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The reality is that, much like that red wine stain on the rug, Sallie Mae student loans aren’t likely to evaporate into thin air. That’s because Sallie Mae is a private lender now.

And despite what you may have heard, there is currently no such thing as private student loan forgiveness.

Forgiveness is limited to federal education loans, and even then, the options are few. There are federal student loan forgiveness programs for those who go into public service or teaching. But other than that, it’s extremely difficult to cancel student loans.

Table of Contents

•   Can Older Sallie Mae Loans Be Forgiven?

•   What If You Don’t Qualify for Loan Forgiveness?

•   Are There Alternatives to Private Student Loan Forgiveness?

•   Can You Refinance Sallie Mae Student Loans?

Can Older Sallie Mae Loans Be Forgiven?

If you’re confused about whether your Sallie Mae loans are private or federal, it may be because the company has evolved over the years.

Though Sallie Mae, aka the SLM Corp., no longer services federal loans, that wasn’t always the case.

Sallie Mae was created in 1972 as the Student Loan Marketing Association, a government-sponsored enterprise that serviced federal education loans. Even though it became fully privatized in 2005, the company continued to service federal loans made under the Federal Family Education Loan (FFEL) Program until that program ended in 2010. Then, in 2014, Sallie Mae split into two companies: SLM Corp. and Navient Corp and shifted all its federal student loans to Navient.

So, if you have an older loan — one that originated before 2014 — it may have been a federal loan that started out with Sallie Mae and then moved on to Navient. And if that’s the case, you may be able to apply for Sallie Mae loan forgiveness.

Applying can be complicated, and you may have to consolidate your loans into a Federal Direct Consolidation Loan as part of the process.

You can see if your old debt is a federal education loan by visiting the Federal Student Aid website. If it is, and you want to seek loan forgiveness, you’ll eventually make your application to the government.

Keep in mind that Navient shifted federal student loan accounts to Aidvantage, a division of Maximus Federal Services, after Navient cut ties with the Department of Education in late 2021.

You can contact your current loan servicer for information on how to get started.

Recommended: How Do Student Loans Work? Guide to Student Loans

What If You Don’t Qualify for Loan Forgiveness?

If federal student loan forgiveness seems a long shot for you, don’t despair — you also may want to look into deferment or forbearance. These strategies allow qualifying borrowers to temporarily reduce or stop their federal student loan payments. However, depending on the type of federal loan you have, interest may continue to accrue while payments are paused, which could increase the overall cost of the loan.

Looking for a more long-term solution? An income-based repayment plan can offer qualified applicants another way to lower federal student loan payments. The four options limit how much money you put towards student loans each month based on family size and discretionary income (the difference between your annual income and 150% of the poverty guideline for your family size and state of residence).

You can contact your loan servicer for assistance with federal loan repayment. If you don’t know who your servicer is, you can find out by visiting your Federal Student Aid dashboard or calling 800-433-3243.

Are There Alternatives to Private Student Loan Forgiveness?

Although there currently is no such thing as Sallie Mae private student loan forgiveness, there are alternatives available to borrowers struggling to manage their private loans.

Private lenders don’t offer income-driven repayment plans. But if you feel comfortable calling Sallie Mae (or any lender) directly, you could ask about other repayment plans they might offer or what ideas they might have for your situation. At the very least, it doesn’t hurt to learn more about your loans.

And some lenders, including Sallie Mae, offer deferment and forbearance for those who qualify.

The timeline and cost for each of these programs may vary by lender. Sallie Mae, for example, may require a “good faith payment” to go into forbearance, and you can press pause on payments for only three months at a time, for a maximum of a year.

Something else to consider if you’re thinking about deferment or forbearance is that — just as with federal loans — even though the payments are paused, interest may continue to accrue. And this can increase the total cost of the loan.

Recommended: Private Student Loans Guide

Can You Refinance Sallie Mae Student Loans?

If you can’t make any headway with your current repayment plan, you can always look into refinancing student loans.

Though there are advantages to refinancing student loans, there are potential drawbacks to consider. For instance, if you refinance your federal loans through a private lender, you may give up some important benefits, such as access to the payment pause and federal repayment programs.

Sallie Mae doesn’t offer student loan consolidation and refinancing anymore, but you could potentially reduce your interest rate by refinancing your student loans with a different private lender, especially if you have a good credit history and strong potential earnings.

If you’re approved, the new lender will pay off your old loans and issue you one new student loan — hopefully with a lower interest rate. A lower rate can save money on interest payments over the life of the loan, provided that the loan term isn’t extended.

Though you can’t combine federal and private student loans through a federal loan consolidation program, some private lenders will refinance both.

You could extend your loan term if you’re hoping to make your monthly payments more manageable, or you could opt for a shorter loan term to try to get out of debt sooner.

Recommended: Student Loan Consolidation Rates: What to Expect

The Takeaway

Lender Sallie Mae used to offer federal student loans, and if you received one, you may be able to qualify for loan forgiveness. But federal student loan forgiveness can be hard to get — and if you have a private student loan through Sallie Mae, forgiveness is not available. There are, however, repayment options, including refinancing your student loans.

It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.

Refi with SoFi today to get flexible terms and a competitive low rate before interest rates rise even higher!

FAQ

Does Sallie Mae service federal loans?

Sallie Mae only services private student loans, though that wasn’t always the case. If you have a loan that originated before 2014, it may have been a federal loan that started out with Sallie Mae and then moved to Navient. In early 2022, Navient shifted all of its federal student loans to a new servicer, Aidvantage.

How do I know whether my student loan is private or federal?

You can visit the Federal Student Aid website; information about your federal loans will be listed in your dashboard.

What student loans are not eligible for forgiveness?

Private student loans are not eligible for forgiveness.

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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.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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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.

If you have federal student loans, you may have enjoyed a payment and interest pause for the past few years.

But after receiving several extensions, the pause may be drawing to a close. While it’s still unclear when exactly the student loan forbearance will end, payments and interest accrual could resume in late August. However, they may start back up sooner than that. The Supreme Court is reviewing two cases challenging the federal Student Loan Debt Relief program. The justices’ decision will determine the fate of the program, though it may be months before they hand down their ruling.

In the meantime, here’s what you need to know about the student loan forbearance extension, some steps to take before it ends, and alternate ways to extend or pause payment.

What Is a Student Loan Forbearance Extension?

The government forbearance — suspending loan payments and collections on defaulted loans and setting a 0% interest rate on almost all federally held student loans — started in March 2020 and was extended several times because of the Covid pandemic and its economic fallout. In November 2022, the Department of Education announced loan repayments could pick back up as late as 60 days after June 30, 2023.

Many private student loan lenders also offered a payment pause or loan modification.

Recommended: What is Student Loan Forbearance?

Will Student Loan Forbearance Be Extended?

It’s unclear right now when exactly the student loan forbearance will end. Much will depend on the Supreme Court’s decision and how the Biden administration decides to proceed if the court rules against its student debt relief plan.

If the Supreme Court allows the plan to go through, many borrowers could be relieved of up to $20,000 in federal student loan debt.

If the court strikes down the plan, payments would resume and interest would begin to accrue 60 days later.

If no ruling has been made by June 30 — and President Biden decides not to extend the payment pause again — payment and interest accrual would resume 60 days later, around the end of August.

Borrowers will be notified before payment restarts.

Recommended: Can the President Cancel Student Loan Debt?

Steps to Take Before the Student Loan Forbearance Ends

Before the student loan forbearance ends, take a look at a few steps you can take:

•   Watch for your billing statement, which should arrive at least 21 days before your first payment is due, or additional communication from your student loan servicer.

•   Update your contact information with the loan servicer and at StudentAid.gov . That way, you’ll learn about your new payment due date, payment amount, and even another pause.

•   Update your bank account information if necessary, particularly if your loan servicer has changed.

•   Consider signing up for automatic payments to avoid missing a payment.

•   Update your income information if you have an income-driven repayment plan, particularly if income has decreased.

•   Go over your budget and determine whether you can make your loan payments. If not, contact your loan servicer to ask about your options.

How to Extend or Pause Student Loan Payments in General

If you’re concerned about your ability to resume student loan payments, consider talking to your loan servicer about:

•   General student loan forbearance

•   General student loan deferment

•   An income-driven repayment plan

•   The Extended Repayment Plan

•   Public Service Loan Forgiveness program

•   Refinancing federal or private student loans with a private lender

Income-Driven Repayment

Based on your income and family size, an income-driven repayment (IDR) plan sets your student loan payments at an affordable repayment amount per month for you. There are four plans, which last for a certain number of years and forgive any remaining balance after that.

•   Revised Pay As You Earn Repayment Plan (REPAYE)

•   Pay As You Earn Repayment Plan

•   Income-Based Repayment Plan

•   Income-Contingent Repayment Plan

To discuss income-driven repayment plans, contact your loan servicer or apply on StudentAid.gov.

Note that if you were on an IDR plan when the moratorium started, each month that passes in this pause counts toward your IDR forgiveness. You’ll also remain on your same plan when the payment pause ends.

Proposed Updates to the REPAYE Plan

In January 2023, the Department of Education released several proposed changes to the REPAYE plan, which would lower monthly payments and lifetime payments for a significant portion of borrowers. Though the updated plan may not be finalized until later in 2023, it includes measures to help borrowers manage their federal student loan debt:

•   Individuals who make less than $30,500 a year, and families of four who make less than $62,400, would not be required to make monthly payments on their loans.

•   Borrowers with undergraduate federal loans would pay 5% of their discretionary income, instead of the 10% or 15% other plans require. Students who took out federal loans for graduate school would pay 10% of their discretionary income.

•   Borrowers who take out less than $12,000 would have their balance wiped out after 10 years of payment, instead of 20 to 25 years.

Refinancing

Refinancing higher-interest student loans with private lenders result in one new loan, ideally with a lower interest rate. If you refinance federal student loans, realize that they will no longer be eligible for federal programs like income-driven repayment plans and the payment pause.

Most lenders offer a fixed or variable interest rate and terms of up to 20 years. It might be a good idea to look for a lender that offers some kind of forbearance.

Alternative Student Loan Financing Options

As you’re thinking about college funding, keep this in mind: You can choose from a number of college financing options, including scholarships, grants, and private student loans.

•   Scholarships: Scholarships are awarded based on merit or need, and students do not need to repay them. Students can get scholarships through businesses, colleges, and other organizations. There are online scholarship search tools that can help you find opportunities you might be eligible for.

•   Direct PLUS Loans: Direct PLUS Loans can help graduate or professional students pay for college. They can also help parents of dependent undergraduate students pay for their child’s college education. You might want to consider a parent PLUS loan refi to a lower rate if you’re repaying a PLUS loan.

•   Grants: Students can get grants from states, the federal government, a public body, and/or other organizations to pay for college.

•   Private student loans: Private student loans are given by commercial lenders, not the Department of Education. Unlike most federal student loans, you will undergo a credit check and possibly have to get a cosigner to sign on the loan with you.

The Takeaway

When will the student loan forbearance end? It’s not clear yet. Payments could resume 60 days after the Supreme Court decides whether or not to strike down the student debt relief program. If the justices have not made a decision by June 30, 2023, payments would pick back up 60 days later, around the end of August.

If you anticipate a struggle resuming payments, now may be a good time to talk to your loan servicer about other ways to extend or pause student loan payments. Options may include forbearance, deferment, an income-driven repayment plan, a loan forgiveness program, or refinancing with a private lender.

When refinancing your student loans, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid. If you refinance federal student loans with a private lender, you give up federal benefits like income-driven repayment, loan forgiveness, and federal forbearance.

Refi with SoFi today to get flexible terms and a competitive low rate before interest rates rise even higher!

FAQ

How do I know when my student loan payments will resume?

Borrowers will be notified before payment picks back up. Be sure to update your contact information with your loan servicer and at StudentAid.gov.

What does student loan forbearance mean?

Forbearance means a borrower can temporarily suspend making loan payments during an approved period. There are two main types of forbearance for federal student loans: general and mandatory.

What are income-driven repayment plans?

An alternative to forbearance, income-driven repayment plans set your monthly loan payments at an affordable amount for you. There are four plans. Each lasts a certain number of years and forgives any remaining balance after that.

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Photo credit: iStock/Andrea Migliarini

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.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
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When it comes to choosing a school, cost is top of mind for many students. In fact, nearly 81% of students and their families eliminated a prospective college based on its price tag, according to a 2022 Sallie Mae survey.

If the cost is a factor you’re considering, it could be worth looking into a college tuition payment plan. These plans allow students and their families to pay tuition and fees over an extended period of time. Qualifying for a plan is usually not difficult, though you may be required to pay an enrollment fee.

Here’s a look at how college tuition payment plans work.

What Is a College Tuition Payment Plan?

Instead of paying for college tuition at the beginning of each year, semester, or quarter, college tuition payment plans — also known as tuition installment plans or deferred payment plans — allow students and their families to spread out the cost of tuition over a period of time.

Depending on the school, the plan may allow payments to be made over the course of the semester or over the full year.

While you’ll generally have to start making payments right away, schools frequently offer the option to spread payments into monthly installments. Some also offer plans that break the payment into a few equal payments throughout the semester.

How Do Payment Plans Work?

Some colleges and schools run their own tuition payment plans. Others use an outside service to administer the plan.

Typically these payment plans only cover the direct costs charged by and paid to the college, such as tuition and fees. Sometimes the cost of housing and meal plans will also be included. The cost of things like textbooks and school supplies are not usually included in these plans.

Many tuition payment plans require an enrollment fee, which may run around $50 to $100, although it could be lower. These plans don’t usually charge interest, which can make them less expensive than taking out a student loan, as long as you are able to make the monthly payments. There generally isn’t a credit check.

What Types of Schools Offer Payment Plans?

Many schools offer some sort of tuition payment plan. Generally, qualifying for the plan isn’t very difficult. However, some schools do have specific enrollment periods. Check with your preferred school to determine when you need to enroll in a payment plan and what is required to do so.

Colleges and Universities

Tuition payment plans are offered at most, though not all, colleges and universities. Check your school’s website for details on available installment plans and see if there’s one that fits your needs and budget.

Graduate Schools

Many graduate programs offer payment plans. Enrollment dates can vary, so contact your program to find you when you’ll need to sign up.

Community Colleges

Community colleges typically offer payment plans for students and their families who are unable to pay costs upfront. Similar to plans at other types of schools, installment plans at community colleges may only cover certain costs, such as tuition and fees.

Trade Schools

On average, trade school tuition can range from $3,674 to nearly $16,000, according to data from the Department of Education. Some schools may offer a payment plan so students can pay the tuition and fees in installments.

What if My School Doesn’t Offer a Payment Plan?

If your preferred school doesn’t offer a payment plan, you can explore independent plans offered through private organizations. Your school’s financial aid office may be able to provide referrals.

Of course, even with a payment plan, the burden of tuition can still be too high for some students and their parents. Consider some of the following options when planning to pay for college tuition. While these ideas alone might not be enough to help you cover the full cost of tuition, a combination of a few could do the trick.

Federal Aid

Federal aid for college encompasses grants, scholarships, student loans, and work-study. To apply, students must complete the Free Application for Federal Student Aid (FAFSA) each year.

The schools you apply to will use this information to determine how much aid you receive. You’ll typically receive an award letter detailing what types of federal aid you’ve qualified for and the amounts.

Federal Student Loans

Federal student loans can be either subsidized or unsubsidized. Subsidized loans are awarded based on need. The Department of Education covers the interest that accrues on these loans while you are in school at least part-time, during the grace period after leaving school, and during periods of deferment or forbearance.

Unsubsidized federal loans are awarded independent of need. Borrowers are responsible for paying the interest that accrues on these loans while they are in school and during periods of deferment.

Payments are not required on either unsubsidized or subsidized loans while you are actively enrolled more than part-time in school.

There are also PLUS loans available to parents who are interested in borrowing a loan to help their child pay for college.

Work-Study

The federal work-study program provides jobs for undergraduate and graduate students who demonstrate financial need. The amount of work-study you receive will depend on factors like when you applied, your level of determined financial need, and the amount of funding available at your school.

The money earned for work-study won’t count against you when you fill out the FAFSA, so it shouldn’t jeopardize future financial aid awards. Each time you fill out the FAFSA, it’s worth indicating that you’re still interested in receiving work-study as part of your financial aid award (that is, if you are still interested).

And it’s important to remember that your financial aid award may change from year to year, depending on your and your family’s circumstances.

Scholarships and Grants

Scholarships and grants don’t typically have to be repaid, which makes them one of the best options for students trying to pay for school. Some scholarships and grants are awarded by schools based on the information you provided in the FAFSA, but there are scholarships and grants available that aren’t based on financial need.

Taking some time to comb through online scholarship search tools could prove helpful. Each scholarship will have different application requirements. Some might require an essay or additional supplementary materials, but the effort could be worth it if you’re able to fund a portion of your tuition costs.

Private Student Loans

Sometimes federal aid, scholarships, and your savings aren’t enough to cover the full cost of tuition. In those cases, private student loans could be an option. Unlike federal student loans, which are offered by the government, private student loans are offered by banks, credit unions, or other private lenders.

The private student loan application process will vary slightly based on lender policies, but will almost always require a credit check. Lenders will review your credit score and financial history as they determine how much money they are willing to lend to you.

In some cases, students might need the help of a cosigner to take out a private student loan. This could be the case if they have little to no credit history.

Some parents may also be interested in taking out a private loan to help their child pay for their education.

The Takeaway

Tuition payment plans, which extend the payment for college tuition over a fixed period of time, can be helpful for parents and students as they navigate how they’ll pay for the cost of education. Spreading tuition payments over the semester or year can help make them more manageable. Check if your preferred school offers a tuition payment plan. Many do.

Sometimes, the burden of tuition is still too high, even with a payment plan. Scholarships and grants, work-study, and federal aid can help you cover the cost of tuition. If you’ve exhausted all federal aid options, private student loans can fill gaps in need, up to the school’s cost of attendance, which includes tuition, books, housing, meals, transportation, and personal expenses.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Are college tuition payment plans the same thing as tuition installment plans?

Yes, college tuition payment plans are also called tuition installment plans.

Do college tuition payment plans cover all school-related costs?

Typically, payment plans only cover tuition and fees. This means you may be responsible for the cost of books, supplies, housing, food, and transportation. Check with your preferred school to find out what its plan covers.

Do college tuition payment plans charge interest?

These plans don’t typically charge interest. However, you may be required to pay a modest fee to enroll.

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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 Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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The only time you’d need collateral for a personal loan is if it’s a secured personal loan. Unsecured personal loans — which is what most personal loans are — are only secured by a borrower’s promise to repay the funds, rather than collateral.

But if you do opt for a secured personal loan, whether due to potential for larger loan amounts or more competitive terms, you’ll need an item to put up as collateral. Collateral can include a house, car, boat, and so forth — really, whatever a lender is willing to hold. You may also be able to use investment accounts, cash accounts, or certificates of deposit (CDs) as collateral to get the cash you need.

Secured Loans: Personal Loans With Collateral

Requiring collateral for a personal loan is uncommon, but not unheard of, depending on the type of personal loan you get. Generally, secured loans have more competitive interest rates, larger loan amounts, and more favorable terms.

But if a borrower fails to repay their secured loan, they’ll receive a notice letting them know they’re in default and giving them an opportunity to become current on payments. If the borrower doesn’t pay up, that can lead to loss of the collateral.

There’s a wide range of possibilities when it comes to types of collateral that can be used to secure a personal loan. Some common examples of loan collateral include:

•   Real estate: One option for personal loan collateral is your home or other real estate you own, like an investment property. Even if you don’t fully own your home, you may be able to use the equity you do have as collateral. Just make sure you understand the risk involved — you could lose your home if you’re unable to make payments.

•   Vehicle: You can use a vehicle as collateral when purchasing a car or truck, but some lenders allow you to use the equity in a vehicle to get funds. This may be a better choice than, say, a payday loan. However, you risk losing that vehicle if you can’t make the payments.

•   Bank or investment accounts: You might be able to use a CD or other investment account as collateral. Just know that using these accounts as collateral might prevent you from accessing the funds in the accounts, which is a downside to consider.

Beyond these more standard items, other things that could be used as collateral for a secured personal loan include paychecks, savings accounts, paper investments, fine art, jewelry, collectibles, and more.

Potential Advantages of Secured Loans

If you need to borrow a larger sum of cash, then you might find more success if you put up collateral. A borrower whose credit score isn’t as high as might be required for a riskier unsecured personal loan may find it easier to get approved for a personal loan that’s secured.

Plus, you might receive more favorable rates and/or terms, because the lender has the security of knowing they can possess the collateral if the loan is not paid back. As a personal loan calculator can demonstrate, a lower interest rate can add up to savings quickly.

Downsides of Secured Personal Loans

Perhaps the biggest downside of secured personal loans is that if you fail to make your payments, you could lose the asset that’s securing the loan. Given that houses, investment accounts, and vehicles are common examples of personal loan collateral, that could be a big blow.

Another downside of secured vs. unsecured personal loans is that the application process is generally longer and more involved. This is because the lender needs to assess the asset being put up as loan collateral to verify its value.

Unsecured Personal Loans

As mentioned, unsecured personal loans aren’t backed by collateral. Instead, lenders just need a borrower’s signature promising they’ll pay back funds (as well as a review of their credit history and other financial fitness indicators, of course). Because of this, you may hear unsecured personal loans referred to as signature loans, good faith loans, or character loans.

Student loans are a type of unsecured loan, though they have their own unique terms and repayment options. So are most credit cards, although they tend to have higher rates than what’s typical on an unsecured personal loan.

Potential Advantages of Unsecured Loans

You can typically obtain unsecured personal loans on short notice. If the borrower has sufficient income and a good credit score and history (among other factors), rates can be competitive compared to those of secured loans.

And, of course, with an unsecured personal loan, you wouldn’t be tying up any assets or putting them at risk if you struggle with repayment.

Downsides of Unsecured Loans

Because unsecured loans are riskier for the lender, rates are typically higher than those of secured loans. Additionally, amounts available to borrow are usually smaller.

While it’s true that there isn’t an asset a lender can repossess for nonpayment, lenders can still take action on unpaid unsecured personal loans. Lenders can report the account as in default to the credit bureaus, send the account to collections, and take a borrower to court for nonpayment. This can significantly affect a person’s credit for years to come.

Building or Repairing Credit to Avoid Loan Collateral

If your credit score or credit history is preventing you from getting an unsecured loan, it might make sense to take time to build or repair your credit. This won’t happen instantly, so it won’t be the magic solution if you need a loan now. But if you’d prefer not to put up an asset as collateral, it might be a worthwhile step prior to taking out a personal loan.

Some steps you can take to build or repair your credit include:

•   Pay all existing loans on time, and make sure not to miss any.

•   Get your monthly bills, such as your rent payments or utility bills, added to your credit report by a third-party service.

•   Keep your credit utilization (meaning the total percentage of your available credit you’re using) below 30%.

•   Get caught up on any outstanding balances or past-due debts.

•   Limit applications for new accounts.

Making a Choice: Secured or Unsecured

Whether a secured or unsecured personal loan is right for you depends on your specific need, financial situation, and credit history, among other factors, though the common uses for personal loans apply to both.

If you’re looking for higher borrowing limits and potentially lower rates, or if you know you may not have as strong of an application, an unsecured personal loan could make more sense. Just think carefully about what asset you decide to put down as collateral, as you do need collateral for a loan of this type.

But if you have strong credit and don’t need to borrow as much money, an unsecured personal loan might make sense. That way, you won’t have to worry about loan collateral. Just remember that doesn’t mean you’re off the hook if you don’t repay the loan — lenders can report the defaulted loan, put it in collections, and even take you to court.

Unsecured Personal Loans at SoFi

If you think an unsecured personal loan is the right choice for you, consider a personal loan from SoFi. Because it is an unsecured loan, you won’t need to worry about loan collateral. Plus, SoFi personal loans have low rates. And, if you sign up for autopay, you could save even more.

Plus, at SoFi, unsecured personal loans are available in amounts up to $100,000. You could use funds for credit card consolidation, home improvements, relocation assistance, unexpected medical expenses, major personal purchases, and more.

Check out an unsecured personal loan from SoFi today.

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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.
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In dental school you’re taught the skills you need to become a successful dentist. What they don’t tell you is how to effectively handle your dental school debt. A typical dental school graduate enters the profession with a student loan burden topping $293,900, according to the Education Data Initiative.

That’s $90,000 more than the average medical school debt. Right when dentists are ready to hit the accelerator on their careers, the reality of repayment presents a sizable speed bump.

The good news is, you’ve picked the right profession when it comes to ROEd, or the “return on education” you should reap down the road. The average base salary for general dentists is $217,620, and more than $355,570 for specialists who provide implant services, per a 2021 survey by DentalPost and Endeavor Media.

Ways to Pay Off Dental School

At this stage of the game, it’s important to have a plan for paying down your debt as efficiently as possible. Getting your finances in order early is especially critical if you anticipate borrowing more money down the road to open your own practice or buy a home.

Below, we explain the various student loan payment options available and how to know which one makes the most sense for you.

Choose a Repayment Plan

Federal student loan borrowers have four repayment plans to consider. They all set your monthly loan payment at an amount deemed affordable based on your income and family size. You can change your plan anytime without incurring fees.

•   Standard Repayment Plan. Spreads payments evenly over 10 years. Under this plan, if you have a loan balance of $250,000 at 7.54%, your monthly payment will be about $2,900. This is the default plan if no other plan is chosen.

•   Graduated Repayment Plan. With this plan, payments start lower and then gradually increase over time, usually every two years. Repayment takes place over 10 years.

•   Extended Repayment Plan. Choose either fixed or graduated payments. Repayment takes place over 25 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).

Thanks to their higher income, dental professionals often pay off their loans before the end of the repayment period, making the forgiveness benefit irrelevant. Also, you may not be eligible for forgiveness programs if your income is over a certain threshold. (Still, we’ll get into forgiveness programs a bit more in the next section.)

Keep in mind that the longer your repayment term, the more interest you pay over the life of that loan. The shorter your term, the less you’ll pay in interest, but the higher your monthly payment will be.

A student loan payoff calculator will give you an idea of your monthly payment for different repayment terms.

Recommended: How To Get Out of Student Loan Debt

Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) program is an option if you start your career at an eligible nonprofit or public service agency. Work for a local, state, tribal, or federal government organization or for a nonprofit organization, and you may be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan. Serving as a full-time AmeriCorps or Peace Corps volunteer also counts.

Examples of qualifying government employers are the U.S. military, public colleges, and public child and family service agencies, but not government contractors.

There are also a number of federal and state loan-repayment assistance programs that reward dentists for providing service to certain segments of the population. The Indian Health Service Loan Repayment Program, for example, offers dentists who serve American Indian communities up to $20,000 per year toward the repayment of school loans.

Student loans from private lenders do not qualify for PSLF.

Student Loan Consolidation

Federal student loan consolidation lets you combine multiple federal student loans into a single new loan with a fixed rate. Your new rate is the weighted average of the old student loans’ interest rates rounded up to the nearest eighth of a percentage point. That means the rate might actually be slightly higher than the prior rate on some of the loans.

If your monthly payment decreases, it’s likely the result of lengthening the term (up to 30 years), which can mean paying more interest over time.

By the way, you can’t include private student loans in this type of a consolidation loan.

Student Loan Refinancing

For many dental school grads, consolidating multiple student loans into a single loan with a private lender, and then refinancing the balance at a lower interest rate, makes sense. Student loan refinancing makes it easier to manage your finances: You’ll get one bill each month from a single lender, instead of several bills for varying amounts that are based on different rates.

Depending on how you structure your loan, a lower interest rate might allow you to pay back your debt faster. That can save you a substantial amount of money over the life of the loan.

You can also choose a term that lowers your monthly payments, leaving more money in your pocket to be used for other things: building an emergency fund, starting a family, and investing for retirement.

Tips for Thriving as a New Dentist

Here are some ways you can set yourself up for success from the very start of your career.

•   Create a budget you can stick to. Leave room for annual and quarterly expenses as well as incidentals.

•   Start a savings plan. The sooner you start saving and investing, the sooner you can enjoy compound growth, which is when your money grows faster over time.

•   Set up automatic payments for student loans. This helps you make payments on time, plus many loan service providers offer a discount if you arrange to autopay.

•   Look into different ways to invest. In addition to maxing out your 401(k) or 403(b), you may also want to consider vehicles such as a health savings account or individual retirement account.

•   Get familiar with your employee benefits package. Find out what perks your employer offers, such as help with student loan repayment.

Recommended: Budgeting as a New Dentist

The Takeaway

Though a typical dental school student owes nearly $294,000 by the time they graduate, there are several student loan payment options that can help borrowers pay down debt more efficiently. All four federal student repayment options, for example, set your monthly payments based on your income and family size. And depending on your employer, you may also qualify for a forgiveness program.

Have multiple loans? Federal student loan consolidation lets you combine them into one new loan with new terms and a new interest rate. Student loan refinancing, which lets you consolidate multiple student loans into a single loan with a private lender, is another option to consider.

It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for example, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more—at no extra cost.

Refi with SoFi today to get flexible terms and a competitive low rate before interest rates rise even higher!

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^†Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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 TO DEC. 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. CLICK HERE FOR MORE INFORMATION.
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.
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.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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