Jun
20
2019
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Which Generation Has the Most Student Debt?

By | Debt Payoff, Financial Independence, Student Loans, student_loan | No Comments

Asked to picture the typical person struggling with student debt, you’d probably imagine a new-ish college graduate or working professional—maybe someone who’s trying to buy a home or who plans to start a family.

But according to recent college debt statistics , that person might just as likely be a parent or grandparent who’s trying to pay off a home or plan for retirement.

Turns out, student debt isn’t just for kids anymore. Even baby boomers, who are now in their mid-50s to early-70s are pressing pause on their dreams because they’re burdened with loans they haven’t paid off, a loan amount that has reached $16,100 for the typical Parent PLUS borrower .

Yes, millennials had their work cut out for them between high tuition rates and lower wages than they might have expected when they graduate.

But their parents and grandparents could be in it with them—sharing at least part of the financial burden. Even those who never borrowed a dime for their own education may have taken out loans or agreed to co-sign for their kids. Now they’re facing some of the same repayment problems—but with less time to bounce back financially.

Student Debt by Generation

According to the Consumer Financial Protection Bureau (CFPB), the number of consumers age 60 and older with student loan debt quadrupled between 2005 and 2015—from about 700,000 to 2.8 million. And the average amount they owe also dramatically increased—from $12,100 to $23,500.

Although most student loan borrowers are still young adults between the ages of 18 and 39, the CFPB says, older consumers are the fastest-growing age segment of the student loan market. In that same 10-year period, 2005 to 2015, the share of borrowers 60 and older increased from 2.7% to 6.4%.

When surveyed, the vast majority of older borrowers (73%) said their student debt was for a child or grandchild’s education. Twenty-seven percent said their loans were for their own education or for their spouse. And the CFPB estimates that 57% of all co-signers are age 55 and older.

Gen Xers, who are now in their late-30s and early-50s, are in a similar situation—except they often have more of their own student debt as well.

In the mid 1970s, boomers started using a combination of grants and student loans, which boosted college attendance, but cracks began to show as student loan debt skyrocketed. In 1986 , more than one quarter of student borrowers owed over $10,000; adjusting for inflation, that’s equivalent to over $21,000 today.

Now, they’re paying for their kids’ education—by taking out loans or contributing less to their retirement savings. Or both. The CFPB found that borrowers nearing retirement (ages 50 to 59) had a lower median amount in their retirement accounts than consumers without student loan debt.

Though financial advisors repeatedly warn parents not to short themselves while helping their kids, a report by the Association of Young Americans (AYA) and the AARP found student loan debt was holding up retirement savings for around a third of Gen X and boomer respondents.

Don’t let student loan debt hold you back.
Learn how refinancing can help.

About a quarter of Gen X parents and a third of boomer parents said college debt prevented or delayed them from buying a home. And about a quarter of Gen Xers and boomers said their debt burden was an obstacle in getting the health care they need.

Some overwhelmed borrowers put at least part of the blame on federal parent PLUS loans, which they say are too easy to get. (Parents with a qualified dependent undergraduate student need only prove they don’t have an “adverse credit history”) On average, parents now borrow nearly $15,880 per year in parent PLUS loans.

In March 2018, Federal Reserve Chairman Jerome Powell said that though he generally supports the idea of a vibrant education loan climate, borrowers need to be informed of the risks they’re taking. “You do stand to see longer-term negative effects on people who can’t pay off their student loans,” he said. “It hurts their credit rating, it impacts the entire half of their economic life.”

In general, a college degree is, of course, a worthwhile investment. The unemployment rate for those age 25 and older with a bachelor’s degree or more education was 2.1% in April 2018.

For workers age 25 and older who graduated from high school but did not attend college, the unemployment rate was 4.3%. And those workers are earning more, on average. According to the Pew Research Center , those ages 25 to 39 with at least a bachelor’s degree have, on average, higher family incomes—the individual’s income plus that of his or her spouse or partner—than those in that age range lacking a bachelor’s degree.

Next Steps Toward Tackling Debt

While policymakers look for broader solutions, borrowers are finding their own. For many, that means getting their payments under control with student loan refinancing.

If you have a good job and have maintained a solid credit history, refinancing your student loans may help in a few ways.

If you can get a lower interest rate, you’ll lower the total amount you’ll pay over time—depending on the loan term you choose, of course. And it can make paying off your debt much easier if you have only one payment to make every month.

If you’re a borrower who proudly supported your child or grandchild through college but ended up with more debt than expected, refinancing may be the answer. And if you’re a new-ish borrower who can’t meet your financial goals because your student loans are eating your income, a different payment plan may help you achieve those milestones. Just keep in mind that if you refinance federal student loans with a private lender, you lose some potential federal benefits, such as income-based repayment plans and forbearance options.

Either way, you don’t have to be stuck. And you don’t have to be a college loan statistic.

See if refinancing student loans with SoFi may be an option for you.

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.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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Jun
12
2019
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What Is the Difference Between Good and Bad Debt?

By | Debt Payoff, Financial Independence, Terminology | No Comments

The word “debt” is commonly defined as something—usually money—owed by one party to another. In the U.S., consumer debt is typically made up of mortgages , auto loans, credit cards, and student loans.

The overall balance of consumer debt in America has been on the rise since 2012, according to the New York Federal Reserve . But that’s not necessarily a terrible thing, because not all debt is bad. So what is the difference between good debt and bad debt? And how do you avoid the latter? Here are some tips to navigating the world of debt.

1. Debt can help build your credit score.

A credit score is a number determined by a consumer’s credit history . How many credit cards you have, how many loans you have, and the total amount of money you owe help determine your score, as does whether or not you pay your bills on time. Credit scores range from 300 to 850, and the scores are compiled
by credit bureaus such as Equifax, Experian, and TransUnion.

Companies and lenders use your score to calculate risk and what interest they will charge you on a debt. If your score is higher, you will likely be offered a lower interest rate. If your credit score is low, you will probably be presented with a higher interest rate.

To build your credit score, you must establish a positive credit history, and one way consumers can do that is by borrowing responsibly—i.e., having good debt.

2. Good debt pays for things you need, and/or things that might increase your net worth or future value.

Going into debt to pay for your education or a home are considered examples of good debt. That’s because attaining a college degree or buying a house are ways to invest in yourself. A college degree might lead to a better paying job, so it has future value. And purchasing a home not only gives you something you need—a place to live—it’s also an investment that is likely to increase in worth over time. In the past year (as of April 2019), U.S. home values have gone up 7.6% in value according to Zillow. And historically, American home values appreciate over time, barring an economic downturn or crisis.

3. Bad debt pays for things you don’t need, or things you can’t afford.

Using a credit card to purchase unnecessary or extravagant items can build up bad debt. Using a credit card to buy the latest tech gadget or to book a tropical vacation may satisfy you in the moment, but they are probably not things you need and they do not add to your net worth. If you must make such a purchase, it might be wiser to save money up over time and buy them outright, rather than pay with a credit card and risk struggling to pay the bill down.

4. Using a credit card can help establish good credit, but not if you can’t afford to pay your bill and in a timely matter.

An unpaid credit card balance at the end of the month can be considered bad debt, because chances are you’re paying significant interest on that balance. In early 2019, the average credit card interest rate (or annual percentage rate, APR) was above 17 percent .

That rate can lead to a decent amount of extra money being owed. And if you let a chunk of the balance roll over month after month, you’re paying interest on top of interest. It’s easy to imagine how your bill total can climb, making it more and more challenging to eliminate the debt.

Payday loans are another example of bad debt, as the interest rate for these short-term cash advances can be incredibly high. Each state sets its own regulations for these loans. For example, in California , a consumer borrowing the maximum amount of $300 could be charged a fee of up to 15% for the loan, immediately turning their $300 to $255.

5. If you have bad debt or debt that feels unmanageable, don’t ignore it. Lessen (or reorganize) it as best you can.

Different debt challenges call for different measures.

If you find your student loans too big to pay, for example, you could consider refinancing them. In order to lower monthly payments, you might redetermine the terms of your loan so that you can pay them off over a longer period of time. Refinancing also gives you the opportunity to lower your interest rate and therefore the total paid over the life of the loan.

If credit card debt has built up to great heights—and that can happen quickly, if you’ve missed a few payments—it’s time to prioritize in a way that fits you. That might mean the “snowball method”—paying your lowest-balance debt off first, then moving onto the next lowest, thus building momentum. Conversely, you could use the “avalanche method,” paying your highest interest debt off first, then moving onto the next lowest, thus paying your debt off based on the interest rate.

At SoFi, we used our experience serving people like you to develop a proprietary debt paydown strategy called “debt fireball.” It combines the best of the two methods described above. You would separate your debt into two categories—good debt and bad debt. Then you would attack your bad debt starting with the one with the lowest balance. Then you would continue to the next lowest balance and build momentum to quickly blaze through your bad debt.

For some, consolidating credit card debt into a personal loan is a good way to go—especially if you’re feeling overwhelmed by the number of credit card bills you are keeping track of. Consolidating all of your credit card debt into one loan means you make one payment to one lender.

The additional good news is that a personal loan is likely to come with a lower interest rate than your credit card debt. Though credit card payments you are behind on can hurt your credit score, consolidating them into a personal loan that you manage and pay monthly can help build your score back up.

If you think a personal loan is a good option for you, check out personal loans with SoFi. SoFi offers personal loans with low rates and no fees. With a low-interest rate and a fixed monthly payment, an unsecured personal loan to consolidate credit cards or other high-interest debt could help you start tackling your debt.

Get started today.

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.

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.

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.

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Jun
06
2019
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Importance of an Accountability Partner for Student Loan Repayment Success

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

When you go to the gym, you might bring your significant other along to hold you accountable in your workout. Or maybe you have a co-worker you always want to collaborate with because they push you to produce your best work.

Whether it’s at home or work, we could all use accountability partners. Having a friend to keep you in check while you’re repaying your student loans could help you pay off your loans in the best way for you.

What Is an Accountability Partner?

While a boss or a parent is a hierarchical relationship, an accountability partner is an equal relationship. You keep tabs on each other to ensure you’re both hitting the goals you set.

When it comes to paying off your student loans, your accountability partner could help you make sure you’re setting goals and achieving them. They might check in often to see how you’re doing and, if you need to reset, they could help you re-evaluate your vision. Having an accountability buddy keeping an eye on you might help motivate you to work toward your goals.

Why Would Someone Need an Accountability Partner?

It’s easy to say you’ll independently hold yourself accountable, but if you fail to follow through, there may not be any consequences. And if you keep putting something off, you might have a hard time achieving your goals.

If you’re a self-starter, or you hit the goals you make for yourself, then you might not need an accountability partner. But if you’re struggling to finish what you start and you want someone to keep an eye on you, having a buddy could be helpful.

Finding a partner or buddy who’s there to talk out your issues with could be an excellent step to reviewing and revising your current strategy for hitting your goals.

Finding an Accountability Partner

Your partner should be your equal—you’ll both be setting yourselves up to stay in line and crush your goals. If you aren’t sure who your accountability partner should be, you could look for the people you’re closest to, like a spouse, friend, co-worker, or even a relative. If you’re okay with your parents keeping tabs on your repayment goals, you could consider them as an option, too.

Author Susan Cain has a few suggestions on how to find an accountability partner, no matter your goals; we just applied them to student loan repayment here:

  1. Finding someone you trust. They don’t have to be your best friend, but they can be a good friend, relative, or significant other. Different personalities might be better, too.

  2. Reviewing your goals. When it comes to your student loans, it can be helpful to have a clear target in mind, like increasing your monthly payments by a certain dollar amount, or paying the full balance off by a set month or year.

  3. Being specific about your action plan. Share your student loan repayment plan and what consequences might occur if you don’t meet that goal.

  4. Setting up regular check-ins. Once a month or every few months, you could have a date set to meet up for coffee or a phone call to catch up on your progress. This could be a good way to set little goals — by achieving them before your check-in.

  5. Revisiting goals. Remember, your goals can be fluid. It’s okay to shift and change as your strategy evolves. Maybe you get a raise and can tweak your contributions. Maybe you get a side hustle, and you could meet your original goal sooner. Don’t be afraid to make changes if what you’re doing isn’t working.

Will an Accountability Partner Help You Repay Your Student Loans?

While you wouldn’t expect your financial accountability partner to gift you money to repay your student loans, you can expect them to give you a figurative kick in the butt to keep your repayment goals on track.

If your goal is to increase your monthly student loan payments, you could set an amount you’re comfortable with paying. If you find after a few months that your goal is easily attainable and want to contribute more, that’s when you could revise your goal and increase your amount.

You might want to talk with your accountability partner about this change, too. They might be able to offer a different perspective.

Are you taking that money away from something important, like a credit card bill or your future retirement? Your accountability partner could help shift your thinking. The change might not be as good as you thought.

Having someone to help you along the way to student loan repayment success might get you to hit your goals you wouldn’t otherwise have managed. A person who has your best interest in mind but also treats you as an equal instead of a subordinate could be a great way to stay on top of your student loan payments.

Refinancing Student Loans

One thing you and your accountability buddy might discuss is the possibility of refinancing your student loans. You could potentially end up paying lower interest over the life of the loan and save money in the long run.

Refinancing with SoFi could mean serious savings, with low interest rates, no hidden fees and no pre-payment penalties.

Learn more about refinancing student loans with SoFi today.

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.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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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Jun
05
2019
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U.S. Student Debt Has Surpassed Credit Card Debt

By | Credit, Debt Payoff, personal_loan, Student Loans, student_loan | No Comments

Scary, but true. The amount of student debt in the United States is approximately $1.5 trillion , about one-and-a-half times what Americans currently owe on their credit cards. People use credit cards for home repairs, to go on vacation, to buy groceries, to eat out at restaurants—and for just about any other expense you can think of. Yet, all of these purchases combined are dwarfed by our country’s total student loan debt.

Student loan debt is now the second biggest form of debt in our country, only behind mortgage loans—and the debt balance and its accompanying crisis continues to grow. In this post, we’ll delve into what impact this situation is having on the millennial generation (and other borrowers). We’ll also reverse engineer the reasons why this debt crisis is taking place and share strategies to help whittle down student loan debt, maybe even paying it off more quickly.

National Student Loan Debt and Its Impact on Borrowers

A recent study shows that millennials who have student debt have a net worth, on average, that’s 75% less than those without student debt (an average of $29,087, compared to $114,376 for those who are loan-free).

Students with loan debt also tend to have, when compared to their peers with no student loan debt:

•  about half as much money in the bank ($5,500 versus $10,180 )

•  approximately $19,000 less in their retirement accounts ($21,160 versus $39,905 )

•  larger mortgages—and on homes with less value

In short, financial wellness of millennials with student loan debt is clearly substandard, overall, when compared to others in their demographic without this debt. And, although people with college degrees tend to get higher-paying jobs, overall, the weight of the student debt that often accompanies it can drag down a person’s ability to gain financial wellness.

Here’s another statistic to consider: in an era when total student loan debt has surpassed total credit card debt, millennials with student loans also have more credit card debt.

•  55% of those with student loans also have credit card debt ; only 32% without education-related debt do.

•  Their average balance is $2,888 compared to $1,476 for graduates without student loan debt.

A Forbes article looks at the “disastrous domino effect” created by student debt, with one couple sharing how their debt is forcing them to “put their lives on hold year after year.” It’s had a negative impact on their marriage as they focus on paying down debt, and as they’re waiting to have children and buy a home. This debt has been a “huge burden and point of contention.”

Related: Will There Ever Be a Student Loan Bailout?

The borrower being quoted was a participant in a 50-state survey, Buried in Debt , of student loan debt and its impact on borrowers.

This report examines how the unrelenting stress of student debt can strain borrowers financially as well as emotionally. One of the participants shares how she regularly thinks about selling everything she owns to live in her car so she can put more money towards her debt.

Conclusions from the report include:

•  Nearly 90% of borrowers surveyed struggle to make payments.

•  The majority have less than $1,000 in their bank account.

•  6% of them have even had Social Security payments or wages garnished.

•  Nearly one third of them say their student loan bill is higher than their rent or mortgage payment.

•  65% say it’s higher than their entire monthly food budget.

More About the National Student Loan Debt Crisis

The amount of U.S. student loan debt continues to grow, increasing by 170% in just 10 years’ time . You read that right: over the last 10 years or so, the amount of student debt (in real dollars!) nearly tripled, which may lead people to believe we’re in the midst of a student loan bubble, similar to the subprime real estate bubble from a decade ago.

In June 2018, NASDAQ.com published Safehaven’s prediction that the student loan bubble is about to pop, and the article also shares how, earlier in 2018, the chairman of the Federal Reserve stated that this student loan increase could “slow down economic growth.”

Why this Debt is Growing

In part, the total student loan debt is growing because the costs of getting an education are still rising beyond the rate of inflation. In fact, over the last 10 years, the published costs of in-state tuition and fees at public universities increased at an average of 3.1% beyond the rate of inflation.

And, as long as the cost of attending college outpaces the cost of living, problems will continue for borrowers. Plus, the housing market crash of 2008 has also fed into today’s student loan debt crisis. That’s because some parents who’d planned to borrow against their homes’ equity to help their children attend college often couldn’t do so, post-2008. So, these students needed to take on debt of their own. More specifically, some economists suggest that, for every $1 drop in home equity loans, there has been an increase of 40 to 60 cents in student loans.

Even more alarming, analysis by The Brookings Institution estimates that, by 2023 (just a few short years away!), nearly 40% of student borrowers may default on their loans.

Paying Down Student Debt More Quickly

If possible, you could consider making an extra payment annually toward your loans’ principal balance. Can you do this twice a year? Every quarter? Paying extra toward your loans can help you get them paid off more quickly.

If that strategy is too much for your cash flow situation, you could always try figuring out how much you could increase your monthly payment beyond the minimum. Even if that doesn’t seem like an option right now, you can continue monitoring your financial situation and taking advantage of when you can pay more to your debt balance.

It can also help to create or review your monthly budget to see where you can cut back on expenses. For example:

•  How many paid apps, monthly subscriptions, and so forth do you have automatically deducted from a bank account or put on a credit card? Do you use them enough to justify their prices? There are even apps that help you can cancel unnecessary subscriptions and more.

•  When is the last time you shopped around to make sure you’re getting a good deal on your car insurance, enter’s insurance, or cell phone plan? How much could you save if you switched to a less expensive plan, and would the coverage still be as good?

•  What discretionary spending can you reasonably live without?

What would happen if you put those “found” dollars onto your student loan balance?

Refinancing Student Loan Debt with SoFi

If you’ve ever consolidated, say, balances from multiple credit cards into a personal loan, then you already know how much more convenient it can be to have one monthly payment. And, if you can get a lower rate on your new loan, you could also pay less interest over the life of the loan—depending on your repayment term.

The same is true when you refinance your student loans. It isn’t unusual for students to have taken out multiple loans for their education, and consolidating them into one loan with one monthly payment and a potentially lower interest rate might help them manage their repayment.

At SoFi, we allow you to refinance federal and private loans. We do, however, recommend that you explore the repayment benefits you can receive with federal loans, such as forgiveness programs or income-driven repayment plans, before refinancing. You’ll lose out on those benefits when you refinance with a private lender, so it’s important to be sure you won’t want to take advantage of any federal loan benefits either now or in the future.

When you refinance, you can opt for a fixed or variable loan and potentially select a more favorable loan term. If you are currently struggling to make your monthly student loan payments, it might make more sense to choose a longer term—though this can mean paying more interest over the life of the loan. Alternately, if you refinance to a shorter term, you could pay your loans off earlier, potentially paying less in interest.

In just two minutes, you can find your rate online and see if you qualify for SoFi student loan refinancing.

Ready to explore refinancing your student loans? Learn about how you can refinance your student loan debt into one convenient payment with SoFi.

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.

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.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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Jun
05
2019
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Which Student Loan Should You Pay Off First?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

As a nation Americans are facing more student loan debt than ever before; the total debt is now around $1.5 trillion . According to the Pew Research Center , about four in 10 American adults hold student loans.

While the amount each individual holds varies greatly, on average those graduating from a four-year college have approximately $30,731 in student loan debt . If you have a graduate degree, that total could be even higher. Approximately 40% of all student loan debt is held by graduate students, which adds up to nearly $563 billion .

When crafting a plan to repay your student loans, it’s beneficial to start by making a budget. Outline all of your expenses, student loans, and any other debts you may have.

Then, tally up all of your income and investments. After cataloging all of that information, take a good look at your spending habits and see where you would be able to make any changes.

When you’re establishing your new budget, try to set aside extra funds to put toward paying off your student loans. And remember that student loans do not penalize you for prepaying on the loan.

What You Should Know About Interest Rates on Your Loans

Interest rates on federal student loans are set by Congress based on the 10-year treasury note. This means every borrower taking out a certain type of federal student loan, in a given year, will pay the same interest rate. These interest rates are fixed for the life of the loan.

Federal student loans also come with some limitations and are regulated by the Department of Education . For undergraduate students, the current aggregate (combined) limit of federal student loans as a dependent is $31,000; and no more than $23,000 of this amount may be in subsidized loans.

As an independent undergraduate student, your aggregate loan limit is $57,500; and no more than $23,000 of this amount may be in subsidized loans. As a graduate student, the aggregate limit for federal student loans is $138,500 for graduate or professional students; and no more than $65,500 of this amount may be in subsidized loans.

The graduate aggregate limit includes all federal loans received for undergraduate study. If the plan of study you’ve chosen requires you to exceed those limits, you may have to consider taking out a private student loan.

These loans come with different interest rates and payment plans. You can learn more about the difference between federal and private student loans at the Federal Student Aid website.

If you’re not sure what your monthly payments will be, you can check out our student loan calculator to get an idea of what your loan payments could look like.

Here are three methods to consider if you’re ready to get serious about paying off your student loan debt.

The Debt Stacking Method

Take a look at your student loans and the interest rates you’re paying. The debt avalanche method, also known as debt stacking, focuses on repaying the debts with the highest interest rates first. In regard to student loans, that means if you have a federal graduate loan with a 6.6% interest rate, plus an undergraduate loan with a rate of 5.05%, you would prioritize paying off the graduate loan first, since it has the higher interest rate.

As you make your minimum monthly payments on all of your loans, you’ll also be paying a little extra toward the loan with the highest interest rate. When that loan is paid off, you’ll redirect those funds to the debt with the next highest interest rate. Continue using this rollover method until all of your debts are paid off.

If you are disciplined and organized when it comes to repaying your debts, the avalanche method could work well for you. Using the avalanche method of debt repayment will likely reduce the amount of money you pay in interest.

The Snowball Method

Another option for debt repayment is the snowball method, which disregards interest rates. With this method, after making the minimum payments on your loans every month, you will focus on the additional funds you have budgeted toward paying off the loan with the lowest balance.

When you have paid off this debt in full, you then roll what you were paying on those monthly payments into the debt with the next lowest balance. You continue to do this until all of your debts are paid off.

One of the benefits of this debt payoff strategy are the early rewards of paying off your smallest loans first. This helps keep you engaged in continuing your repayment plan.

If you feel overwhelmed by the amount of student loans you have to pay off, the snowball method could work for you. Often times when paying off debt, it can be discouraging if you don’t see immediate progress.

The snowball strategy works to encourage you to continue paying off your debts by establishing more frequent rewards. When you pay off that first loan, the sense of accomplishment you feel is enough to keep you committed to your repayment plan and financial goals.

Refinancing Your Student Loans

Another option to consider while you are setting your student loan repayment strategy is refinancing your student loans. Before you do, it’s important to understand that if you have federal student loans, certain benefits like deferment, forbearance, or the option for a Direct Consolidation Loan will be eliminated if you refinance with a private lender.

Refinancing allows you to take out a brand-new loan, with a new interest rate, and new loan terms. Often times, if you have good credit and income, you can lower your interest rate or potentially reduce your monthly payments depending on the loan term.

Another plus to refinancing your loans—instead of managing a number of monthly payments with different interest rates, you only have to worry about one monthly payment with one interest rate. To see how your payments and interest rate could change when you refinance, take a look at SoFi’s student loan refinancing calculator.

Consider refinancing your student loans with SoFi.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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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