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Qualifying for the Public Service Loan Forgiveness Program

As a college graduate, getting started in your career and planning for your financial future should be top priorities. For 44 million college graduates , part of this includes repaying student loans. The average college student graduates with approximately $37,172 in student loan debt.

Repaying student loans can cost a substantial amount of money when you factor interest into the equation, but if you’re planning on working for a non-profit organization or a government agency, public service loan forgiveness could save you years’ worth of payments. But federal loan forgiveness is not necessarily for everyone.

Another option is potentially refinancing your student loans at a lower interest rate—an appealing way to save money over the life of your student loan, especially if you don’t qualify for public student loan forgiveness.

After starting your new post-graduation career and creating a budget, you’ll also want to consider your student loan repayment options and have a plan for managing your student loans.

As with any loan option, there are pros and cons to the Public Service Loan Forgiveness (PSLF) program. You’ll have to decide if it’s right for you or if refinancing your loans could be a better option for your finances in the long run.

What Is Public Service Student Loan Forgiveness?

Also known as PSLF, the Public Service Student Loan Forgiveness is a federal program that may forgive or cancel the remainder of your Direct Student Loans if you work in a qualifying public service job and meet certain stringent criteria, including making 120 qualifying monthly payments. There is no cap on how much can be forgiven, so if you are able to meet the criteria, the rest of your loan goes away.

What Are Public Service Loan Forgiveness Qualifying Jobs?

The first step to qualifying for any kind of federal loan forgiveness program is filling out the employment certification form . Often people wait until after a few years of making payments before filling out the employment certification form, only to then find out those payments didn’t qualify because their job didn’t meet the requirements.

In general, PSLF qualifying jobs are more about the employer than about the specific role you’re filling at the organization. The important thing is that the employer qualifies as a public service organization.

That includes government organizations and 501(c)3 tax-exempt non-profit organizations. There are a few non-profit organizations that are not officially 501(c)3 but still qualify—but only if they provide certain types of qualifying public services. Working as an AmeriCorps or Peace Corps volunteer also counts as a qualifying job.

Employers that don’t qualify—even though working for them can include meaningful and important jobs: Labor unions, partisan political organizations, non profit organizations that are not official 501(c)3 tax-exempt organizations, and any for-profit companies.

You also must be working full-time in the qualifying job, which generally means at least 30 hours per week or whatever your employer’s definition of full-time is.

Other Requirements for the Public Service Loan Forgiveness Program

There are a number of other requirements and specifications necessary to qualify for public student loan forgiveness. For example, only Direct Loans are eligible for PSLF.

If you have other kinds of federal student loans, particularly if you borrowed before July 1, 2010, then you may be able to consolidate your federal student loans into one qualifying federal Direct Consolidation Loan.

However, none of the payments you might have made on your Direct Loan before consolidation will count toward your 120 monthly qualifying payments.

The slightly more confusing part of the requirements are the 120 monthly qualifying payments. These do not necessarily need to be consecutive—if you leave a qualifying employer, you do not lose credit for previous payments you may have made under the employer.

The payments do have to be on qualifying repayment plan, however. Generally, to qualify for federal loan forgiveness programs, you need to be on an income-driven repayment plan. There are four different kinds offered, with the most desirable being the Pay As You Earn Repayment Plan (PAYE) and the Income-Based Repayment Plan (IBR). These typically set a cap on how much your monthly student loan payment will be based on how much you’re currently earning.

For example, if you’re on the Income-Based Repayment Plan, then your monthly payments will be either 10% or 15% of your discretionary income (depending on when your loan was disbursed), but never more than your payment would have been under the standard federal 10-year repayment plan. Your discretionary income is calculated each year based on your family size, location, and salary.

If you’re making income-based payments each month, then it might take longer to pay off your loan because your repayment term will be longer (20-25 years for IBR and 20 years for PAYE), and you’ll be paying interest during that whole time—which adds to the total amount you’ll end up paying.

However, if you meet all the requirements and make the payments, then you could ultimately have your loan forgiven. But even after you’ve made all the 120 qualifying monthly payments, you do not automatically get loan forgiveness or have the rest of your loan cancelled. You still need to apply.

Is Loan Forgiveness Right for You?

While loan forgiveness seems like the ultimate dream, there are downsides, too. Income-driven repayment plans are, obviously, tied to your income.

That means if you have a large loan but a small income and are making very small payments on your student loan, then you could end up paying more over the life of the loan as the interest compounds and gets added to the remaining balance.

If for some reason you make the 120 qualifying monthly payments but then aren’t able to get the remainder of your loan forgiven, all that extra interest could end up costing you. And, unfortunately, many students find it challenging to get their loan forgiveness application officially approved.

Another downside is that your loans have to remain as federal direct loans in order to qualify for potential forgiveness. That means you cannot consolidate or refinance them as private loans, even if the lower interest rates might save you money.

For example, the federal interest rate for undergrad Direct Loans is set at 5.05% through June 30, 2019. A $37,000 federal loan, paid back over 10 years, with a monthly payment of $393, would end up costing you about $10,202 in interest payments on top of the principal. That’s a lot of money.

Student Loan Refinancing with SoFi

And, of course, there’s the fact that if you want to pursue a career that doesn’t fall under the public service definition, then you might want to consider other student loan repayment options, like refinancing. When you refinance your student loans, you take out a new loan—potentially with a new interest rate or loan term.

Depending on your earning potential and credit score, you could qualify for a lower interest rate, which might reduce the amount you pay in interest over the life of the loan.

Learn more about whether refinancing your student loans with SoFi may be right for you.


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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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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What Are Some Student Loan Refinance Options?

Before you even think about a lender to refinance your student loan with, you need to think about why you’re refinancing in the first place.

Everyone’s reasons for refinancing are different—maybe you want to refinance for a lower monthly payment, or perhaps you’re looking for a lower interest rate. Maybe it’s to pay off your loans sooner. Your motivations may mean you choose one lender over another, which is why it’s so crucial to have a debt payoff plan in place before applying for refinancing.

Before you begin scouting out refinancing options you might be eligible for, make sure you have a solid idea of what you’re looking to get out of a lender.

Option 1: Student Loan Consolidation

If you have federal student loans, you might think about a Direct Consolidation Loan with the Department of Education. This might be a good option if you only have federal loans and don’t want to deal with managing multiple loan payments. It can be easy to lose track of monthly loan payments, and missing a payment might be a hindrance to your finances.

Missing a loan payment could cause your credit score to plummet, which hurts your chances of borrowing money in the future, whether it’s opening a credit card or buying a car. Payment history makes up 35% of your FICOⓇ score , so missing a payment can be bad news t when it comes to your credit.

Consolidation combines multiple federal loans into one loan—and one monthly payment. Your interest rate becomes the weighted average of all your old interest rates, rounded up to the nearest one-eighth of a percent.

This might not lower your payment, or your interest rate, but it can potentially help make your federal student loan payments more manageable.

If you have private student loans, you can’t apply for a Direct Consolidation Loan. If you have federal and private student loans and still want to have one streamlined payment, you may want to look into refinancing with a private lender—both federal and private student loans may qualify for refinancing.

Refinancing is a lot like consolidation, but instead of combining your loans with a weighted interest rate, you get a new loan with new loan terms and a new interest rate. And depending on your financial standing, that might even mean you get a better interest rate when you refinance.

If you’re having trouble qualifying for refinancing, you can consider finding a cosigner. A friend or relative with great credit can be your cosigner to help you qualify for a loan or get a better interest rate.

But having a cosigner means that if you don’t make the minimum monthly payments, your cosigner may be on the hook for them. And if you default on your loan, both your credit and your cosigner’s credit may take a hit.

Option 2: Refinancing for a Lower Monthly Payment

Whether you’ve already consolidated your loans or you’re struggling to pay several little loans every month, missing payments can be detrimental to your credit report.

Payment history makes up 35% of your FICOⓇ score—which means on-time payments have a substantial impact. Sometimes, other bills like rent and utilities are your main financial priorities and you don’t have much left for other things—even other bills.

If you’re struggling to make student loan payments and are worried about missing payments, refinancing for lower payments might be worth looking into. And it’s especially important to think about refinancing before you miss a payment, because your financial credibility could go down once you’ve missed a student loan payment.

Refinancing your student loans can help you lower your monthly payments when you’re having trouble making them, typically by opting to extend your loan term. Even if your interest rate isn’t the lowest, you can concentrate on making on-time payments to help reestablish a good track record.

Keep in mind that a lower monthly payment doesn’t necessarily mean you’ll pay off your loan faster. The goal here is to make your monthly payments more workable for your budget.

But it might extend the life of your loan and in turn, you could end up paying more in interest over the course of the loan.

If your monthly payments start to become manageable and you can pay more into them every month, you may want to consider doing so. But check with your lender first. Some charge fees for paying off your loans early.

Option 3: Refinancing for a Lower Interest Rate

Generally, a lower interest rate might reduce the cost of your debt overall—depending on your loan term. Review all your lender options to find one that offers you the lowest possible rate. If that rate still isn’t lower than what you’re currently paying, it might not be worth it.

The lowest interest rates are typically offered to those with excellent credit (among other positive financial factors). You might want to build up your credit score if you want to eventually refinance your student loans for a lower interest rate.

Option 4: Refinancing to Pay Off Your Loans Sooner

Refinancing to pay off your student loans sooner means you might have to make larger monthly payments—that’s because a shorter loan term would increase your minimum payments. Chunking away at your loan principal means at the end of your loan’s life, you will have paid less interest overall. Shortening your loan term so you get out of debt faster might be a good reason to refinance.

If you have a solid job with steady income, you may be able to structure your budget to pay off more of your loan every month, resulting in paying it off sooner. But if you don’t have reliable income, this may not be the best option for you.

Are You Ready to Refinance Your Student Loans?

Regardless of your reason, you have plenty of options when it comes to refinancing your student loans. Get quotes from multiple lenders so you can find the refinancing offer that best suits your needs.

Don’t settle for options that don’t help you. If you aren’t getting a good deal on any of your refinancing options, it’s okay to walk away.

Learn more about refinancing your student loans with SoFi today.


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.
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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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A Guide to Student Loan Forgiveness for Nurses

Whether you’re thinking about a career in nursing, or you’re already working as a nursing professional, it’s almost inevitable that you’ll have to shoulder a good bit of student loan debt. The cost of nursing school, like other forms of education, keeps rising, and many students are taking on higher levels of student loan debt as a result. Balancing a student loan payment with all the other expenses you have, especially if you recently graduated from college, can really add to your stress.

The good news: The median income for registered nurses in 2017 was $70,000. Want another bit of really good news? There are many programs to help you manage your student loan payments and debt. Nursing is one of the careers that has numerous options for student loan forgiveness. And if you don’t qualify for student loan forgiveness for nurses, you can leverage one of the many federal loan repayment plans to help you pay back what you owe more easily.

The government considers nursing to be a vital service to society, so they offer multiple ways to help nurses with student loan debt. If you’re starting to research the right options for you, some key places to contact include your school, your employer, your state’s department of financial aid, and studentaid.ed.gov , for the federal government’s loan repayment and forgiveness plans.

But before you do that, check out our quick guide to student loan forgiveness for nurses. We’ll start by talking about what loan forgiveness is, the repayment plans nurses may be eligible for, and loan forgiveness and assistance plans specifically targeted at nurses. And if for some reason you don’t qualify for a loan forgiveness program, you may still have options.

What Is Loan Forgiveness?

Simply put, loan forgiveness means the borrower of the loan is no longer required to pay all or part of the remaining principal and interest balance. To qualify under most federal forgiveness plans available, your student loan must not be in default. Private loans do not qualify for federal loan forgiveness programs.

There are nurse-specific loan forgiveness programs, and loan forgiveness programs designated specifically for those working in public service. Nurses can also take advantage of federal student loan repayment plans that offer forgiveness after 20 or 25 years of qualifying payments. (The caveat is that it takes quite a bit of time before the loans are forgiven. And your loan forgiveness balance may be subject to taxes.)

Getting to Know Your Federal Student Loans

Before we get into loan forgiveness, let’s talk about the loans you may have taken out for undergraduate or nursing school.

1. Direct Student Loan Program

Most federal student loans are part of the Federal Direct Student Loan Program. When you borrow funds for your education, you’re borrowing directly from the U.S. Department of Education. Here’s a rundown of eligible student loan options:

Direct Subsidized Loans : Undergraduate students can take advantage of these if they demonstrate financial need.

Direct Unsubsidized Loans : Students don’t have to demonstrate financial need for these loans, plus they are available to both undergraduate and graduate students.

Direct PLUS Loans : These loans allow parents to help pay for a dependent student’s education, and are meant to bridge the gap after other financial aid has been exhausted. Some graduate, professional, and certain undergraduate students may be eligible for PLUS Loans on their own as well.

Direct Consolidation Loans : This loan allows you to consolidate all your federal loans into one, at an interest rate that’s a weighted average of all your loans’ interest rates rounded to the nearest one-eighth of 1%.

2. Federal Perkins Loan Program

This plan is usually reserved for students with severe financial needs. The loans are sourced by the school to help students pay for their education. P.S., the loan program has been discontinued, but those still paying them off may be eligible for forgiveness.

3. The Federal Family Education Loan Program (FFEL)

This loan program has been discontinued and has not been available since 2010. However, if you have one, these loans can still be forgiven.

Federal Loan Forgiveness Programs

The federal government provides several loan forgiveness programs, but borrowers must be in good standing with their lender, meaning they have a history of making full payments on time.

Just don’t fall for the “Obama Student Loan Forgiveness Act,” because it doesn’t exist. There was a bill called the Student Loan Forgiveness Act that would’ve capped how much you paid on your student loan, but it never became law. So check out these bona fide programs that provide loan forgiveness for nurses and see if you qualify.

The Public Service Loan Forgiveness Program (PSLF)

This program forgives loans after you’ve made 10 years (120 months) of on-time, qualifying payments. These are for Direct Student Loan Program loans, but FFEL loans can be included if you combine them with your direct loans in a Direct Consolidation Loan.

To be eligible for Public Service Loan Forgiveness, you must work for a qualifying government organization, tax-exempt not-for-profit organization, certain other not-for-profits, or as a volunteer for AmeriCorps or Peace Corps.

Federal Perkins Loan Cancellation

While we’ve been mostly using the term loan forgiveness, the phrase “cancellation of loan” is basically the same thing, and that’s how it’s used under the Federal Perkins Loan cancellation program. Nurses may be able to have their Perkins Loans cancelled if they qualify and meet the eligible service requirements .

NURSE Corps Loan Repayment Program

The federal government wants to encourage careers in nursing, especially as the nation ages. The Nurse Corps Loan Repayment program will repay some of a nurse’s eligible student loans when they work full-time at a Critical Shortage Facility (CSF) or as a faculty member at a qualifying nursing school. The financial award depends upon the nurse’s role at the facility.

Successful applicants are eligible to receive 60% of their outstanding student loan balances over a two-year employment commitment. Those who qualify may be able to get an extension to a third year and an additional 25% of their original loan balance forgiven.

You have to be a licensed registered nurse, advanced practice registered nurse, or a faculty member at a qualifying nursing school to be eligible for the award. There are additional requirements, so check out the details at the Bureau of Health Workforce , which administers the program.

National Health Service Corps Loan Repayment Program

This program can provide up to $50,000 of student loan forgiveness for nurses if they commit to working two years in clinical practice at a National Health Service Corps site.

Not only do federal student loans apply, but so do some state and local loans. The program is available for nurse practitioners, mental health nurse practitioners, certified nurse midwives, or psychiatric nurse specialists.

Other Loan Forgiveness Options

It’s not just the federal government that’s offering student loan forgiveness for nurses. Other entities have programs you can take advantage of, too. Individual states may also provide some type of loan forgiveness for nurses.

Just like the federal government, states seek to place health professionals in needy areas, designated as Health Professional Shortage Areas (HPSAs). Each state has its own program requirements and benefits, so you’d just need to call your state’s department of health to see what’s available.

A newer trend can be found in the private sector. More and more employers offer loan forgiveness or loan repayment assistance as a way to retain and recruit qualified professionals.

If you’ve got an in-demand specialty or designation, you could even consider negotiating for assistance or loan forgiveness as part of your compensation package. Of course, this is far from guaranteed when starting a new job. But if you’re looking at potential new employers, you may want to check online resources like Glassdoor or even contact their HR department before applying to see if they offer any kind of student loan repayment program.

If You Don’t Qualify for Loan Forgiveness

It’s not the end of the world if you can’t find a student loan forgiveness program. You’ve still got options. If you have federal loans, there are plenty of repayment plans that may suit your financial needs.

Here are some federal loan repayment plan options to consider. If one of these plans speaks to you, check studentaid.ed.gov to see if your loan qualifies.

Graduated Repayment Plan: This plan allows you to start with a lower monthly payment that grows larger over time, increasing usually every two years. The idea is that as your career progresses, so does your income. You have 10 years to repay your loans (within 10 to 30 years if you have a Direct Consolidation Loan).

Extended Repayment Plan: You must have at least $30,000 in outstanding Direct Student Loan debt to be eligible for this repayment plan. These plans extend the time to pay off your direct student loans out to a maximum of 25 years. You can choose a fixed or graduated payment.

Revised Pay As You Earn Repayment Plan (REPAYE): This plan might be an even easier-to-live-with option because, if you qualify, it caps your monthly payment at 10% of your discretionary income. You have 20 years to pay for undergraduate loans and 25 years for graduate or professional education loans.

Pay As You Earn Repayment Plan (PAYE): To qualify for PAYE, you must have taken out the loan on or after October 1, 2007 and begun receiving loan funds by October 1, 2010. Payments would be 10% of your discretionary income (never more than what you would pay on the Standard Repayment Plan); any qualifying remaining balance after 20 years is forgiven, and you have 20 years to repay the loan.

Income-Based Repayment Plan (IBR): This plan is available for certain loans under both the Federal Direct Student Loan Program and the Federal Family Education Loan Program (FFEL). Payments would be between 10% and 15% of your discretionary income. You’d have between 20 and 25 years to repay the loan, with any remaining balance forgiven at the end of those periods, depending on when you first acquired it.

Income-Contingent Repayment Plan (ICR): If you have high debt relative to your income, this plan allows you to make payments equal to 10% to15% of your discretionary income. Both direct student loans and FFEL loans qualify. You’d have 25 years to pay the loan and any remaining balance is then forgiven.

Income-Sensitive Repayment Plan: Those with subsidized and unsubsidized Federal Stafford Loans, FEEL Plus Loans, and FEEL Consolidation loans may be able to qualify for income-sensitive repayment. While your new monthly payment is still based off your income, it is calculated on a timeline that allows you to be done with repayment in 10 years.

Refinancing Your Student Loans

Here’s one more option for nurses who have both federal and private loans. You can combine your federal and private loans into a new loan by refinancing—ideally at a lower interest rate. When you refinance, you lose access to federal loan benefits such as income-based repayment plans and the Public Service Loan Forgiveness program. However, you gain the chance to potentially qualify for a more desirable interest rate and loan term.

For example, if you qualify to refinance your student loans with SoFi, you could choose a fixed-rate loan, where the interest remains steady over time, or a variable-rate loan, in which payments may start lower, but could rise and fall over time.

Plus, with refinancing, you may be able to change the term of the loan, lengthening it to reduce the monthly payment, increasing the total interest you’d pay over time, or shortening it, so your monthly payments are higher, but you could pay less in interest over time.

If you’ve exhausted your options in finding loan forgiveness for nurses, consider refinancing your student loans with SoFi. You can do it all online, so it’s fast and easy—and with no hidden fees.

Learn more about whether SoFi can help you refinance your nursing school loans.



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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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When Will My Student Loans Be Paid Off?

About 65% of college graduates in 2017 owed an average of $28,650, according to The Institute for College Access and Success . Owing nearly $30,000 can seem overwhelming, and you might wonder how long it will take to pay off that loan, and whether paying it off will prevent you from reaching other financial milestones, such as buying a house or a car, or starting a family.

Our Student Loan Payoff Calculator can help you figure out how long it might take to pay off your loan under your current payment plan. If you are unsure of your loans and payment dates, you can also look them up. Use the National Student Loan Data System to view all your federal loans and the AnnualCreditReport.com to find a list of any of your private loans.

If you’d like to pay off your student loans faster, here are eight ways to potentially hit that debt-free milestone sooner than you planned to.

Making Extra Payments

There are no prepayment penalties with student loans, so if you want to pay off your loan faster, you can simply make an extra payment each month. However, borrowers may need to specify that any extra payments should be applied to their principal loan balance, not the next monthly payment.

Making a Yearly Lump-Sum Payment

Tax refunds or yearly bonuses can be used to make an extra one-time payment each year. Paying even an extra $1,000 from a tax return once a year could help someone get out of debt sooner.

Devoting Side-gig Earnings to Your Loans

Taking on a side gig that allows you to earn extra money can start with an Etsy shop, walking dogs, or offering guitar lessons. Considering the average dog walker rate is $13.94 an hour , just five hours a week walking dogs could mean an extra $3,600 a year.

Need help paying down your student loans?
Student loan refinancing with SoFi may
be able to help.


Putting An Income Raise to Use

If you get a raise, rather than spending that extra money to buy something new, upgrade to a nicer apartment, or take a vacation, that extra cash could mean an extra payment on your student loans each month. The 2018 to 2019 U.S. Compensation Planning Survey , projects a 2.9% raise for employees in 2019.

Looking at Jobs that Can Help You Qualify for Loan Forgiveness

There are several types of jobs that can help you qualify for student loan forgiveness (on certain federal student loans), including working for the Peace Corps and AmeriCorps.

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on Direct Loans after 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

Employment with the following types of organizations may qualify graduates for PSLF, according to the U.S. Federal Student Aid office :

•   Any federal, state, local, or tribal government organization.
•   Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
•   Other types of not-for-profit organizations that are not tax-exempt provided their primary purpose is to provide certain types of qualifying public services.
•   You can learn more about qualifying employment here .

Seeking Employers that Offer a Matching Student Loan Contribution Plan

A number of companies are starting programs to help their employees pay off their student loans, including Fidelity, Aetna, PwC, Carvana, and SoFi, according to GlassDoor . Some of these employers help pay off loans while others offer a matching payment plan.

For instance, PricewaterhouseCoopers offers up to $1,200 per year toward their employees’ student loans, with a maximum of $7,200. And Aetna offers up to $2,000 in matching student loan payments for a maximum of $10,000 for full-time employees.

Refinancing Your Student Loans

Don’t underestimate the potential power of refinancing your student loans. You could end up with a lower monthly payment, or you may be able to reduce your student loan interest rate. Refinancing allows you to combine any federal or private student loans into one new loan with a new (and hopefully lower) interest rate.

And SoFi offers rate discounts to eligible members who enroll in autopay for their loan payments. SoFi offers a range of refinancing options to help optimize your monthly payments, and potentially improve your loan terms and rates.

Hoping to pay off your student loans sooner? See what refinancing your loans with SoFi could do. You can check your rates in just two minutes.


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.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Why Consolidate Debt Before Buying a Home

As adults, we tend to bounce from one big financial quest to the next. We need money to buy a car, to go to college, to own a home, which usually means we have to keep asking for loans.

You’d expect it would get easier as you go, but sometimes it doesn’t, especially if you’ve made mistakes along the way. Unfortunately, your missteps could keep you from qualifying for a mortgage—the Mount Everest of money-borrowing pursuits. If you’ve buried yourself in credit card and other debt, it’s crucial to get clear before you can move forward.

Consolidating Credit Card Debt Before a Mortgage Approval

Your credit card debt and mortgage approval can sometimes go hand in hand. Mortgage lenders want to know that you can afford to pay back the loan they’re offering, so they’re going to be curious about what you already owe others. While every lender is different, they’ll typically look at what you earn every month versus what you’ll be paying for your home and other debt obligations. Our home buyer’s guide is an excellent resource for first-time home buyers or existing homeowners looking to brush up on the home buying process.

Even if you have a good credit score and a debt-to-income ratio of 43% or less, high credit card debt payments could still make it difficult for you to pay a mortgage.

Credit cards typically come with a high interest rate and as long as you don’t pay your balance off in full every payment cycle, interest can continuously compound.

Taking out a debt consolidation loan is a way to help break the debt cycle. While you’ll then have to take out a personal loan, the interest rate may be lower than your credit cards, and personal loans usually offer fixed interest rates.

Think of it as your borrowing base camp—a personal loan can help you catch your breath and get your finances in order before you move on in your quest for a mortgage.

Recommended: Home Affordability Calculator

Using a Personal Loan To Consolidate Debt

Let’s get into more detail about how it all works:

You’ll combine the credit card debt into one manageable bill with a single payment due date. That means you’ll no longer have to worry about multiple payment due dates (or what will happen to the interest rates attached to those accounts if you don’t make your payments on time).

You may also qualify for a lower interest rate. The average interest rate on credit cards hovers around 16%, which is pretty hefty. Or maybe you accepted a higher rate on a new card a while ago when you needed it to build your credit and never got the rate adjusted. If you have a good credit record, a consistent job history, and a solid income, you may be able to bring your interest rate down with a personal loan.

Those high interest rates might be the very reason you got into trouble in the first place. Perhaps you aren’t an over-spender or maybe you just got into the habit of paying the minimum on your credit cards each month, figuring you’d catch up “someday.”

And it wasn’t until you started thinking about purchasing a home that you realized you’re on thin ice. With a lower interest rate and just one bill, you could help set yourself up for success with a better chance of staying on top of your debt.

Having the balance of one or more of your credit cards near the credit limit may negatively affect your credit score. Credit utilization is one of five major factors that help determine your credit score (along with payment history, the age of the credit, credit mix, and the number of recent credit inquiries).

Credit Card ConsolidationCredit Card Consolidation

Credit utilization is a comparison between the amount of credit you have available to you (your account limits) and what you’re actually using (your balances). If your credit utilization is high, a lender might see you as more of a risk, and the ratio can impact up to 30% of your credit score . Paying off your credit cards —and keeping them paid off—may help you boost your credit score.

Being on firmer footing with debt also could boost your savings sense. You’re probably going to want to get home-loan-ready one careful step at a time, and knowing you’re doing something about your debt might inspire you to make other savvy moves, like spending less and saving more.

If you reduce your monthly debt payments with a consolidation loan, you could put that extra money toward the down payment you’ll need for your new home. And putting down more up front will ultimately mean you own more of your house—and have a smaller mortgage.

Using a personal loan to lower the amount you’re required to pay on your debt each month may help improve that statistic lenders lean so hard on: the debt-to-income ratio.

Lenders may conclude that those with higher debt-to-income could have more difficulty paying their mortgage. You may seem like a safer bet in the eyes of a lender with a lower debt-to-income ratio.

Understandably, they just don’t want the risk, so why give them an excuse to turn you down? Your consolidation loan won’t magically make your debt disappear, but by paying regularly on your personal loan, you can get a better grip on your debt load and eventually improve your credit profile.

You might find you don’t even need those credit cards anymore—at least not as many or not so often. Maybe when you were starting out on your own, you used credit to get by when times were tight. Now that you’re earning more money and your finances are more in order, that’s hopefully not true anymore.

You might find yourself chopping up some of those extra cards. After all, if your personal loan comes with a lower monthly payment, you’ll likely have more cash in your pocket to pay for the small stuff.

Other Options For Knocking Down Debt

If you think you have the resources and discipline to knock down your credit card balances on your own within six months or so, you probably don’t need to bother with a loan.

Or you might want to look into using a balance transfer card—that is, if you think you can focus on paying it off within the required timeline to take advantage of the low interest rate…and you can resist the temptation to keep charging.

But, if it feels as though your debt is becoming a slippery slope, and consolidation would help you set up a new and better payment structure for getting rid of it, you may want to consider a personal loan.

Consolidating debt before buying a home can be a wise first step. And if all goes as planned, when you’re ready to purchase that home, you could decide to apply for a mortgage loan through SoFi.

Take control of your credit card debt with a SoFi personal loan today.


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 .
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 Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.

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