Editor's Note: Since the writing of this article, the federal student loan payment pause has been extended into 2023 as the Supreme Court decides whether the Biden-Harris Administration’s Student Debt Relief Program can proceed. The U.S. Department of Education announced loan repayments may resume as late as 60 days after June 30, 2023.
Wondering how to handle your student loans? Knowledge and a solid plan are powerful — especially when it comes to your loans. The first step in managing student debt is to know how much you owe and keep tabs on the terms.
Then, take a look at loan forgiveness options. With an understanding of how much you owe, you can make progress toward repaying your debts.
5 Things to Help Manage Student Debt
These five high level tips can help you figure out how to handle your student loans. If you’re looking for more in-depth information, SoFi offers a full library of student loan resources with tips and strategies to help you deal with your student loans.
1. Know What You Owe
The first step in tackling your student loan debt is knowing exactly how much you owe, and the terms associated with each loan. It can be scary to meet your loan debt head-on, but you can’t take steps to get out of debt until you know exactly how much you owe.
This can help inform how much you’ll pay each month and how long it will take to pay off your debt. SoFi’s student loan payoff calculator will give you an idea of your loan payoff date.
If you aren’t sure, find out if you have a combination of federal and private student loans. Confirm your loan servicer and identify the monthly due dates for loan payments. Federal student loans come with some benefits like a six-month grace period and protections like deferment options. SoFi’s student loan help center has additional resources detailing the differences between private and student loans and much more.
2. Find Out If You Qualify for Biden’s Loan Forgiveness Plan
In August 2022, President Biden announced his loan forgiveness plan. He also announced the final extension of the pause on student loan payments that has been in effect since the beginning of the COVID-19 pandemic. Federal student loan payments are set to resume in January 2023.
Under Biden’s forgiveness plan, federal student loan borrowers earning up to $125,000 (as individuals) or $250,000 for those filing jointly may qualify for up to $10,000 in forgiveness. Pell Grant recipients may qualify for up to $20,000 in forgiveness.
Amounts forgiven under this plan will not be considered taxable on the federal level. Some states have announced that they will charge income tax on forgiven amounts.
The application is expected to go live in October 2022. Borrowers can make sure that their contact information is accurate in their Student Aid account to receive updates. You can also opt in for text alerts here.
The application for loan forgiveness will be open until December 2023.
Private student loans do not qualify for federal loan forgiveness programs.
3. Choose a Payment Plan
Federal student loan borrowers can change their repayment plan at any time without incurring any fees. Here’s a brief overview on the different types of plans:
• Standard Repayment Plan spreads payments evenly over 10 years. The extended plan.
• Graduated Repayment Plan. On this plan payments start lower and then gradually increase over time. Repayment takes place over 10 years.
• Extended Repayment Plan can have either fixed or graduated payments and repayment takes place over 10 years.
• Income-Driven Repayment Plans. There are four types of income-driven repayment plans that tie a borrower’s income to their loan payments. Repayment takes place over 20 or 25 years. At the end of the repayment period, the remaining balance is forgiven (though this amount may be taxable).
This may also be a good time to evaluate whether or not you want to pursue a loan forgiveness plan like the Public Service Loan Forgiveness program. Individuals who work for a qualifying nonprofit may qualify to have their loans forgiven after making 120 on-time payments. Amounts forgiven under PSLF are generally not considered taxable income.
Consider Student Loan Refinancing
If you have private student loans, the repayment terms for them were likely set at the time you borrowed the loan. Student loan refinancing is one option that could allow you to adjust the terms on your loans. Keep in mind that extending your loan terms generally results in lower monthly payments, but may increase the amount of interest you owe over the life of the loan.
Unlike consolidation through the federal government, a borrower may secure a more competitive interest rate through refinancing which could potentially reduce the amount of money a borrower owes over the life of their loan. Learn more about consolidating vs. refinancing.
If refinancing is intriguing, you can take a look at this student loan refinancing calculator to see how your loan may change if you refinance. Note that refinancing federal loans will eliminate them from any federal benefits or programs, including forgiveness programs.
4. Automate Loan Payments
Setting up automatic payments with your loan servicer is one of the easiest ways to make sure you never miss a payment. Most loan servicers will let you set up automatic payments within your account online. If you’re having trouble, contact your loan servicer.
5. Make a Big Picture Budget
It’s easy to get tunnel vision when you are so focused on student loan repayment. So keep in mind that student loans are only part of your overall financial picture.
Take the time to budget and make room for other financial goals, like saving for retirement. In addition to budgeting monthly for food, entertainment and utilities, you might have a car loan and rent or a mortgage to pay. Personal finance tools like SoFi Relay can help you track your spending and income, so you can stay on top of your financial goals.
Recommended: Student Loan Refinancing Guide
Not all accounts are free by any means, but SoFi Checking and Savings® has no account fees. It’s a bank account online that offers cash-back rewards. Money can be tucked into vaults for goals or an emergency fund. Checks can be deposited from your phone, and more.
Ready for a Better Banking Experience?
Open a SoFi Checking and Savings Account and start earning 1% APY on your cash!
How to manage student loans? The first priority is knowing exactly what you owe. Choose the repayment plan that works for you, and take advantage of Biden’s recently announced loan forgiveness program if you qualify.
You can always reevaluate your current pay-off strategy or loan terms. Some may find that refinancing — combining all loans into one new private loan, with a new, hopefully, lower, interest rate and/or new term — may make sense for their personal situation.
If refinancing student loans seems appealing, it’s easy to check your rate. When you sign up for any SoFi product and become a member, you gain access to a range of exclusive SoFi member benefits like career coaching.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
CLICK HERE for more information.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.