)

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

Pros Pros

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

Cons Cons

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

Bottom line

Bottom line

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

4. LendKey

LEARN MORE Secured

on LendKey’s secure website

Read Full Review

LendKey : Variable Rates from 2.47% and Fixed Rates from 3.49% (with AutoPay)

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

Pros Pros

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

Cons Cons

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

Bottom line

Bottom line

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

5. Laurel Road Bank

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Laurel Road Bank : Variable Rates from 2.80% and Fixed Rates from 3.50% (with AutoPay)

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

Pros Pros

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

Cons Cons

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

Bottom line

Bottom line

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

6. Citizens Bank

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Citizens Bank (RI) : Variable Rates from 2.72% and Fixed Rates from 3.50% (with AutoPay)

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

Pros Pros

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

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

Cons Cons

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

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

Bottom line

Bottom line

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

7. Discover

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

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

Pros Pros

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

Cons Cons

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

Bottom line

Bottom line

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

 

Additional Student Loan Refinance Companies

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

Traditional Banks

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

Credit Unions

  • Alliant Credit Union: Anyone can join this credit union. Interest rates start as low as 3.50% APR. You can borrow up to $100,000 for up to 25 years.
  • Eastman Credit Union: Credit union membership is restricted (see eligibility here). Fixed rates start at 6.50% and go up to 8% APR.
  • Navy Federal Credit Union: This credit union offers limited membership. For men and women who serve (or have served), the credit union can offer excellent rates and specialized underwriting. Variable interest rates start at 4.07% and fixed rates start at 4.70%.
  • Thrivent: Partnered with Thrivent Federal Credit Union, Thrivent Student Loan Resources offers variable rates starting at 4.13% APR and fixed rates starting at 3.99% APR. It is important to note that in order to qualify for refinancing through Thrivent, you must be a member of the Thrivent Federal Credit Union. If not already a member, borrowers can apply for membership during the student refinance application process.
  • UW Credit Union: This credit union has limited membership (you can find out who can join here, but you had better be in Wisconsin). You can borrow from $5,000 to $150,000 and rates start as low as 3.87% (variable) and 3.99% APR (fixed).

Online Lending Institutions

  • Education Loan Finance:This is a student loan refinancing option that is offered through SouthEast Bank. They have competitive rates with variable rates ranging from 2.55% – 6.01% APR and fixed rates ranging from 3.09% – 6.69% APR. Education Loan Finance also offers a “Fast Track Bonus”, so if you accept your offer within 30 days of your application date, you can earn $100 bonus cash.
  • EdVest: This company is the non-profit student loan program of the state of New Hampshire which has become available more broadly. Rates are very competitive, ranging from 4.29% – 7.89% (fixed) and 4.02% – 7.62% APR (variable).
  • IHelp : This service will find a community bank. Unfortunately, these community banks don’t have the best interest rates. Fixed rates range from 4.00% to 8.00% APR (for loans up to 15 years). If you want to get a loan from a community bank or credit union, we recommend trying LendKey instead.
  • Purefy: Purefy lenders offer variable rates ranging from 2.70%-8.17% APR and fixed interest rates ranging from 3.25% – 9.66% APR. You can borrow up to $150,000 for up to 15 years. Just answer a few questions on their site, and you can get an indication of the rate.
  • RISLA: Just like New Hampshire, the state of Rhode Island wants to help you save. You can get fixed rates starting as low as 3.49%. And you do not need to have lived or studied in Rhode Island to benefit.

Is it worth it to refinance student loans?

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

This is particularly important if you have Federal loans.

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

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

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

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

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

Is there an origination fee?

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

Is the interest rate fixed or variable?

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

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

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

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

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Nick Clements
Nick Clements |

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

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Best of, College Students and Recent Grads, Credit Cards

Best Student Credit Cards August 2018

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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

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

Our Top Pick

Discover it® Student Cash Back

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Rates & Fees

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Discover it® Student Cash Back

Annual fee
$0
Rewards Rate
5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs up to the quarterly maximum each time you activate. 1% unlimited cash back automatically on all other purchases.
Regular APR
14.74% - 23.74% 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 card offers great perks for college students, such as a rewards program for good grades and a free FICO® score so you can learn about your credit firsthand. Its cash back rewards program is our favorite. No other card for students (that we could find) offers the opportunity to earn up to 5% cash back. And with no annual fee, this is our top pick.

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

Best for Commuter Students

Bank of America® Cash Rewards Credit Card for Students

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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
14.99% - 24.99% Variable
Credit required
fair-credit

Average

Magnify Glass Pros

  • Cashback program: You’ll earn 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. All other purchases will earn you 1% cash back. 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 3% foreign transaction fee, not suitable for students who travel abroad. You will negate any cash back earned while using this card outside the U.S.
Bottom line

Bottom line

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

Best Flat-Rate Card

Journey® Student Rewards from Capital One®

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Journey® Student Rewards from Capital One®

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

Magnify Glass Pros

  • 1.25% cash back if you pay on time: Each purchase you make earns a flat-rate 1% cash back. There’s no bonuses or categories to track: a simple 1% on everything. And then you get 0.25% on top if you make the payment 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 24.99% variable APR: This card carries an interest rate that’s almost twice as high as some other student credit cards, such as the Wells Fargo Cash Back College® Card with a rate as low as 12.65% – 22.65% 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
12.65% - 22.65% Variable
Credit required
fair-credit
Fair Credit

Magnify Glass Pros

  • Interest rates as low as 12.65% variable APR: Depending on your credit, your interest rate could be between 12.65% and 22.65% variable APR, but their is no gurantee 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.
  • 3% cash back rewards for the first six months: Normally you’ll earn 1% cash back on all purchases. For the first six months, though, you’ll earn 3% cash back on any purchases you make for gas, groceries, or drugstores.
  • 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 College Card is a relatively simple card with a great intro bonus of 3% cash back for the first six months. 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 College Card is your best bet.

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

Altra Federal Credit Union Student Visa® Credit Card

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Altra Federal Credit Union Student Visa® Credit Card

Annual fee
$0
Rewards Rate
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® for Students or the Journey® Student Rewards from Capital One® card.
  • Must join Altra Federal Credit Union: Luckily, anyone can join, but it might take a bit of legwork on your part compared to a bank. If you don’t meet certain membership eligibility criteria, you can join the Altra Foundation for $5. Then you’ll need to open a savings account with a minimum $5 deposit that must remain in the account while you have your card open.
Bottom line

Bottom line

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

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

Best for Studying Abroad

Bank of America® Travel Rewards Credit Card for Students

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on Bank Of America’s secure website

Bank of America® Travel Rewards Credit Card for Students

Annual fee
$0
Rewards Rate
Earn unlimited 1.5 points for every $1 you spend on all purchases everywhere, every time and no expiration on points.
Regular Purchase APR
16.74% - 24.74% Variable
Credit required
fair-credit
Fair Credit, Limited Credit history

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 there is no expiration on points. This is a decent flat-rate that isn’t limited to bonus categories.
  • Redemption bonus: Bank of America customers will receive a 10% customer bonus every time cash back is redeemed into a Bank of America® checking or savings account. The bonus is even better if you’re a Bank of America® Preferred Rewards client — you could get a 25% – 75% bonus. Redeeming this way allows you to maximize your cash back rewards.
  • Free FICO® Score: The main reason to get a credit card as a student is to boost your credit score. So, actually being able to see your credit score is a huge help, especially as you can watch it climb over time with good credit management.

Cons Cons

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

Bottom line

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

Best Secured Card

Discover it® Secured

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Rates & Fees

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Discover it® Secured

Annual fee
$0
Minimum Deposit
$200
Regular APR
24.74% 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: At the end of your first year as a cardholder, Discover will automatically match all of the cash back you’ve earned (new cardmembers only). This is a great added bonus that increases your cash back in Year 1.
  • Automatic monthly reviews after eight months: Discover makes it easy for you to transition to an unsecured card with monthly reviews of your account starting after eight months. Reviews are based on responsible credit management across all of your credit cards and loans.

Cons Cons

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

Bottom line

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

Read our full review of the Discover it® Secured

Best for No Credit History

Deserve® EDU Mastercard

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on Deserve’s secure website

Deserve® EDU Mastercard

Annual fee
$0
Rewards Rate
1% unlimited cash back on ALL purchases
Regular Purchase APR
20.49% Variable
Credit required
bad-credit
Fair Credit/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% cash back per dollar spent. 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 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 card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

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

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College Students and Recent Grads

Is College Worth It? Here’s What to Consider

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Rising tuition and fees at colleges may have children and parents alike questioning if college is worth the cost. On the one hand, many jobs may require a college degree and, on average, lifetime earnings could be higher for those who earn a degree. But bachelor’s degrees recipients also graduate with an average five-figure debt. It could be too high a cost to pay, particularly if you’re not certain that you want to work in a field or job that requires a degree.

Is college worth the cost?

There’s no simple answer to such a personal question, and there are many subjective questions to ask yourself before applying for college. But overall, there is data that points to the value of having a college degree.

  • Bachelor’s degree holders earned 61% more than high school graduates, after taxes, in 2015.
  • Those who get their bachelor’s degree in four years earn enough by the time they’re 34 to offset the cost of attending school, based on median earnings.
  • The unemployment rate for bachelor’s degree holders is generally about half what it is for high school graduates, among those 25 and older
  • Only 4% of bachelor’s degree holders lived in poverty versus 13% of high school graduates, among those 25 and older.

Earnings-related statistics clearly show that a college education could be worth it from an economic perspective. However, statistics don’t guarantee an individual’s outcome or experience. So, here are a few of the advantages and disadvantages of attending college to consider.

Advantages of attending college

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A degree could help you get a job

A college degree could help open doors and may be a requirement to start certain career paths. Data from the U.S. Bureau of Labor Statistics shows that in May 2016, nearly 37 percent of entry-level jobs required at least some secondary education.

The importance of a college degree may increase over time, as well. Georgetown University’s Center on Education and the Workforce predicts that by 2020, about 65 percent of job openings (not only entry-level jobs) will require at least some college experience or an associate’s degree.

Having a degree could lead to higher lifetime earnings

As the College Board statistics showed, bachelor’s degree holders generally earn more money each year than high school graduates. Even if it takes some time to pay off student loans and offset the years that you were in school rather than working, the long-term earnings potential is higher for those with a college degree.

The U.S. Department of Education found, on average, college graduates will earn $1 million more during their lifetimes than high school graduates.

There could be other financial and personal benefits

In addition to a potentially higher income, bachelor’s degree holders are more likely to have employer-provided health insurance and access to employer-sponsored retirement plans than employees with only a high school diploma.

Having a college degree also correlates with more civic activity and healthy behavior, such as regularly exercising, volunteering and voting. College degree holders are also more likely to engage in educational activities with their children, such as reading and visiting cultural centers.

You can expand your personal and professional networks

There may not be hard numbers to back up the value of forming friendships and professional connections in college, but there is some truth behind the adage, “it’s not what you know but who you know.”

Hopefully, if you’ve spent years attending classes, “what you know” is important as well. But there is value in having strong connections with other college graduates and professors in your area of interest.

Drawbacks of attending college

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Earnings among degree holders can vary a lot depending on your career

Even among those with college degrees, there’s a large variation in income, depending on individuals’ jobs or career paths. The College Board found that by mid-career, the difference in college degree holders’ median earnings was as large as $46,000 a year. For example, an early childhood educator might earn $40,000 a year while someone with a computer science degree could earn $86,000.

Student loans could impact many areas of your life

Taking out student loans is a necessity for many college students. However, leaving college and entering the “real world” with students loans can impact graduates in many ways. A survey conducted by American Student Assistance in 2015 found that most students’ decision to purchase a home or car and their ability to save for retirement was affected by their debt. More than a third said it was difficult to afford daily necessities due to their loans.

Some people leave college with debt but no degree

Student loans could be seen as an investment in one’s future. Unfortunately, that’s not necessarily the case for students who take out loans to attend school but leave before earning a degree.

According to an analysis of federal data by The Hechinger Report, a nonprofit focused on inequality and education, 3.9 million undergraduates with federal student loans dropped out of school from 2014 to 2016.

Students may drop out for various reasons, from having to deal with medical issues or financial troubles to getting a job offer that’s too good to pass up. Some may also return to school and finish their degree in the future. However, having to leave school or deciding college isn’t for you after taking out loans could set you back financially.

Is college worth it for you?

College isn’t a good fit for everyone, and being able to recognize that early on could save you a lot of time and money. To that end, here are a few questions you can ask yourself to help you determine if college is worth it for you.

Are you prepared for the cost?

Using the Department of Education’s net price calculator, or calculators on colleges’ websites, you can estimate your annual cost to attend different schools. Consider the four-year cost, how much you and your family can contribute and how much you may need to borrow in student loans.

Comparing your net cost at different schools could help you make an educated choice when deciding if college is worth the cost, and if it is, which school to attend.

Are you ready for the academic rigor?

The jump from high school to college can be difficult for those who had trouble keeping up with school work during high school or attended a high school that didn’t have especially demanding teachers. It could also be up to you to manage your time and find support and assistance, such as study groups or tutors, once you’re in college.

You don’t need to avoid college because it’s difficult. After all, challenges can be great learning opportunities. Acknowledge the academic expectations that you’ll face in college and ask yourself if you’re ready to put in the work.

Have you identified your career goals?

While students can switch majors once they enter college, knowing what you want to do before you begin could help you create a plan and finish college within four years.

If you’re unsure of your career goals but certain that you want to earn a bachelor’s degree, you might want to save money by satisfying some of your general education requirements at a local community college and then transferring to a four-year school.

Does your desired degree increase your earning potential?

If you have a specific major in mind, you may be able to research the average annual income of other people who graduated with the same major. The Center on Education and the Workforce’s The Economic Value of College Majors project could be a good place to start.

A proposed major doesn’t need to lead to riches to be worthwhile, but consider your overall cost, potential loans and how much you might earn after graduation. If your monthly loan payments will make it difficult to maintain a modest standard of living, the cost of college might outweigh the benefits.

Do you have a plan for repaying student loans?

A 2017 MagnifyMoney survey found that nearly half of recent college graduates regret not being more careful handling their debts. If you anticipate having to take out student loans, having a plan early on could help you manage the debt and pay as little as possible.

For example, the interest on unsubsidized student loans can accumulate while you’re at school, causing you to graduate with more debt than you took out. You may be able to avoid this by working and starting to repay your loans while you’re at school.

Will you make the most of your time at college?

You can address this question in different ways. Will you make the most of the educational opportunities, social events and experience of living away from home? There’s more to the college experience than receiving a degree and a potential earnings increase, and you should consider that as well when you’re trying to decide if going to college is worth it.

Alternatives to a traditional college education

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It may sometimes feel like a college degree is a new norm. However, while young adults today are more likely to have a college degree than past generations, you’re not alone if you decide to forgo college. You also don’t need a college degree to go into a well-paying field.

A Pew Research Center report shows only about 36 percent of millennial (ages 21 to 36) women had at least a college degree in 2017. Less than a third (29 percent) of men in the same age group had a degree.

In other words, more than six out of every 10 millennials today don’t have a bachelor’s degree.

If you feel like enrolling at a four-year institution isn’t the correct choice for you right now, here are a few alternatives to consider:

Attend a community college

Community colleges, also known as junior colleges, can provide educational opportunities at a much lower cost than four-year schools. You may be able to earn an associate’s degree or certification, or explore different fields of study while determining if you want to continue your academic studies. You may be able to transfer credits from community college toward later efforts to earn a bachelor’s degree at a four-year institution.

Some community colleges also have bachelor’s degree programs, although they’re generally in specialized or technical fields. There are also a few places throughout the country where you can attend community college tuition-free.

Enroll in a technical college

A technical, vocational or career school education could set you on a path toward a career of your choosing. The programs can vary in nature and you may be able to get a degree, certification, license or diploma in a specific trade, such as cosmetology, auto mechanics or different healthcare professions. If you’re looking for hands-on training and skills that can help you land a job, a technical college could be a good route.

Become an apprentice

Somewhat similar to attending a technical school, an apprenticeship lets you get hands-on experience as you start a career. You’ll also get paid during your apprenticeship, which often lasts for one to six years, with pay increases depending on your experience.

Apprenticeships combine classroom and real-world training, and you may be able to earn college credits which you could apply toward an associate’s or bachelor’s degree later. Apprentices also receive a certification or credentials once they finish their training program, which they can use to continue their career.

You can choose an apprenticeship in different industries, including hospitality, construction, energy and technology. The U.S. Department of Labor has tools and resources for those interested in becoming an apprentice, along with a job board you can use to find local opportunities.

Applying won’t guarantee your admission, as you may need to interview, pass aptitude tests and, in some cases, have work experience. You could consider a pre-apprenticeship program at a technical school to increase your chances of getting an apprenticeship from your top-choice employer.

Join the military

Just like college, the military isn’t a good fit for everyone. However, military service does offer potentially valuable technical training along with professional development. It could also be a career path of its own or offer you financial assistance that you can use to pay for a technical school or degree-granting college or university.

Start your own business

Running a business isn’t necessarily as glamorous as it sounds. In some cases, you might wind up working long hours with little to show for it. Or, you could have to take out a loan to start the business or keep it running, and eventually find yourself in trouble if the business stops making money.

On the other hand, if it does work out, you’ll get to be your own boss. One day, you may even be able to step back and continue making money while you explore other interest or ventures.

Take a gap year

Some students decide to take a year off before starting at a four-year university. They might spend the year working to save money, try out several jobs to get ideas for what they want to study or travel if they can afford it. A gap year could be a good option if you need more time to explore or mature before heading to college.

However, if you’re planning on going to a four-year school after the gap year, you may want to apply while you’re still in “school mode.” It could be more difficult to take a standardized test and complete application requirements after taking time away from school. If you’re accepted into a college or university, the school may let you defer your start date and hold a spot for you until after you return from the gap year.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

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

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College Students and Recent Grads

Paying Off Student Loans Faster: A How-to Guide

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Whether you’re facing a mountain of student loans or you’re just a few thousand dollars away from finally doing away with the debt, several methods and tactics could help you pay off student loans faster. However, every solution does not fit every situation. Depending on which type of loans you have, what your other debt and financial obligations are and how much disposable income you have, paying off your student loans aggressively may not be the best option.

Consider the pros and cons before you dive in and send every extra penny to your loan servicer.

Pros of paying off student loans quickly

You can save money on interest. Your student loans could be accruing interest every single day, and the quicker you pay off your loans, the more money you could save on interest. Unlike with some other types of loans, student loans don’t have any prepayment penalties, meaning you don’t need to worry about extra fees for paying off your loans ahead of schedule.

It could be easier to qualify for other financial products. Having a student loan payment due each month can impact your debt-to-income ratio (DTI) — your monthly financial obligations divided by your monthly income. Paying off the loan and lowering your DTI could help you get approved for more financial products, such as other loans or credit cards, and may help you qualify for better rates or terms.

You’ll have one fewer debt to worry about. It can be hard to quantify the psychological impact of paying off debt, but there certainly could be benefits to having fewer monthly bills. Even if you still have other debts to repay, striking your student loans from the list could be a relief.

Cons of paying off student loans quickly

It may make more financial sense to pay off other loans first. If you have several types of loans, you may want to focus on other debts before paying off your student loans.

For example, you may have credit card debt that has a much higher interest rate than your student loans. Paying off the credit card could save you more money, and you could then put those savings toward your student loans (or the next highest-rate debt).

It also may make more sense to pay down a secured loan, such as an auto loan, first. Falling behind on your auto loan could lead to your vehicle getting repossessed, which could then snowball into other negative impacts, such as having trouble getting to work. While falling behind on student loans may lead to fees or even wage garnishments, your physical assets aren’t at risk.

There may even be benefits to starting with other unsecured loans, such as a personal loan. If both your personal loan and student loan have the same interest rate, your student loan may actually cost you less overall each year if you qualify for a student loan interest deduction.

You might come out ahead by investing instead. Your student loans may have a low single-digit interest rate. While it’s not guaranteed, you might earn more from investing your money in, say, a 401(k) or IRA than you could save paying off your loans early. However, you’ll need to weigh the risks. There’s no guarantee that your investments pay out, while you know for certain the return you can get on extra student loan payments. The key is to find a balance — pay off your student loans but don’t let that stop you from investing for your future, especially when it comes to funding your retirement account.

You may want to establish an emergency fund first. An emergency fund, generally three to six months’ worth of normal expenses, can help you overcome a financial emergency without having to take on more debt or falling behind on loan payments.

If you deplete your fund, or put off building one to focus on student loan payments, you may have to turn to more expensive forms of debt (such as credit cards) if you’re faced with an emergency.

You may qualify for loan forgiveness. Federal student loans may be eligible for forgiveness and cancellation programs. If you’re on a path towards loan forgiveness, paying off your loans early could lead to paying more than you need to and getting less debt being forgiven.

9 ways to pay off student loans quickly

Paying off student loans ahead of schedule can require planning, hard work and dedication. There’s no single path to success. But whether you can make double your normal payment or are having trouble affording payments at all, there are options and tactics that could speed up the process.

#1 Make additional payments on your loans

Making extra payments when you can or increasing your monthly payment will help you pay off your loans sooner. However, simply sending more money to your loan servicer(s) may not be the best approach.

First, be sure that those extra payments go toward the loan with the highest interest rate. Ask if your loan servicer will allow you to designate which loan the extra funds should go to. Depending on the servicer, your extra payments may be evenly divided amongst all your loans by default.

Also, the servicer may credit your account for future payments instead of putting your payments towards your a loan’s principal. As a result, you might not owe anything next month, but you also won’t be saving as much on interest. To make matters even more confusing, the servicer may continue to withdraw automatic debits from your account even if you’ve already prepaid next month.

Contact your servicer and find out how you can make sure additional payments go toward the principal balance of the loan with the highest interest rate. You may be able to send instructions for how it should apply all your extra payments. Or, if you don’t want to give it a blanket rule, there may be ways to specify how you want each payment applied.

Another option if you can’t afford to make more than your required payment each month is to send loan payments every two weeks rather than once a month. Paying half of the amount early can decrease how much interest accrues during the month, leading to paying less overall in the long run. Make sure you make both payments before the due date to avoid a late payment fee.

#2 Start making payments as soon as you can

You don’t need to wait until after you graduate, or until your grace period is over, to start repaying your student loans. Making payments while you’re in school and during the deferment could lead to significant long-term savings.

Aside from subsidized federal loans, interest will accrue on your loans while you’re in school and during other deferment period. Once you start making full payments, the interest could be added to your principal balance (i.e. capitalized) and your interest rate will now apply to that larger balance.

If you can afford to make payments on your loans while they’re in deferment, you can limit how much interest will accrue and capitalize.

#3 Avoid deferment and forbearance

You may qualify to temporarily stop making payments and place your loans into deferment or forbearance for various reasons, such as returning to school, losing your job or following a medical emergency. However, as with the initial in-school deferment, unsubsidized loans will continue to accrue interest that will capitalize once you start making full payments. Even subsidized loans accrue interest during forbearance.

Continue making payments if you can afford it. Or, even if you have to put your loans into deferment or forbearance, try to make at least partial payments when you can. Doing so will limit how much interest accrues and could keep your loans from growing.

If you’re having trouble affording your payments, you also may be able to switch your federal student loans to an income-driven repayment plan. Depending on your income, doing so could decrease your monthly payment amount and let you continue paying down your loans and avoiding debt default or placing them in deferment and forbearance.

Even if your monthly payment is only a few dollars, with four of the income-driven repayment plans, the remainder of your loan’s balance could also be forgiven after 20 to 25 years of payments. Your monthly payments may also qualify you for other federal forgiveness and cancellation programs.

#4 Increase your income and cut expenses

Whether you can negotiate a raise at work, take on extra hours, find a higher-paying job or start working a side gig for extra income, the more money you have coming in, the more you can afford to put toward your student loans. There are many opportunities to make money online, and while they don’t all pay especially well, they’re often flexible and can be squeezed into your normal routine.

On the other side of your personal cash flow statement, you could try to cut your expenses. There are a lot of ways to go about doing this, everything from looking for fee-free financial accounts and ending subscriptions, to changing your dining and grocery habits.

#5 Consider consolidating your federal student loans

Consolidating (i.e. combining) your federal student loans can be one way to make it easier to manage multiple student loans at once. However, it may not save you money in the long run. That’s because when you consolidate your loans, you’ll be issued a new loan for the total balance with the weighted average interest rate of the loans you’re combining.

If you keep your loans separate, however, you can focus on paying down the loan with the highest interest rates first. Doing so could help you save money, which you can then put toward paying down the next highest rate loan. But that’s not an option if consolidate all your loans together.

Also, consolidation could result in a much longer loan term and lower monthly payment. While you can still make extra payments each month and pay off the loan early, it may be easier to stick to your plan if you don’t have to regularly schedule extra payments.

There are pros and cons to this approach. Consider whether it’s worth it based on your unique situation.

#6 Stay on the standard federal repayment plan

Federal student loans may be eligible for a variety of repayment plans, including plans that base your monthly payment amount on your income. You may want to stay with the standard 10-year repayment plan, as generally the income-driven plans will lead to lower monthly payments and a longer repayment term.

There is a middle ground, though. If you can’t afford the monthly payments on the standard plan, switching plans could help you avoid late payments or missed payments, which could result in fees and potentially hurt your credit. However, you can still pay more than the minimum and pay off your loans faster.

#7 Look into loan forgiveness programs and options

Federal student loans may be eligible for several forgiveness and cancellation programs which could help you get out of debt sooner. Only certain types of federal loans may qualify, and you may need to meet a variety of qualifications and requirements before the Department of Education forgives your remaining debt. Generally, the programs are restricted to those who take on some sort of service work, whether that be as a teacher, government worker or nonprofit employee.

You might also find employer- or government-backed programs that could help you repay your private and federal student loans. These can range from industry-specific opportunities for attorneys and health care workers to more general loan repayment programs that companies offer as an employee benefit.

In some cases, it may make sense to switch to an income-driven repayment plan and decrease your monthly payments to take advantage of a forgiveness or repayment program. You won’t necessarily pay off your loans as quickly as possible, but it could be a worthwhile trade-off if you can pay less out of pocket overall.

#8 Sign up for automatic payments

Many student loan servicers offer a 0.25 percent interest rate discount if you sign up for automatic payments. It may not make a huge difference in your overall costs, but every little bit counts.

#9 Refinance your student loans

By refinancing your student loans — taking out a new loan to pay off your current debts — you may be able to your lower interest rate and decrease how much interest your loans accrue each month. After refinancing, even if you make the same monthly payments you’ll pay off the loans quicker.

You may be able to refinance your student loans by taking out a new private loan and using that loan to pay them off. There are lenders that specifically offer student loan refinancing.

Just keep in mind if you use a private loan to refinance federal loans, you will be forfeiting your option to use federal repayment programs and may not be able to apply for federal loan forgiveness programs.

If you refinance with a private lender, your loans could still be considered student loans for tax purposes and the interest payments may qualify you for the deduction.

Borrowers who have a good credit score and high income may qualify for the lowest rates when refinancing their student loans. However, don’t assume you can’t get a good rate if that doesn’t describe your situation. You can at least apply for preapproval with a soft credit check from some lenders and see your estimated rates and eligibility without affecting your credit scores.

Also, compare your options before you go through with refinancing. You may find that lenders offer you different rates or terms, and you won’t necessarily get the best rate from the company with the lowest advertised rates.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Louis DeNicola
Louis DeNicola |

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

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College Students and Recent Grads

Subsidized vs. Unsubsidized Student Loans: What’s the Difference?

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Undergraduate and graduate students who need money to pay for school can apply for federal students loans after submitting a Free Application for Federal Student Aid (FAFSA). But once your school sends you an award letter, you’ll need to figure out which student loans to accept.

The U.S. Department of Education issues several types of federal student loans through the William D. Ford Federal Direct Loan Program, or simply the direct loan program. Two of these are direct subsidized loans and direct unsubsidized student loans.

Direct subsidized loans are only available to eligible undergraduate, community college, trade, career or technical school students, while direct unsubsidized student loans may be offered to graduate students as well.

There are also several other types of direct loans:

  • Direct PLUS loans for graduate or professional students, also known as grad PLUS loans
  • Direct PLUS loans for parents of undergraduates, also known as parent PLUS loans
  • Students who have previously taken out federal student loans may be able to combine their loans with a direct consolidation loan.

We’re going to delve into direct subsidized and direct unsubsidized student loans, the differences between the two and when one type of loan may be better than the other.

What is a direct subsidized loan?

Direct subsidized loans are federal student loans for undergraduate students. There’s no credit or minimum income requirement to borrow a direct subsidized loan, but the loans are need-based, and your school’s official cost of attendance (COA) and your expected family contribution (EFC) will impact your eligibility for direct subsidized loans.

Direct subsidized loans also have a $23,000 aggregate loan limit along with annual loan limits:

  • $3,500 for your first year
  • $4,500 for your second year
  • $5,500 for your third and subsequent year

Your school will determine your loan offer. At most, you may be offered direct subsidized loans for the greater of your annual loan limit or your financial need amount, which is the difference between your COA and EFC.

Since your COA and EFC may change from one year to the next, your eligibility for direct subsidized loans and your loan offer amount may also vary.

You also can’t borrow direct subsidized loans for longer than one-and-a-half times your programs length. For example, if you’re in a two-year associate degree program you can only take out direct subsidized loans for up to three years. If you later switch to a four-year bachelor’s degree program, your timeline increases to six years, but the direct subsidized loans you previously took out still count against that limit.

What is a direct unsubsidized loan?

Like with direct subsidized loans, there’s no credit or minimum income requirement for direct unsubsidized student loans. Unlike direct subsidized loans, they aren’t need-based, and you may be able to borrow an unsubsidized loan even if you don’t have financial need. However, your school still determines your loan offer amount, which may depend on your COA and EFC.

The loan limits for direct unsubsidized loans are different for dependent and independent undergraduate students, and for graduate students. A dependent student whose parent applies but doesn’t qualify for a parent PLUS loan may also be eligible for an increased annual loan limit.

Borrower’s status

Annual loan limit

Aggregate loan limit

Dependent undergraduate students

$5,500 for your first year
$6,500 for your second year
$7,500 for your third and subsequent years

The limit includes your subsidized loans.

$31,000

The limit includes up to $23,000 in subsidized loans.

Independent undergraduate students

Dependent undergraduate students after a parent applies and is denied for a PLUS Loan

$9,500 for your first year
$10,500 for your second year
$12,500 for your third and subsequent years

The limit includes your subsidized loans.

$57,500

The limit includes up to $23,000 in subsidized loans.

Graduate and professional students

$20,500

$138,500

The limit includes up to $65,500 in subsidized loans. This limit also includes any federal loans obtained during undergraduate study.

Both subsidized and unsubsidized direct loans require students to maintain at least a half-time schedule at a Title IV school to be eligible. You will also need to meet the basic eligibility requirements and complete and submit a FAFSA each year to remain eligible for any form of federal student loan.

There are also a few differences between subsidized and unsubsidized loans. In addition to the need-based requirement for subsidized loans and the varying loan limits, the primary difference is right in the name — the subsidy.

How does the subsidy work?

With direct subsidized loans, the education department will pay the interest that accrues on your loan while you’re enrolled at least half time in school and during your loan’s grace period (the six months after you leave school).

The department will also pay interest that accrues if you place your loan in deferment and temporarily stop making payments. And, if you consolidate your federal loans and include a subsidized direct loan, the Department of Education will pay a portion of the interest that accrues on your direct consolidation loan if it’s placed in deferment.

There are a few situations when you may lose your interest subsidy, such as if you’re still in school but you’ve exceeded your eligibility period for direct subsidized loans. However, even when this happens, you’ll only lose the subsidy going forward, and you won’t have to repay the interest that was already paid on your behalf.

With a direct unsubsidized loan, the interest will begin to accrue once the loan is disbursed (the money is sent to your school). Because there’s no subsidy, the interest will continue to accumulate if you defer your payments while you’re in school, during a grace period or if you temporarily stop making payments by placing the loan in deferment or forbearance.

Once you begin making payments, the interest will be added to your loan’s principal balance (i.e., the interest will be capitalized). Now, your interest rate will apply to a larger loan balance, and your loan will accumulate more interest each month.

The value of the subsidy

If you borrowed $5,500 during your first term as an undergrad in the 2018-19 school year, you received about $5,441 after paying the disbursement fee. During the following 51 months (45 months at school, plus a six-month grace period), the loan would accrue about $1,168 in interest. (The interest rate for undergraduate loans disbursed for the 2018-19 school year is 5.05%.)

With a subsidized direct loan, your principal balance will be $5,441 at the end of your grace period since the Department of Education pays the interest. But it would be $6,609 if you had an unsubsidized loan, because the interest will accumulate and capitalize.

If you repay the loan using the standard 10-year repayment plan, you’ll pay approximately $6,941 in total for the direct subsidized loan. By contrast, you’ll pay approximately $8,431 in total for a direct unsubsidized loan—a difference of $1,490 for just one year of school.

Rates and fees

For undergraduate students, or students who are enrolled at a community college, trade, career or technical school, the subsidized and unsubsidized loans offer the same interest rate and disbursement fee.

Graduate and professional aren’t eligible for subsidized loans and will receive a higher interest rate on their unsubsidized loans.

Subsidized vs. unsubsidized student loan

Loan type

Borrower type

Interest rate

Disbursement fee

Subsidized

Undergraduate

5.05%

For loans disbursed from Oct. 1, 2017, to Sept. 30, 2018: 1.066%


For loans disbursed from Oct. 1, 2018, to Sept. 30, 2019: 1.062%

Unsubsidized

Undergraduate

5.05%

Oct. 1, 2017-Sept. 30, 2018: 1.066%


Oct. 1, 2018-Sept. 30, 2019: 1.062%

Unsubsidized

Graduate / professional

6.60%

Oct. 1, 2017-Sept. 30, 2018: 1.066%


Oct. 1, 2018-Sept. 30, 2019: 1.062%

What about other types of student loans?

In addition to subsidized and unsubsidized direct loans, students may be eligible for grad PLUS loans or private student loans.

Grad PLUS loans are unsubsidized direct PLUS loans for graduate and professional students. Like other federal student loans, they offer the same fixed interest rate to all borrowers, and charge a disbursement fee that’s taken out of the loan disbursement amount. For grad PLUS loans disbursed from July 1, 2018, to June 30, 2019, the interest rate is 7.60%, a full 1 percentage point higher than unsubsidized student loans.

Unlike with subsidized loans, the education department will review borrowers’ credit reports, and you may not be eligible for a grad PLUS loan if you have an adverse credit history. However, your income and credit score won’t affect your eligibility.

Private student loans are available from a variety of lenders, including banks, credit unions, online-only lenders, states and schools. Private student loans are credit-based loans, meaning your credit history, credit score, income, outstanding debts and other factors may be considered when you apply for the loan.

Each lender may set its own eligibility requirements, and the rates and terms you’re offered can depend on the lender as well as your creditworthiness. Lenders may also have different policies that can impact borrowers who have trouble making payments. Because of this, it’s important to compare private student loan lenders and their loan offers.

Private student loans don’t give borrowers access to federal student loan repayment, deferment, forbearance, forgiveness or discharge programs. Because of this, and due to the underwriting requirements that may lead to much higher interest rates than federal student loans, many borrowers are better off with federal student loans.

Which type is right for you?

Undergraduate students

For undergraduate students who are offered both subsidized and unsubsidized direct loans, starting with a subsidized loan is generally the best option. Although the loan limits are lower than for subsidized loans, the interest rate and disbursement fees are the same and you can save money by avoiding accumulating interest while you’re at school. The subsidy will also help keep your debt from growing if you need to put a loan into deferment in the future.

If you’ve maxed out your subsidized loan limit for the year, in aggregate or due to the time limit, you may still be able to borrow more money with an unsubsidized direct loan. And, if you still have a funding gap, one of your parents may be able to take out a parent PLUS loan or cosign a private student loan for you.

Graduate and professional students

Graduate and professional students aren’t eligible for subsidized loans, but they may be able to take out grad PLUS loans. For these students, the subsidized loans are probably the best option because they have a lower interest rate and disbursement fee than grad PLUS loans.

Students who’ve maxed out their unsubsidized loan limits may then want to turn to grad PLUS loans, which don’t have a preset annual or aggregate loan limit.

Because graduate and professional are more likely to have an established credit history and higher income than undergrads, they may also want to look into different private student loan options. Although private student loans don’t offer as many options to borrowers who have trouble repaying their loans, they may offer you a lower interest rate than federal loans, and generally don’t charge an origination fee.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Louis DeNicola
Louis DeNicola |

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

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College Students and Recent Grads

How to Transfer a Parent PLUS Loan to the Student: Is It Possible?

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you’ve taken out a federal parent PLUS loan to help a child pay for college, you may have already started making loan payments while your child is in school. Or, perhaps you’ve deferred the payment until after graduation.

When you borrow a parent PLUS loan, the money gets sent to your child’s school. However, as the borrower, you are legally responsible for repaying the loan.

Sometimes, a parent and child may have an arrangement where the child starts making payments or reimbursing a parent once he or she can afford it. However, these are informal arrangements and don’t reflect the legal liability that you have as the borrower. If you want the child to take on full responsibility for the loan, you’ll have to figure out a way to transfer the debt to the child’s name.

Can a parent PLUS loan be transferred to the student?

Yes, transferring a parent PLUS loan to a child is possible. However, the U.S. Department of Education, which issues parent PLUS loans and lends money to students for educational costs, doesn’t offer a way to transfer a parent PLUS loan.

Even if your child has his or her own student loans and is making monthly payments to the same loan servicer that you’re working with, there’s no way to transfer the parent PLUS loan to the child within the federal student loan system.

To transfer the debt, the child will need to qualify for and take out a loan from a private lender and then use the money to pay off the parent PLUS loan. The new loan doesn’t have to be a student loan. Children could take out a personal loan or use a cash-out refinance if they own a home, and then give the money to a parent to pay off the parent PLUS loan.

But there are student loan refinancing companies that let borrowers refinance a parent PLUS loan into the child’s name. The loan may remain a qualified educational loan, which means eligible borrowers may be able to deduct up to $2,500 in interest payment from their taxes each year. The refinancing company will also generally pay off the other student loans directly, rather than sending the borrower cash.

Steps for children who want to take over parent PLUS loans

If you’re a student or former student who wants to transfer a parent PLUS loan to your name, refinancing the loan with a private student loan refinancing company could your best option.

You can choose which loans you want to refinance, including some of your own student loans. Refinancing could even save you money if you can qualify for a lower interest rate, and combining multiple loans into one new loan can make managing your loans easier.

However, carefully consider your options before refinancing your federal student loans. After refinancing, your new private student loan won’t be eligible for federal repayment, assistance and forgiveness programs.

Whether or not you want to refinance your own loans, if you’re looking to transfer a parent PLUS loan, consider taking these four steps:

1. Review your budget

Refinancing your student loans could lead to lower monthly payments if you’re only refinancing your own loans. However, if you’re taking on additional debt by adding in a parent PLUS loan, your monthly payments may increase. You can use a student loan refinance calculator to estimate the change in your monthly payment amount.

Consider how your new monthly payments will impact your budget, and whether you’ll still be able to cover all your living expenses. If you don’t think you can afford all the payments, you may not want to transfer the parent PLUS loan.

2. Find lenders that offer parent PLUS loan transfers

Many lenders offer student loan refinancing, but some lenders only let your refinance your own student loans. If you want to transfer a parent PLUS loan, you’ll need to find lenders that let you include a parent PLUS loan into the child’s new loan. For example, CommonBond, SoFi and Laurel Road — some of the top private student loan refinancing companies — all offer parent PLUS refinancing that transfers the debt to the student.

3. See if you’re eligible

Once you’ve identified a few lenders that let you transfer parent PLUS loans, review their basic eligibility criteria to see if you’ll qualify for refinancing.

Your citizenship status, state of residence, whether you received a bachelor’s degree and how much debt you’re refinancing could impact your eligibility. Your monthly income could also be a factor, as lenders want to be certain you can afford your loan payments.

Additionally, your credit history and score can determine whether a lender will approve your loan application and the terms it offers. Some lenders offer a soft credit preapproval, which lets you see if you qualify for refinancing and your estimated loan terms without affecting your credit score. With others, you won’t know what terms you’ll get until you apply.

You could check your credit score for free online to help estimate your chances of getting approved. Although lenders may use different credit scoring models to evaluate applicants, and a credit score isn’t the only important factor, you may need a minimum score of around 660-680 to qualify for refinancing from some of the top lenders.

You also may want to review your credit reports for negative marks. For example, regardless of your score, some lenders may not approve your application if you have recent collections accounts or a bankruptcy on your credit reports. You may need to wait until the negative items fall off your reports (which can take seven to 10 years), and can focus on building a good credit history with on-time payments.

4. Compare your loan offers and complete a loan agreement

Once you have a list of lenders that you think may be a good fit, you could start submitting applications.

When you submit a complete application for student loan refinancing, the resulting hard inquiry on your credit report could have a small, negative impact your credit score. And multiple inquiries can sometimes increase the damage. However, multiple hard inquiries from student loan applications that occur within a 14-day period (depending on the type of credit score) only count as one inquiry for scoring purposes. Therefore, shopping lenders and comparing offers during a short period could help you secure the lowest rate possible without causing excessive damage to your credit.

Once you figure out which offer is best, and if you decide to move forward, you’ll need to complete the application process. You may need to upload verification documents, such as recent pay stubs, tax returns or a job offer to verify your income. You’ll also have to sign the loan agreement, which you may be able to do electronically.

The private lender will then generally send payments to your loan servicer as well as your parent’s loan servicer to pay off those student loans. You should both continue making payments as usual until you’ve confirmed the original loans were paid off.

Pros of transferring your parent PLUS loans

Transferring your parent PLUS loan to a child may offer several benefits for both parties.

The debt will no longer impact the parent’s eligibility for financing. Decreasing the debt that’s in the parent’s name will lead to a lower debt-to-income ratio, which can help the parent qualify for loans and lines of credit at lower rates.

The child may be making the loan payments anyway. If you have an informal agreement that the child makes the loan payments or reimburses the parent, transferring the parent PLUS loan will let the legal responsibility match your arrangement.

The child can build credit. After transferring the loan, the child can build his or her credit by making on-time loan payments. However, a late payment could now hurt the child’s credit.

The loan’s interest rate could drop. Depending on the loan offers that the child receives, the refinanced loan could have a lower interest rate. A lower rate could lead to lower monthly payments and long-term savings.

Cons of transferring parent PLUS loans

There are also potential drawbacks to transferring your parent PLUS loans. Consider these carefully, because you can’t undo the transfer once it’s complete.

The borrower loses access to federal programs. Private student loans aren’t eligible for federal repayment plans, forgiveness programs or forbearance and discharge options. Therefore, if you’re having trouble making payments, you may have fewer options when dealing with your private lender.

The child might not qualify for a good rate. If the child doesn’t qualify for an equal or lower interest rate, the long-term cost of repaying the loan could increase. When there isn’t a pressing reason to transfer the loan, you may want to wait to refinance while the child builds their credit.

Additional parent PLUS loan repayment options

If your child doesn’t qualify to refinance the parent PLUS loan in his or her name, or you decide against the transfer for another reason, there still may be other options for your loan.

Consider a different federal repayment plan

If you’re struggling to afford monthly parent PLUS loan payments, you may want to consider switching your repayment plan. The graduated plan starts with a lower rate, which usually increases every two years. There’s also an extended plan, which increases your term to 25 years, versus 10 with the standard or graduated plans, and leads to a lower monthly payment (but more interest paid over time).

Parent PLUS loans borrowers are also eligible for the income-contingent repayment (ICR) plan, if you first consolidated your parent PLUS loan (or loans) into a federal direct consolidation loan. The ICR plan will adjust your monthly payments based on your discretionary income, and any remaining balance will be forgiven after you make payments for 25 years. You may, however, have to pay income taxes on the forgiven amount.

Look into federal forgiveness and discharge options

Parent PLUS loans are eligible for some of the same federal cancellation and discharge programs as federal student loans lent directly to students. For example, the debt may be discharged if your child’s school closed and he or she wasn’t able to complete the program.

You could also get part of the loan forgiven through the Public Service Loan Forgiveness. You’ll need to consolidate your loan and switch to the ICR plan specifically. To qualify, you (not your child) must work for an eligible employer, such as a government or nonprofit tax-exempt 501(c)(3) organization, and make 120 qualified monthly payments.

Additional student loan forgiveness or repayment programs

There are a variety of federally funded and private student loan repayment assistance (LRAP) programs that could also help you with your loan. Many of these programs are targeted at people in specific professions, such as those who work in health care, law or the military. And there may be additional requirements to work in high-need areas. Depending on the program, you may receive an additional signing bonus or annual stipend that will be sent to your loan servicer to repay your student loan.

Refinance the loan in your name

Just as your child may be able to refinance his or her student loans, you may be able to refinance your parent PLUS loan with a private lender. You may be able to qualify for a lower interest rate or change your loan term, which could lower your monthly payment and may save you money over the lifetime of your loan.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Louis DeNicola
Louis DeNicola |

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

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College Students and Recent Grads

Education Loan Finance: Student Loan Refinance Review

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

As long as you qualify to refinance your student loans, you may be able to combine multiple student loans into one new loan, lower your interest rate and decrease your monthly payment. Doing so could save you money and make it easier to manage your loans. But remember, if you want to refinance your student loans, you can shop around to make sure you find the best deal.

Student loan refinancing companies may offer you different interest rates, loan terms and benefits, which is why it can be important to compare lenders before deciding which one to use.

What is Education Loan Finance?

In 2012, SouthEast Bank was bought by Education Services of America (also known as Edsouth Services), a nonprofit that’s been in the student loan space for 30 years. SouthEast Bank went on to create Education Loan Finance, or ELFI, a division of SouthEast that offers student loan refinancing. ELFI is based in Knoxville, Tenn., which is also where the customer service representatives are based.

ELFI prides itself on its decades of experience in the student loan industry and the positive reviews it receives from borrowers. It has a student loan refinancing product for graduates, and for parents who took out federal student loans to pay for their child’s education. The program we’re reviewing here is for students who are refinancing their loans.

Education Loan Finance student loan refi in a nutshell

Fixed APR range

3.09% to 6.69%

Variable APR range*

2.69% to 6.01%

Loan terms offered

Five, seven, 10, 15 and 20 years

Fees

The are no application, origination or prepayment fees.

The late fee is the lesser of $50 or 5% of the amount past due.

There’s a $30 returned check or insufficient funds charge.

Maximum loan amount

You must refinance at least $15,000 in student loans. The maximum loan amount varies by applicant.

Cosigners

You can apply with a cosigner.

You can reapply to refinance the loan in your name and release a cosigner.

Savings opportunities

None

Other perks

ELFI will mail you a $100 bonus if you accept your loan offer within 30 days of your application date.
You can earn $400 for referring new ELFI customers.

*Although the interest rate will vary after you are approved, the interest rate will never exceed 9.95% for the 5-year, 7-year, 10-year, 15-year, or 20-year term.

What it takes to qualify with Education Loan Finance

Credit score

680

Income/employment

You or your cosigner must make at least $35,000 a year.

Loan types

  • Federal and private student loans

  • Parent PLUS loans that were taken out to pay for your education.

School/state eligibility

You must graduate with at least a bachelor’s degree from one of the approved post-secondary institutions.

Available to residences of every state, Washington, D.C. and Puerto Rico.

How Education Loan Finance compares with other lenders

You may find that there are a lot of different lenders that offer student loan refinancing. ELFI stands apart from some of the other top lenders with its relatively low interest rates and somewhat strict eligibility requirements.

In general, if you can qualify, ELFI may be one of the better options because the lender doesn’t seem to sugarcoat its offering. For example, ELFI doesn’t offer an interest rate discount if you sign up for automatic payments. Other lenders may offer you a discount, such as 0.25% off your interest rate, while you’re using autopay — and they may advertise this lower rate on their website.

While the lack of a discount may sound like a drawback, it isn’t necessarily a bad thing. If ELFI approves you for a lower rate than other lenders, then you’ll receive this lower rate whether or not you use autopay.

There are other potential advantages and drawbacks to consider as you’re comparing lenders.

Advantages of refinancing with Education Loan Finance

Soft credit pull preapproval. You can check your eligibility and get estimated loan rates with a soft credit check, which won’t hurt your credit score.

Open to residents of every state. While other lenders aren’t able to offer refinancing to residents of some states, ELFI’s refinancing is available to everyone in the U.S.

You can include multiple types of student loans. ELFI lets you combine your federal and private student loans. You can also include a parent PLUS loan, as long as your parent took out the loan to pay for your education.

Forbearance option. You may be able to put your loans in forbearance and temporarily stop making payments for up to 12 months. Eligibility is handled on a case-by-case basis.

Up to a 20-year loan term. ELFI offers five loan terms with both its variable- and fixed-rate loans. While the longest, a 20-year term, may lead to paying more interest over your loan’s lifetime, it may also lower your monthly payment. Having that option is a plus because some lenders don’t offer a 20-year term.

Bonus opportunities. ELFI offers three potential bonuses: a $100 bonus if you’re referred by an ELFI borrower, an additional $100 bonus if you accept a loan within 30 days of submitting your first application and $400 for each new ELFI borrower you refer.

Drawbacks of refinancing with Education Loan Finance

You must earn at least a bachelor’s degree. Other lenders may let you refinance your student loans once you earn an associate’s degree, or if you didn’t graduate.

No cosigner release option. If you add a cosigner to help you qualify for refinancing, or secure a lower interest rate, you may want to remove the cosigner later. Some lenders let you apply for a cosigner release (removing the cosigner without refinancing) after making a series of consecutive on-time payments. While you may need to agree to a credit check and meet all the requirements to take over the loan on your own, you’d keep the original loan terms if you qualify. ELFI does not offer such a cosigner release option.

The only way to remove a cosigner from an ELFI loan is to refinance again, without a cosigner. However, interest rates may have risen since you originally refinanced.

There isn’t a clear policy for death or permanent disability discharge. Some other lenders will always discharge the remaining loan balance if the borrower dies or becomes completely and permanently disabled. ELFI doesn’t have a clear policy and handles situations on a case-by-case basis.

Relatively high minimum credit score requirement. ELFI requires a 680 credit score, which is in line with some other refinancing companies, but a bit higher than a few other lenders that only require a 660 to qualify.

Relatively high minimum income requirement. ELFI requires you, or your cosigner, make at least $35,000 a year to qualify for refinancing. Some lenders only require a $24,000 a year income or don’t have an explicit minimum income requirement.

$15,000 minimum loan requirement. Other lenders may let you refinance as little as $5,000 in student loan debt, but ELFI requires you to refinance at least $15,000.

Who is Education Loan Finance best for?

Since it won’t hurt your credit, there’s no downside to applying for preapproval with ELFI to see if you qualify and check your estimated rates. Even so, the lender may be a better fit for some types of borrowers.

Creditworthy applicants with a high income relative to their debts may pass the eligibility requirements and lock in one of ELFI’s low interest rates. These types of applicants may get the best rates from many student loan refinancing lenders, but they they may not be eligible with other lenders based on where they live or which loans they want to refinance.

ELFI may not be the best option if you need a cosigner because it doesn’t offer a cosigner release, unless you reapply for refinancing again with either ELFI or a different lender. It also might not be a great fit for those who don’t have a lot of outstanding private student loan debt.

Borrowers may want to only refinance their private student loans to avoid losing the benefits on their federal student loans. But ELFI’s $15,000 minimum threshold could be difficult to reach with just your private student loans.

Education Loan Finance

LEARN MORE Secured

on Education Loan Finance’s secure website

Taking a closer look at the online platform

Education Loan Finance’s website is intuitive to navigate and focused on its student loan products. There are pages devoted to each product, a few pages about the company or recent company-related news, a blog with personal finance posts and a page with testimonials.

There is also a calculator, several checklists that you can review to see if you’ll be eligible for refinancing and to prepare for the application process and an FAQ page. The FAQ page is broken down into six sections, ranging from general questions to sections about rates or the ELFI bonus programs.

Starting an application is also simple — we detail the process below — and if you want to take a break and start again later, you can log in to your account and pick up wherever you left off.

The fine print

There are a few fine-print items that were fairly easy to find on ELFI’s website. There’s a page with a list of the approved postsecondary schools, as well as a document checklist you can reference to see what you should gather before applying.

The terms page is also helpful, as it has an overview of the potential loan fees, interest rate amount, variable-rate interest rate cap, eligibility requirements and repayment options.

However, there were also a few fine-print items that were difficult to find on the website. A representative from the company confirmed the 12-month potential forbearance period and the case-by-case nature of the death or permanent disability discharge.

What to expect during the application process

ELFI’s online application process straightforward, and you may be able to complete it in just a few minutes.

Create your account

You’ll need to create an account to start your application. After entering your name, email address and password, you’ll be sent an email with a verification code. Submit the code, and you can then fill out your profile with your:

  • Name, address, date of birth and citizenship status
  • The school you attended, highest degree you attained and date of graduation
  • Your Social Security number
  • Whether you own a home, rent or live with family, as well as your monthly housing expense
  • Your gross income
  • The loan amount you’re requesting

You also must agree to a soft credit pull and read the Education Loan Finance’s communication policy before continuing.

Choose a loan term

If you qualify for preapproval, you can now choose between a fixed- or variable-rate loan with a term of either five, seven, 10, 15 or 20 years. You’ll see an estimated interest rate and monthly payment for each loan type.

The final loan offer may vary from these preapproval rates, and you can choose a different interest-rate type and loan term later if you want.

Complete your profile

The next step is to complete your profile by entering your mailing address and choosing three security questions and answers.

Read the loan disclosure forms

There are three loan disclosure forms you must read, and acknowledge that you read, before continuing:

  • The federal loan disclosure form goes over the differences between federal and private student loans.
  • The application disclosure fixed-rate form discusses the fixed-rate loan that Education Loan Finance offers. It will tell you your potential interest rate range, the fees associated with the loan and eligibility requirements, and it has examples of repayment times and amounts.
  • The application disclosure variable rate form is similar to the fixed-rate form, but for Education Loan Finance’s variable-rate loans.

Apply for refinancing

Once you reach this point, you can complete the official application for refinancing. Some of the information will be filled in for you based on what you’ve already entered.

  1. Borrower information. Much of this section will be filled in already, but you may need to add your driver’s license number/state and how long you’ve lived at your current address. If you’ve lived there for fewer than two years, you’ll also need to add your previous address.
  2. Reference information. You need to have two references who are at least 18 years old, don’t live with you and aren’t your cosigner. You’ll have to share the reference’s name, email address, phone number, mailing address and how you know the person.
  3. Employment information. Choose your employment status and then complete the related information about your employer, or how long you’ve been unemployed or retired. If you’re employed, you’ll also be asked to share the company’s address, how many years you’ve worked for the company and your income. You can also add additional sources of income, which may help you qualify for refinancing.
  4. Review application and approve hard credit pull. The fourth step asks you to double-check all your information and then authorize a hard credit pull. A hard pull could affect your credit score.
  5. Student loan information. You’ll need to share information about the student loans that you’re refinancing and may need to upload copies of recent billing statements or payoff letters. The documents should show the loan servicer’s name and address, your account number and the current balance or payoff amount.
  6. Rates. Choose the interest rate type and loan term that you want for your new loan.
  7. Documents. The documents step is where you’ll find copies of the disclosures you previously read. This is also where you can upload additional documents, such as pay stubs or tax returns to verify your income, or a copy of a government-issued ID to verify your identity.

Once you finish the seven steps, ELFI can use the documents you uploaded to verify your eligibility for the loan you chose. You can then sign the promissory note for the new loan to complete the process.

It can take about 30 to 45 days for your current loan servicer(s) to receive the payments for your student loans. You should continue making your loans payments as usual during this period to avoid missing a payment. And don’t worry, if you overpay your loan, the overpayment will decrease your loan balance with ELFI.

If you refinance with ELFI, a company named MOHELA will service your loan. MOHELA should reach out to you so you can set up an account, and you’ll send your monthly payments to MOHELA.

How to compare student loan refinance companies

There are many factors to consider when comparing student loan refinancing companies. The most important ones may be the eligibility requirements so you can rule out potential lenders, and the interest rates that the lenders offer you. The lower your interest rate, the greater your potential savings.

However, there may be other details to compare as well. For example, some lenders may not offer a 20-year term, which you may want if you’re looking to lower your monthly payments. And there are lenders, including SoFi and CommonBond, that give borrowers extra perks, such as invitations to exclusive events.

You can quickly compare lenders’ maximum loan terms, interest rate ranges, maximum loan amounts and transparency scores on MagnifyMoney.

But determining which lender is best for you depends on your circumstances. Once you find a few lenders you think may be a good fit, look to see if they offer a soft credit check preapproval so you can compare estimate interest rates.

Once you’re ready to refinance, submit applications to all the lenders on your short list. Although each application could result in a hard inquiry, which may hurt your credit score, multiple student loan inquiries won’t increase the impact if they occur within a 14-day period. Some, depending on the credit-scoring models, offer a longer “rate shopping” period, but to be safe, it’s a good idea to shop around in as short a period as possible.

After completing the applications, you can compare the official loan offers from each lender and decide which option is best. If you want to see how the different loan offers may affect your savings, you can plug the numbers into our student loan refi calculator.

 

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Louis DeNicola
Louis DeNicola |

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

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College Students and Recent Grads

The Ultimate Guide to Paying Off Big Grad School Loans

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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A graduate degree can open up new doors and may lead to higher annual earnings. But earning a degree generally isn’t cheap.

According to the College Board, as of the 2016-2017 academic year, the average graduate student borrowed $42,710 in federal student loan to pay for that year’s schooling — more than six times the $6,590 that the average undergrad borrowed. (Although, on average, parents also borrowed $15,880 to help pay for a child’s undergraduate education.)

And that’s not including any private loans students may have obtained along the way. By the time graduate students finish their degree, they may have a combination of undergraduate and graduate student loans to repay.

Tackling these student loans can be a daunting task, but having a plan could help diminish some of the fear or anxiety that may arise. Here’s a guide to help you navigate the process. You may even learn a few tips or strategies that could save you money or make your monthly payments more affordable.

Get organized and understand your grad school loans

Getting a clear understanding of all your student loans can be an important first step. You may want to start listing your student loans alongside important information for each loan.

Write down the name of the loan servicer, the loan type, the loan amount, remaining amount due, your monthly payment, the loan’s interest rate and whether the loan has a fixed or variable interest rate. Using a spreadsheet could be helpful, as you can then quickly arrange the loans by different criteria, such as the remaining amount due or interest rate.

You may then want to separate your loans into two groups — federal and private student loans — and further separate your federal loans by the federal loan type. These can be important distinctions and you may want to take different approaches to different types of loans.

The different types of student loans

You may have one or more of the following types of student loans:

Private student loans. A variety of institutions offer private student loans, including banks, credit unions, schools, states and online lenders. If you applied for a student loan without first filling out the Free Application for Federal Student Aid (FAFSA), then you took out a private student loan.

Some private student lenders outsource their loan servicing to a third party and the company you make your monthly payments to may not be the same company that lent you the money. You may need to contact that loan servicer, review a recent statement or check your account online to get information on your private student loans.

Federal student loans. The Department of Education offers federal student loans to undergraduate and graduates students, as well as parents of students. The federal government funds the loans, and there have been several different federal student loan programs over the years.

You may have different types of federal loans, including ones from your undergraduate degree. Some of the federal student loans also go by several names. Your loans could include:

  • Direct loans, which may be direct subsidized loans, direct unsubsidized loans, direct consolidation loans, and direct PLUS Loans (also known as grad PLUS loans when offered to a graduate or professional student).
  • Perkins loans
  • Federal Family Education Loan (FFEL), which may include subsidized and unsubsidized Stafford loans, FFEL PLUS loans, and FFEL consolidation loans.

Your federal student loans may be serviced by one or more of the 10 loan servicers that the education department contracts to collect payments. However, you can log into the National Student Loan Data System (NSLDS) to get an overview of all your federal student loans.

Know your options

Once you’ve got your loan information organized, learn about your options for loan forgiveness and repayment. You may be able to use one or more of the programs below to help manage your payments and ultimately get rid of your graduate school debt.

Federal student loan forgiveness programs

Several loan forgiveness programs are exclusively for federal student loans. However, your eligibility may depend on the type of federal loan you have, and you may need to meet other requirements to qualify.

For example, the federal Public Service Loan Forgiveness (PSLF) is only available for direct loans. With PSLF, you’ll have to make 120 qualifying monthly payments while working full time at a qualifying employer to get the remainder of your direct loan forgiven. Our guide to applying for PSLF has more details on determining if your loans qualify and how to get started.

Consolidate your federal loans

You may be able to consolidate your federal student loans into a direct consolidation loan. Consolidation lets you combine multiple loans into a new loan that’s part of the direct loan program.

Consolidating your loans may not save you money because the new loan has the weighted average interest rate of your existing loans. In some cases, since your loan term could be extended, it may even result in you paying more in interest over the lifetime of the loan.

However, consolidation could make managing your loans easier since you’ll have fewer monthly payments to manage, and it could give you access to repayment plans and forgiveness or cancellation programs that are only available to direct loans.

Federal repayment plans

Although you may wind up paying more in interest in the long run, switching repayment plans could lower your monthly payments and make managing your finances a little easier.

Student loans start with a 10-year standard repayment plan. You could change to a graduated repayment plan, which also has a 10-year term but the payments start low and gradually increase. The extended repayment plan, which has a 25-year term, is another option.

There are also income-driven repayment plans that base your monthly payment amount on how much money you earn. An income-driven plan could greatly decrease your monthly payments if you’re not making a lot of money. Plus with four of the plans, the education department will forgive your remaining balance after you make payments for 20 or 25 years on an income-driven plan.

Career-based forgiveness programs

You may be eligible for a variety of loan forgiveness or repayment programs from government or private organizations. Unlike the federal forgiveness programs, your private student loans may also be eligible for some of the programs.

The career-based programs can help you repay undergraduate and graduate degree loans, but they are generally limited to a few qualifying professions, some of which require an advanced degree. These are often service-oriented jobs, such as teachers, attorneys, military members and healthcare professionals.

You may also need to work in a high-need area, such as a federally designated health professional shortage area, for at least a year to qualify for loan repayment assistance.

Employer-based repayment programs

Some employers offer student loan repayment assistance programs (LRAPs) as an employee benefit. The specifics of the programs and the amounts vary, but some employers offer monthly payment toward your private or federal student loans.

Design your repayment road map

Once you know your options, you can start designing your plan for repaying grad school loans and any remaining undergrad debt. Here are a few of the questions you may want to ask yourself:

Which loans should you try to pay off first?

If you’re focused on paying off your graduate student loan debt ahead of schedule, you may want to organize your loans based on which one you want to pay off first.

For example, you could try to pay off the higher rate loans first, which could save you money on interest in the long run. Or, you may want to focus on your private student loans first, since those generally offer fewer options to borrowers who are having trouble making payments.

Should you consolidate your federal student loans?

Consolidating your federal student loans could be a good first step, but there are several pros and cons to consider.

Pros to consolidating your federal loans

  • It may be easier to manage your monthly loan payments if you only have one loan.
  • You can choose your new loan servicer.
  • Non-direct loans, such as FFEL loans, could be eligible for PSLF after consolidation.
  • The consolidated loan may be eligible for more income-driven repayment plans than your previous loans.
  • You may be able to take a loan out of default by consolidating it.
  • The consolidated loan will have a fixed interest rate (some previously issued federal student loans had variable rates).

Cons to consolidating your federal loans

  • If you consolidate all your federal loans, you won’t be able to make extra payments on the loan that has the highest interest rate.
  • You may lose progress you’ve made toward a federal loan forgiveness program.
  • If you consolidate all your loans, and then default on your loans, you won’t be able to consolidate again to take them out of default.
  • Consolidating could increase your loan term, and may lead to paying more interest over time, unless you make more than the required monthly payments.
  • You may lose interest rate discounts or rebates that you had on your loans.

Consider the pros and cons, as well as your circumstances, before rushing to consolidate your federal student loans. You can also pick and choose which loans you want to consolidate. For example, you could only consolidate your relatively low-interest-rate loans. Then, you can still make extra payments on your higher-interest loans.

Does it make sense to refinance any loans?

Private lenders offer student loan refinancing, which involves taking out a new loan to pay off one or more of your existing student loans. Depending on the lender and your creditworthiness, you may be able to qualify for a lower interest rate, which could save you money.

Even if you considered refinancing in the past, and weren’t able to get a good rate, you may want to revisit the option. Your credit score may have risen if you’ve been making your credit card and loan payments on time, and your debt-to-income ratio may be lower if your graduate degree helped you secure a higher paying job. Both of these factors can help you qualify for a better rate.

When you refinance, you can often choose your new loan’s term. A longer term can lead to lower monthly payments, but also paying more in interest over the lifetime of the loan. A shorter term could help you get a lower interest rate, but your required monthly payments could increase.

Keep in mind, there’s no prepayment fee for student loans. So, even if you refinance with a longer term and have a lower required monthly payment, you could pay extra and repay your loans early.

Your new loan may maintain its status as an educational loan, which means you may still be eligible for a tax deduction. However, once you refinance a student loan, it will be a private student loan. As a result, the loan won’t be eligible for any of the federal loan forgiveness, cancellation, discharge or repayment programs.

One option could be to only refinance your private student loans. Or, you may find it makes sense to refinance a few federal loans that have a higher interest rate, such as your grad school loans, while leaving other federal loans untouched.

If you do decide to refinance your student loans, comparing lenders can be a good idea since different lenders may offer you different interest rates, loan terms and benefits.

Strategies for getting ahead of graduate student debt

Being proactive and following through on your road map could help you repay your loans early. Here are a few strategies and tips that could help:

Create a budget and look for ways to save

A budget is a tally of your income and expenses broken down by category, and many free and inexpensive apps can help you with the tracking and organization. Knowing where your money comes from and goes to each month can be an important step in getting your finances in order, and may provide insights into savings opportunities.

For instance, you may find that you’re spending a lot of money eating out each month or paying for subscription services you rarely use. Cutting back on these expenses could help you free up money that you can then put toward your student loans.

Increase your income: negotiate a raise, change jobs or find a side gig

While saving money can help you pay down loans, there’s usually a limit to how much you can cut back. On the other hand, you may be able to greatly increase your income, maintain your standard of living and make big strides in paying down your debt.

While it’s not necessarily a quick or simple process, negotiating a raise is one way to increase your income. Alternatively, you may be able to get a higher pay increase if you’re open to changing companies or finding a new job in your field.

In the meantime (or in addition) you could get a side gig to earn extra money. There are a number of opportunities, ranging from turning a hobby into a source of income, to using one of the many “sharing economy” apps. You also may be able to leverage the specialized knowledge you obtained while earning your graduate degree, and use the side gig experience to build your resume or help make your case for why you deserve a raise.

Make (targeted) extra payments

Research how your student loan servicer will apply additional payments to your loans before you send a payment. Some servicers may split the payment amount between all your loans or use the money to prepay next month’s bill unless you specify how you want them to apply the payment. And, even if you don’t owe anything next month, they may still withdraw money from your account if you signed up for autodebit.

Whether you’re paying extra each month, or get a large gift, bonus or tax refund that you want to use to repay student loans, you want to make sure the payment aligns with your strategy. Ask your loan servicer how you can ensure this happens, and check your loan balances after you send in payments to make sure they were applied correctly.

Ask for help if you are struggling

While your aim may be to quickly pay down your grad school loans, you could find yourself falling behind on payments or struggling to meet all your financial obligations. If this happens, reach out to your student loan servicer and ask about your options.

You may be able to switch repayment plans, or the servicer may allow you to temporarily stop making payments while you get your finances in order. However, if you miss a payment, you may wind up having to pay late fees and hurting your credit.

Keep your entire financial situation in mind

You might be focused on paying off your grad school debt as quickly as possible, and that’s a commendable undertaking. However, consider your grad school loans within the context of your entire financial situation.

In some cases, you may want to start by paying down other, higher interest debt before your student loans. Doing so could free up the money you’d been spending on interest payments, which you can then use to pay off your student loans.

Building an emergency fund could also be a priority, as it can help you weather a financial setback without having to take on additional high-interest debt.

Advertiser Disclosure: The card offers that appear on this site are 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 card companies or all card offers available in the marketplace.

Louis DeNicola
Louis DeNicola |

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

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