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Can You Refinance Student Loans Without a Degree?

If you’ve dropped out of college but are still carrying student loan debt, you have a number of repayment options, depending on your income and credit profile. Some private lenders may allow you to refinance your federal student loan, but others definitely will not.

College dropout rates indicate that up to 32.9% of undergraduates do not complete their degree program, according to EducationData.org. If anyone hopes that not graduating gets them off the hook for paying back a student loan, the answer is a resounding no. The U.S. Department of Education’s Federal Student Aid (FSA) department spells it out on its website for those repaying federal student loans:

“Your federal student loans can’t be canceled or forgiven because you didn’t get the education or job you expected or you didn’t complete your education (unless you couldn’t complete your education because your school closed).”

Why is that? Lenders believe that not having a degree can pose difficulties in getting a high-earning job. College dropouts make an average of 32.6% less income than bachelor’s degree holders. And some data show that college dropouts are four times as likely to default on their loans compared to graduating counterparts.

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Can You Refinance Student Loans Without a Degree?

Student loan refinancing allows you to pay off federal student loans with a private one carrying different terms. For some borrowers, this new loan might come with a lower interest rate or lower monthly payment than their existing debt, particularly if they have a strong credit and employment history.

However, many private lenders won’t allow you to refinance your student loans if you haven’t graduated. SoFi and some other lenders require that you have at least an associate degree from a Title IV accredited school in order to be eligible for refinancing.

Title IV schools are eligible to process federal student aid under the Higher Education Act. You can verify whether the institution you attended is a Title IV school on the federal student aid website.

Even though some of the most popular lenders require you to have a degree, that doesn’t mean you can’t refinance student loans if you did not graduate. There are some financial institutions that may offer refinancing to borrowers who dropped out.



💡 Quick Tip: Some student loan refinance lenders offer no fees, saving borrowers money.

Federal Student Loan Consolidation Without a Degree

There are other solutions to easing your burden. If you have more than one federal student loan, not having a degree doesn’t stop you from being able to combine them through a Direct Consolidation Loan. Doing so can be beneficial because it allows you to make just one payment every month instead of many, potentially with multiple loan servicers. That can make things simpler for you and make it more likely that you’ll remember to pay your loans on time.

Another reason to consolidate is that you could qualify for a lower monthly payment by extending the term of the loan (though you’d pay more interest over the life of the loan). Also, by consolidating, loans that wouldn’t otherwise qualify might become eligible for income-driven repayment plans or the Public Service Loan Forgiveness program.

Should I Consolidate Student Loans

Consolidation isn’t for everyone, however. As we mentioned above, extending the term of the loan means interest will have more time to stack up. Plus, if you’ve already been making payments under an income-driven repayment plan or toward Public Service Loan Forgiveness, you could lose credit for those payments and have to start over.

You can apply for a Direct Consolidation Loan as soon as you leave school or are enrolled less than half-time. You’d submit an application through StudentLoans.gov. If your loans are still in the grace period, you can ask for the consolidation to be delayed so that it’s closer to the end of that period. If you receive the loan, you’ll need to start repaying it 60 days after it’s paid out.


💡 Quick Tip: Federal parent PLUS loans might be a good candidate for refinancing to a lower rate.

Repayment Options for Federal Student Loans

Federal student loan repayment was put on pause in March 2020 due to Covid-19 hardships. The pause ended in October 2023. If you are focused on dealing with your federal student loans, it’s vital to know that the Department of Education has focused on strengthening its income-driven repayment options.

Any Direct Loan borrowers can apply to the Saving on a Valuable Education (SAVE) Plan, introduced in 2023. (SAVE replaces the REPAYE program.) Your monthly payments will be 10% of discretionary income, possibly lowering to 5% in 2024 when SAVE has been fully implemented. You can learn more about SAVE, and apply through its portal, on the FSA site.

For those really struggling to make any payments, the “On-Ramp Program” is in effect through Sept. 30, 2024. This prevents the worst consequences of missed, late, or partial payments, including negative credit reporting for delinquent payments for 12 months. However, payments are still due, and interest will continue to accrue.

You can also apply for forbearance or deferment, temporarily pausing your payments and providing more predictability when you must resume repaying. Keep in mind that forbearance and deferment have financial pros and cons.

Refinancing Your Student Loans

Now or in the future, you may be able to apply for student loan refinancing. You can check your rates with several lenders (using a soft credit check, if possible) to compare rates and terms and see what you might prequalify for.

If you decide to complete a full application, the lender may ask for information like your Social Security Number, outstanding loans and repayment history, income, and employment history. They typically complete a credit check to find out your FICO® Score and look for any red flags, like a history of missed payments, student loan default, eviction, or bankruptcy.

Those who don’t initially qualify for refinancing, or get a favorable rate, can try reapplying with a cosigner — someone who guarantees to repay the loan if the primary borrower can’t.

If you feel you need a cosigner, one with strong credit history and a solid income and employment history (among other financial factors) could help you qualify. If you do use a cosigner, remember that if you default, any missed payments on your end may damage their credit.

It’s important to bear in mind with refinancing that, if approved, you would lose out on several options. These include:

•   Access to temporary loan payment relief through approved periods (deferment or forbearance) when you do not have to make payments because of financial hardship, continuing your education, or military service.

•   No interest accumulation on subsidized student loans during periods when payments are deferred.

•   Access to repayment plans based on your income that provide loan forgiveness once you have been in repayment for 20 or 25 years.

Recommended: Refinancing Student Debt With a Cosigner

Taking Control of Your Student Loans

Not completing your college degree or stopping and starting over an extended period is far from uncommon. However, It can be frustrating to carry a student loan balance for a degree you don’t have.

Unfortunately, SoFi does not offer student loan refinancing to borrowers who don’t have at least an associate degree, but some lenders do. Plus there are other options, such as applying for income-driven repayment and exploring other federal programs to help with loans.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Can I get a loan without a degree?

Yes, it’s possible to get student loans without a degree — if you are currently enrolled in school. The federal student loan program offers student loans to qualifying borrowers who are attending eligible institutions. Students may also look into private student loans.

Can you refinance student loans without a job?

Refinancing student loans without a job may be more challenging than if you are able to show a record of stable employment. However, lenders evaluate a variety of factors when making lending decisions including employment history, income, credit score, among other factors. The lender is trying to evaluate whether you are able to repay the loan. If you are able to show other sources of income — outside of a traditional job — it may be possible to refinance your student loans.

Do you need to graduate to refinance student loans?

In many cases, yes, you do need to graduate before you can refinance student loans. Many private lenders won’t allow you to refinance your student loans if you haven’t graduated. Though, there are some lenders that are willing to refinance student loans for borrowers who did not graduate.


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
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.


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.

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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Personal Loan vs Personal Line of Credit

When it comes to a personal loan vs. a personal line of credit, the two main differences are how the loan funds are disbursed to the borrower and how the credit is repaid.

There are also similarities between these two financial products. Funds from each can be used for a variety of expenses, with few exceptions. Also, to approve a personal loan or line of credit, lenders will run a hard credit check during the application process.

Deciding whether a personal loan or a personal line of credit might be right for you can require looking at a few different factors. Here, you’ll learn more about this important topic so you can make the best choice for your specific situation.

What Is a Personal Line of Credit and How Does It Work?

A personal line of credit (LOC) is a type of revolving credit similar to a credit card. But funds are typically accessed by writing checks provided by the lender or requesting a funds transfer to your checking account instead of by using a card.

An LOC typically allows the borrower to withdraw funds repeatedly, up to the credit limit. Any funds that are withdrawn are subject to repayment with interest. When they are repaid, they can be accessed again up to your particular credit limit. There may be a limit on the number of years the line of credit is available.

Additional points to know:

•   Some lenders may assess fees associated with an LOC. There may be a maintenance charge for inactive accounts. There may also be ongoing fees, monthly or annual, even if the LOC is being used. Some other expenses may include application fees, check processing fees, and late fees, among others. It’s important to be aware of any potential fees before you sign an LOC agreement.

•   Personal lines of credit are usually unsecured, although you may be able to put up collateral to get a lower interest rate. A home equity line of credit, or HELOC, is an example of a secured line of credit.

•   Typically, a personal LOC will be offered by a bank or credit union, and you might have to have another account with the lending institution to be considered for an LOC.

•   If your LOC is unsecured, the interest rate will probably be variable, which means it could go up or down during the loan’s term, and your payments could vary. But you’ll only be charged interest on the amount you withdraw. If you’re not using any LOC funds, you won’t be charged interest.

If you expect to have ongoing expenses or if you have a big expense (like a wedding or home renovation) but don’t know what your final budget will be, this type of borrowing might be a useful financial tool.

A personal LOC also may be the right fit if you need some flexibility with your borrowing. For example, self-employed workers who know they’ll be paid by a client but aren’t sure exactly when, can tap into their line of credit to pay expenses while they wait. They can pay that money back when they receive payment from the client, and they won’t have to use high-interest credit cards or borrow from other savings to make ends meet.

Of course, there are downsides to that easy-to-access money. Here’s a closer look:

•   Since unsecured lines of credit are considered by lenders to be riskier than their secured counterparts, it can be more difficult to qualify at a favorable interest rate.

•   Once you have access, it may be tempting to use the funds for purposes other than originally planned. Keeping in mind the intended purpose for the funds may help you stick to it and not use the funds for other purchases.



💡 Quick Tip: A low-interest personal loan from SoFi can help you consolidate your debts, lower your monthly payments, and get you out of debt sooner.

Pros and Cons of Personal Lines of Credit

Having funds that can be accessed as needed can be helpful. But there are also some drawbacks to consider. Take a look at how the pros and cons stack up for personal lines of credit.

Pros of Personal Lines of Credit

•   Easy access to funds.

•   Open-ended vs. set distribution of money.

•   Minimal limits on use of funds.

•   Can be useful for ongoing expenses.

Cons of Personal Lines of Credit

•   May have a higher interest rate than other forms of credit.

•   Typically are unsecured, so may be more difficult to qualify for than other forms of credit.

•   Interest rate may be variable, presenting a budgeting challenge.

•   Ease of access can be tempting to use for impulse shopping.

What Is a Personal Loan and How Does It Work?

A personal loan, on the other hand, is a fixed amount of money disbursed to the borrower in a lump sum. If the loan has a fixed interest rate, as is typical for personal loans, the payments are in fixed installments for the term of the loan. If the loan has a variable interest rate, the monthly payments may fluctuate as the interest rate changes in accordance with market rates.

Because personal loans typically have lower interest rates than credit cards, they’re often used to pay off other debts such as home and car repairs or medical bills, or to consolidate other higher-interest debts such as credit card balances into one manageable — and potentially lower — monthly payment.

Here are some more ways these loans are often used:

•   A personal loan can be a helpful tool for debt consolidation. If you can qualify for a personal loan that has a lower interest rate than your other outstanding debts, you may be able to save money in the long run by consolidating those debts. In order for this financial strategy to work, it’s important to stop using the old sources of credit to avoid going deeper into debt.

•   A personal loan also could be a suitable choice for paying for a wedding or home renovation. But it’s important that you feel confident about being able to repay the loan on time and in full. If you don’t responsibly manage a personal loan — or any kind of debt, for that matter — your credit can be adversely affected.

•   You can apply for a secured or unsecured personal loan. A secured loan, which is backed by collateral, is typically considered less of a risk by lenders than an unsecured loan is. Collateral is an asset the borrower owns — a vehicle, real estate, savings account, or other item of value. If the borrower fails to repay a secured loan, the lender has the right to take possession of the asset that was put up as collateral.

Here are a few more points about how the process of getting a personal loan can work:

•   An applicant’s overall creditworthiness will be considered during the approval process. Generally, an applicant with a higher credit score will qualify for a lower interest rate, and vice versa.

•   Some lenders charge personal loan fees such as origination fees or prepayment penalty fees. Before signing a loan agreement, it’s important to be aware of any fees you may be charged.



💡 Quick Tip: In a climate where interest rates are rising, you’re likely better off with a fixed interest rate than a variable rate, even though the variable rate is initially lower. On the flip side, if rates are falling, you may be better off with a variable interest rate.

Pros and Cons of Personal Loans

When you need a set amount of money for an expense, a personal loan can be a good choice. Along with the benefits of using this financial tool also come a few drawbacks to consider.

Pros of Personal Loans

•   May be a good choice for large, upfront expenses.

•   Typically have fixed interest rates.

•   Steady payments may be easier to budget for.

•   May have a lower interest rate than credit cards.

Cons of Personal Loans

•   Unsecured personal loans may have higher interest rates than other forms of secured credit.

•   May need a higher credit score to qualify for lower interest rates.

•   If not used responsibly, it can add to a person’s debt load instead of alleviating it.

•   May have fees.

Major Differences Between Personal Lines of Credit and Personal Loans

When you’re looking for the right source of funding for your financial needs, it can help to compare different types. Here are some specifics to consider when looking at personal LOCs and personal loans.

Personal Line of Credit

Personal Loan

Typically has a fixed interest rate More likely to have a variable interest rate
Fixed interest rate may make it easier to budget payments Variable interest rate may present a budgeting challenge
Fixed, lump sum Open-ended credit, up to approved limit
Interest is charged during entire loan term Interest is only charged on withdrawn amounts
Revolving debt Installment debt

Considering the Type of Debt

When you’re thinking about applying for a personal LOC or a personal loan, it’s important to consider the effect borrowing money can have on your credit score. If you borrow money without a repayment plan in place, you could run into trouble no matter which borrowing option you go for. But each is looked at differently by the credit bureaus.

A personal LOC is revolving debt, which means it will factor into your credit utilization ratio — how much you owe compared to the amount of credit that’s available to you. This can count as the second most weighty factor (at 30%) toward your score.

For a FICO® Score, keeping your total credit utilization rate below 30% is recommended. That means if your credit limit on is $15,000, you would use no more than $4,500.

•   Using a large percentage of your available credit can have a negative effect on your credit score. And lenders may see you as a high-risk applicant because they may assume you’re close to maxing out your credit cards.

•   Using a small percentage of your available credit can work in your favor. If your credit utilization ratio is low (under 10%), it signifies to potential lenders that other lenders have determined you to be a good risk, but you don’t need to use the credit that’s been extended to you.

•   Having a low credit utilization rate by using just a little of your available credit could actually have a more positive effect on your credit score than not using any of it at all. Lenders generally look for signifiers of a healthy relationship with credit.

A personal loan is installment debt and isn’t considered in your credit utilization ratio. In fact, if you pay off your revolving debt with a personal loan, it potentially can lower your credit utilization ratio and have a positive effect on your credit score. A personal loan also can add some positive variety to your credit mix — something else that’s calculated into your credit score.

Personal LOC or Personal Loan: Which Is Right for You?

Before you decide to take out a line of credit or a personal loan, it’s wise to compare lenders. Look at the annual percentage rate and whether it’s fixed or variable. You can also take into account any fees you might have to pay, including origination fees, annual fees, access fees, prepayment penalties, and late payment fees.

Estimating the total cost of the loan until it’s paid in full, including the principal loan amount, interest owed, and any fees or penalties you could potentially be charged, will help you figure out how much the loan will actually cost you.

You might use an online personal loan calculator to help you assess these total costs.

The Takeaway

Deciding when and how to borrow money can be a tough decision. Personal loans and personal lines of credit each have their pros and cons. Personal lines of credit allow you to borrow up to a credit limit, while personal loans disburse a lump sum. Interest rates, fees, and other features may vary. It’s wise to consider your needs and options carefully, reading the fine print on possible offers.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.


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.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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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Is It Possible to Pause Student Loan Payments?

The average student loan borrower with federal loans graduates with $37,338 in debt. If you were to pay that amount on the Standard Repayment Plan at a rate of 5.50%, you’d have to shell out $405 per month for the next 10 years.

But depending on where life takes you after graduation, you may not be able to afford it. There are plenty of circumstances that may make repayment difficult, including going back to school, going into active military duty, and losing a job.

As such, it’s important to know how to pause student loan payments when you can’t afford them. Depending on who your lender is, though, the options can vary.

Repayment of federal student loans was effectively paused from spring 2020 until fall of 2023, but the Debt Ceiling bill required payments to restart in October 2023. However, there are still options available to borrowers who need to pause payment on their student loans.

Two Ways You Can Pause Student Loan Payments

Depending on your situation, you may be able to pause student loan payments through student loan deferment or forbearance. Each of these options has different requirements and outcomes, so it’s essential to understand how they work.

1. Student Loan Deferment

Student loan deferment allows you to reduce or pause your payments for a set period of time. In the meantime, however, the deferred loan will continue to accrue interest, in most cases. For example, if you have an unsubsidized loan or a PLUS loan, you’ll need to make interest-only payments during the deferment, otherwise the interest will capitalize (be added to the loan balance) at the end of the deferment period.

This means that you’ll have a new, higher balance that includes the principal amount at the beginning of the deferment period plus the unpaid interest that accrued during deferment.

The exception is if you have subsidized federal loans or Perkins Loans, in which case you won’t be responsible for paying accrued interest.

2. Student Loan Forbearance

Another option is putting loans in forbearance. Like deferment, forbearance allows qualified applicants to delay payments for a set period of time.

The primary difference is that you’re responsible for paying any interest that accrues during the forbearance period, regardless of which type of loan you have.

Again, it is possible to make interest-only payments during the forbearance period. Under new rules introduced in 2023, though, unpaid interest that accrues during forbearance will not capitalize at the end of the forbearance period.

While these general definitions apply to both federal and private student loans, some details differ between the two.


💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

Federal Student Loans

The U.S. Department of Education offers both deferment and forbearance on all of its student loans. With the exception of the pandemic-era federal forbearance period that came to an end in fall 2023, neither comes automatically. Both deferment and forbearance need to be applied for through your student loan servicer. Here’s what you need to know about both options.

Qualifying for Federal Loan Deferment

If you have federal loans, you may be able to defer your student loan payments for up to three years. Here’s how to know if you may be eligible:

•   You have any federal student loan, subsidized or unsubsidized.

•   You’re enrolled at least half-time at an eligible school, and you received a Direct PLUS Loan or FFEL PLUS Loan as a graduate or professional student. In this case, your loans will be deferred while you’re in school at least half-time plus six months after you leave.

•   You’re a parent who took out a Direct PLUS Loan or FFEL PLUS Loan on behalf of your child student, and they’re enrolled at least half-time at an eligible school. In this case, your loans will be deferred while your child remains in school plus six months after they leave.

•   You’re enrolled in an approved graduate fellowship program.

•   You’re enrolled in an approved rehabilitation training program for the disabled.

•   You’re unemployed and unable to find employment.

•   You’re experiencing economic hardship.

•   You’re serving in the Peace Corps.

•   You’re on active duty military service in connection with a war, military operation or national emergency. In this case, your loans will be deferred while you’re on active duty plus 13 months afterward.

You can read more about deferment eligibility here .

Qualifying for Federal Loan Forbearance

The federal government has two types of forbearance: general and mandatory. Both can last for up to 12 months at a time. But if you still qualify once that period is up, you can request a renewal.

General forbearance is also sometimes called discretionary forbearance because your loan servicer gets to choose whether or not to approve your request.

You can request general forbearance if you’re unable to make your monthly payments due to:

•   Financial difficulties

•   Medical expenses

•   Change in employment

•   Other reasons your loan servicer will accept

Mandatory forbearance is not at the discretion of your loan servicer, and can be granted if you meet any of the following requirements:

•   You’re serving in a medical or dental internship or residency program and meet specific requirements.

•   The total amount you owe on all of your loans is 20% or more of your gross monthly income.

•   You’re serving in an AmeriCorps position for which you’ve received a national service award.

•   You’re a teacher and qualify for teacher loan forgiveness.

•   You qualify for partial payments on your loans through the U.S. Department of Defense Student Loan Repayment Program.

•   You’re a member of the National Guard and have been activated by a governor, but don’t qualify for the military deferment.

You can read more details about eligibility requirements for forbearance here .

A Note on the Temporary On-Ramp Period

If you’re currently struggling to manage federal student loan payments, you may be able to take advantage of a temporary repayment on-ramp period without having to rely on deferment or forbearance. This period, which takes place from Oct. 1, 2023 to Sept. 30, 2024, protects financially vulnerable borrowers from the consequences of missing payments. Those who miss payments will not have them reported to the credit bureaus or collections agencies, and loans will not be considered delinquent or in default. However, once this on-ramp period is over, any missed payments will be due.

Private Student Loans

While the options and requirements for these programs are clear on federal student loans, they can be a little trickier with private loans.

That’s because there are so many different private student lenders, and each has its own policy and criteria for determining eligibility.

Unfortunately, there’s no mandatory forbearance option like there is with federal loans. Instead, it’s typically at the lender’s discretion to determine whether you qualify.

Also, the deferment and forbearance periods can vary by lender. For example, you may need to apply every few months, and you may be limited on how often you can apply.

Since there’s no real consistency among private student lenders, if you borrowed a private loan it’s important to check with your lender directly to find out what their policy is.

How Deferment and Forbearance Can Affect You

When you request a deferment or forbearance on your federal loans, it will be noted on your credit report. However, neither option will have a negative impact on your credit score.

That said, if you miss a payment while you’re waiting for your deferment or forbearance request to get approved, it may hurt your credit. At 90 days overdue, your lender can report the missed payment(s) to the credit bureaus.

Because of this, it may be wise to continue making payments as usual until you receive the official approval for your deferment or forbearance with an effective date.

Also, since interest accrued during a deferment can capitalize at the end of the period, you could end up with a higher balance and monthly payment than when you started.

If you originally wanted to pause student loan payments because you couldn’t afford them, a higher payment could make things more difficult. Take interest into account while considering these options.

What If You Don’t Qualify to Pause Student Loan Payments?

Depending on your lender and situation, you may not be eligible for deferment or forbearance. If this happens, there are a couple of options to consider.

Income-Driven Repayment Plans

If you have federal student loans, it may be possible to reduce your monthly payment by enrolling an income-driven repayment plan, such as the newest SAVE plan.

If you qualify, you can decrease your monthly payment to a percentage of your discretionary income. It won’t stop your loan payments altogether, but it can help make them more affordable.

Refinancing Your Student Loans

Whether you have federal or private loans, you can opt to refinance your student loans. Refinancing could help you save money by reducing your monthly payment, either by securing a lower interest rate or lengthening the repayment term. Note that you may pay more interest over the life of the loan if you refinance with an extended term.

You may also be able to switch to a different lender that offers hardship programs or other support if you’re having trouble making payments.

Keep in mind that refinancing federal loans with a private lender will cause you to lose certain benefits, including income-driven repayment options and access to federal loan forgiveness programs.

Determine If Pausing Student Loan Payments Is Right for You

As you’re considering your options and seeing whether you qualify, take a step back and think about whether deferment or forbearance are right for you in the long run.

And if you find that your current lender’s options aren’t enough, consider refinancing your student loans with a lender that provides what you need.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.


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.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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.

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How to Recertify Your Income Based Repayment for Student Loans

How to Recertify Your Income Based Repayment for Student Loans

If you have federal student loans, you can enroll in an Income-Driven Repayment (IDR) plan, which may make your monthly payments more affordable. That’s because the amount is calculated based on your income and the size of your family.

Income-Driven Repayment is the umbrella term for several federal repayment programs tied to salary, while Income-Based Repayment refers to one specific plan. (Yes, it’s a bit confusing.)

Once you are enrolled in an IDR, you will need to “recertify” annually, by providing updated information about your salary and family size — essentially reapplying for the plan. The government uses this information to calculate your payment amount and adjust it if necessary.

You can easily recertify online or by mail. Read on to find out when to recertify your income-driven repayment, how to do it, and more.

What Is Income-Based Repayment?

As noted above, the correct umbrella term is Income-Driven Repayment, which encompasses four different plans. These are available to federal student loan borrowers to help make their payments more manageable. It’s an option to keep in mind when choosing a loan or if your current federal loan payments are high relative to your income. The program is intended to make the amount you pay on your student loan each month more affordable.

The four income-driven repayment programs offered for federal student loans are:

•   Saving on a Valuable Education (SAVE) Plan — formerly the REPAYE Plan

•   Pay As You Earn (PAYE) Repayment Plan

•   Income-Based Repayment (IBR) Plan

•   Income-Contingent Repayment (ICR) Plan

For all of these plans, your payment amount is generally based on a percentage of your discretionary income, which is defined by the U.S. Department of Education (DOE) as “the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.” There is a Loan Simulator tool you can use to see what your payments would be for each of the repayment programs.

IDR payments are determined as 10% of your discretionary income if you are a “new borrower,” who received their loan on or after July 1, 2014. You must also have no outstanding balance on a Direct Loan or Federal Family Education Loan (FFEL).

If you’re not a new borrower, payments are generally 15% of your discretionary income.

With an IDR plan, your payment will never be more than the 10-year Standard Repayment Plan amount, which is the typical repayment plan for the Federal Direct Loan program and FFELs.

Each income-driven repayment plan has a different loan term. For IDRs, it’s 20 years for new borrowers and 25 years for those who aren’t considered new borrowers. Any loan balance that remains unpaid at the end of the repayment period will be forgiven.

Recommended: Guide to Student Loan Forgiveness

Which Federal Loans Are Eligible for an Income-Driven Repayment Plan?

IDR plans are available for the following types of federal loans:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans made to graduate or professional students

•   Direct Consolidation Loans that did not repay any PLUS loans made to parents

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans made to graduate or professional students

•   FFEL Consolidation Loans that did not repay any PLUS loans made to parents

•   Federal Perkins Loans, if consolidated.

Income-Driven Repayment plans are not available to FFEL PLUS loans or Direct PLUS loans that are made to parents. They are also not available for Direct Consolidation Loans or FFEL Consolidation Loans that repaid PLUS loans to made parents.

You don’t need to consolidate your student loans to apply for an income-based repayment plan.

Recommended: Refinancing Student Loans Without a Cosigner

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The New SAVE Plan

Editor's Note: The SAVE Plan is still in limbo after being blocked in federal court. SAVE enrollees are in interest-free forbearance until at least April 2025. Two closed repayment plans — Income-Contingent Repayment (ICR) and PayAs You Earn (PAYE) — are reopened to those who want to leave forbearance. We will update this page as information becomes available.

The DOE recently rolled out a new income-driven repayment plan called SAVE (Saving on a Valuable Education). It replaces the old plan known as REPAYE (Revised Pay As You Earn). Under the SAVE plan, the income exemption increases from 150% to 225% of the poverty line.

Those enrolled in SAVE pay 5% to 10% of their discretionary income toward their monthly student loan payments, and their loans will be discharged after 20 years for undergraduate loans, and 25 years for graduate loans. For comparison, on an IDR plan, borrowers pay between 10% and 15% of their discretionary income and loans are forgiven after 20 to 25 years.

Borrowers who have $12,000 or less in federal loans will receive forgiveness after 10 years of on-time payments (even if their payment is $0 each month). Borrowers with more than $12,000 in loans should add a year for every additional $1,000 of debt they owe. So if they have $14,000 in loans, they will receive forgiveness after 12 years of on-time payments under the SAVE plan.

Under SAVE, if you are a single borrower earning $32,800 or less or a family of four earning $67,500 or less (amounts are higher in Alaska and Hawaii), your monthly payments will be $0. According to the DOE, borrowers earning more than this will save at least $1,000 per year compared to the other income-driven repayment plans.

What’s more, under the SAVE plan, interest will not accrue if you make your payment on time each month. For example, if your interest charge is $50 each month, and your payment is $30, you won’t be charged the remaining $20.

Like other IDR plans, the SAVE plan will need to be recertified every year.

What Is Student Loan Recertification?

Since your repayment plan is based on your income and the size of your family, you need to reconfirm these details every year.

If you apply for an income-driven repayment plan online, the DOE will ask you for consent to access your tax information. If you give consent, they will automatically recertify your loan every year.

If you choose to apply manually (printing out a PDF and mailing it into your loan servicer), you will need to manually recertify every year with your loan servicer.

If your financial situation changes ahead of recertification — like you lose your job — you can reach out to your loan servicer and ask them to immediately recalculate your payments.

How to Recertify Income-Driven Repayments

You can apply for income-driven repayments and recertify your status by going online to StudentAid.gov. Filing your application online ensures that it is sent to each of your loan servicers if you have more than one. Alternatively, you may send paper applications to each of your loan servicers if you haven’t filed a tax return in the last two years or your income has changed significantly since you filed your last return.

To file online, go to the student aid website above, click on “Manage My Loans,” and then click on “Recertify an Income-Driven Repayment Plan.” You’ll need to log in with your federal student aid ID.

Next you’ll answer questions about your family, including family size, your marital status, and your spouse’s income, if applicable. You can connect your account directly to your tax return to verify your income information. And if your income has changed since your last tax return, you can upload more recent pay stubs.

To recertify by mail, you can download the Income-Driven Repayment Plan Request form, which you can find in the Federal Student Loan Forms library. Fill out the form and attach the required documents. You’ll send the request to the address provided by your loan servicer.

When to Recertify Income-Driven Repayment Plans

The government paused income-driven repayments as part of its COVID-19 relief program. Paused payments still count toward IDR forgiveness.

Borrowers were not required to recertify before payments restarted. So if a borrower’s recertification date fell between October 2023 and March 1, 2024, it was pushed out by one year. For example, if your recertification date was January 1, 2024, your new recertification date is January 1, 2025.

If your income has decreased or your family status has changed in the past three years, you may want to recertify earlier. You can fill out a recertification form at any time if you’re struggling to make your payments because your financial situation has changed.

If you fail to recertify your IBR plan by the annual deadline, your monthly payment will switch to the amount you will pay under the Standard Repayment Plan. You’ll be able to make payments based on your income again when you update your income information.

The Takeaway

Income-Driven Repayment plans are available to most federal student loan borrowers and can be a great way to make sure your student loan repayments work with your budget. Recertification is a critical step borrowers need to take each year to inform the government of changes to your situation that might affect your payment size.

Refinancing is another way to manage your student loan debt, especially if you have private student loans that don’t qualify for government assistance programs.

If you’re considering refinancing federal loans, just be sure the amount you save outweighs the benefits of income-driven programs, potential student loan forgiveness, or other federal loan protections, all of which you lose access to when you refinance with a private lender. Our Student Loan Refinance Calculator can help you run the numbers.

Visit SoFi to explore options for student loan refinancing. SoFi offers a competitive rate, flexible terms, no hidden fees, and no prepayment penalty — and you can view your rate in 2 minutes.

FAQ

Can you recertify student loans early?

Federal student loan borrowers who are on an income-driven repayment plan need to recertify their loans once a year. You can recertify early, and it may be a good idea if your family has grown or your income has decreased.

How do I recertify my student loans?

You can recertify your student loans online at the Federal Student Aid website (studentaid.gov), or by downloading and mailing in the Income-Driven Repayment Plan Request form with any supporting documentation. If you mail in the request, you’ll need to send a copy to each of your loan servicers.

When should I recertify my student loans?

Your recertification date is the date one year after you started or renewed your IDR plan. Your loan servicers will send you a notice that it’s time to recertify your loan.


SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.


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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.


Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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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Explaining Federal Direct Unsubsidized Loans

Most of us simply don’t have the cash on hand to pay for college or graduate school out of our pockets. For the 2023-24 school year, the College Board estimates it costs $41,540 on average annually to attend a private non-profit four year university and $11,260 for in-state students at a public four-year school.

That means you might need to take out student loans to fund your education.To make sure you’re not in danger of defaulting on your loans or paying too much, you might want to understand some basics of student loans.

When you take out student loans, they’re either private or federal — meaning they either come from a private lender, like a bank, or are backed by the federal government.

Federal student loans are either subsidized or unsubsidized Direct Loans. There are also Federal Direct PLUS loans for parents or graduate and professional students. Interest rates for federal loans are set by Congress and stay fixed for the life of the loan. Federal student loans come with certain protections for repayment.

But what are the differences in the types of federal loans? When you’re weighing your options, you might want to understand some of the differences between a Federal Direct Unsubsidized Loan vs. a Direct Subsidized Loan vs. a private student loan, so you can evaluate all of your options.

Key Points

•   Federal Direct Unsubsidized Loans allow students to borrow without proving financial need, making them accessible to undergraduates, graduates, and professional degree students.

•   Interest on Unsubsidized Loans begins to accrue immediately after disbursement, resulting in a higher total amount owed upon graduation compared to Subsidized Loans.

•   To apply for a Federal Direct Unsubsidized Loan, students must complete the Free Application for Federal Student Aid (FAFSA), which determines eligibility for various financial aid options.

•   The interest rates for these loans are fixed and set annually by Congress, with specific rates for undergraduates, graduate students, and PLUS Loans for parents.

•   Advantages of Unsubsidized Loans include higher borrowing limits and income-based repayment options, while disadvantages involve responsibility for accruing interest and potential capitalization.

What Is a Federal Direct Unsubsidized Loan?

The federal government offers two umbrellas of Direct Loans: unsubsidized and subsidized. When you take out a loan, the principal amount of the loan begins to accrue interest as soon as the loan is disbursed (when the loan is paid out to you). That interest has to be paid or it is added onto the loan amount.

Subsidized Federal Student Loans

On a Federal Direct Subsidized Loan, the federal government (specifically, the US Department of Education) pays the interest while you’re in school, during the six-month grace period after you graduate, and if you temporarily defer the loans. On a Federal Direct Unsubsidized Loan, you are responsible for paying all of the interest on the loan from the moment it starts accruing.

Since the interest is paid for you while you are in school on a subsidized loan, it doesn’t accrue. So the amount you owe after the post-graduation grace period is the same as the amount you originally borrowed.

Unsubsidized Federal Student Loans

On a Federal Direct Unsubsidized Loan, the interest accumulates even while you’re in school and during the grace period — even though you aren’t required to make any payments while in school.

The interest is then capitalized, meaning it gets added to the total principal amount of your loan. That amount in turn accrues interest, and you end up owing more when you graduate than you originally borrowed.

Of course, you can make interest payments on your unsubsidized loan while you’re in school to save yourself money in the long run. However, you’re not required to start paying off the loan (principal plus interest) until six months after leaving school.

For the 2023-2024 school year, the interest rate on Direct Subsidized or Unsubsidized Loans for undergraduates is 5.50%, the rate on Direct Unsubsidized Loans for graduate and professional students is 7.05%, and the rate on Direct PLUS Loans for graduate students, professional students, and parents is 8.05%. The interest rates on federal student loans are fixed and are set annually by Congress.

Origination fees for unsubsidized and subsidized loans is set at 1.057% for the 2023-2024 academic year.

How Do You Apply for a Federal Direct Unsubsidized Loan?

The first step to finding out what kind of financial aid you qualify for, including Federal Direct Unsubsidized Loans and Subsidized Loans, is to fill out the Free Application for Federal Student Aid (FAFSA®).

Your school will then use your FAFSA to present you with a financial aid package, which may include Federal Direct Unsubsidized and Subsidized Loans and other forms of financial aid like scholarships, grants, or eligibility for the work-study program.

The financial aid and loans you’re eligible for is determined by your financial need, the cost of school, and things like your year in school and if you’re a dependent or not.

Who Qualifies for Federal Direct Unsubsidized Loans?

Federal Direct Subsidized Loans are awarded based on financial need. However, Federal Direct Unsubsidized Loans are not based on financial need.

To receive either type of loan, you must be enrolled in school at least half-time and enrolled at a school that participates in the Federal Direct Loan program. And while subsidized loans are only available to undergraduates, unsubsidized loans are available to undergrads, grad students, and professional degree students.

Pros and Cons of a Federal Unsubsidized Direct Loan

There are pros and cons to taking out federal unsubsidized direct loans.

Pros

•   Both undergraduates and graduate students qualify for Federal Direct Unsubsidized Loans.

•   Borrowers don’t have to prove financial need to receive an unsubsidized loan.

•   The loan limit is higher than on subsidized loans.

•   Federal Direct Loans, compared to private loans, come with income-based repayment plan options and certain protections in case of default.

Cons

•   Federal Direct Unsubsidized Loans put all the responsibility for the interest on you (as opposed to subsidized loans). Interest accrues while students are in school and is then capitalized, or added to the total loan amount.

•   There are limits on the loan amounts.

Recommended: Should I Refinance My Federal Loans?

The Takeaway

Federal Direct Unsubsidized Loans are available to undergraduate and graduate students and are not awarded based on financial need. Unlike subsidized loans, the government does not cover the interest that accrues while students are enrolled in school. Unsubsidized federal loans are eligible for federal benefits like income-driven repayment plans or Public Service Loan Forgiveness.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.


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


SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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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