7 Tips to Avoid Student Loan Scams

As college costs soar, U.S. student loan debt is increasing with it. American undergraduates in 2018 borrowed 40% more than students did a decade ago. With over 45 million Americans in the thick of the student debt crisis, some estimate that the class of 2018 won’t be able to retire until they’re 72 . And as the student debt bubble grows, so does the number of predatory companies running student debt scams.

Researchers have identified over 130 companies that operate in this manner. They run the gamut—from offering student loan forgiveness scams to straight up stealing your hard-earned dollars. Some can even lead to your debt increasing, which is a hard no.

There are plenty of authentic refinancing and consolidation options, such as income-driven repayment plans , that might help you in the long run. But unfortunately, there are also a slew of bad actors. Luckily for you, we’ve laid out some typical student loan scams as well as seven red flags that can help you suss out if a company is legitimate or not.

The Typical Student Loan Scams

As they say, there are a few ways to shear a sheep, and for fraudulent companies, there are a few ways to trick you out of your moolah. Those under stress from student loans can feel compelled to go to extreme measures to get rid of their debt, which can make them more susceptible to predatory tactics. So buckle in.

One typical scam is a student loan assistance company that advertises loan forgiveness or lower payments in exchange for an upfront fee, followed by a few more payments.

Unsuspecting people pay and then six months later, the firm will shut down. This one isn’t as insidious as some other common scams, but you could still be out some money. And if you’re part of the college debt crisis and thousands of dollars in debt, that isn’t where you want to be.

Another common tactic is to offer federal student loan consolidation for a fee. Student loan consolidation is always available for free from the Department of Education. Or you could refinance your federal student loans with a reputable lender. But it is important to remember that if you refinance your student loans with a private lender, you will lose access to federal benefits such as student loan forgiveness, income-driven repayment plans, and deferment.

If you’re going to refinance your student loans, however, it’s a smart idea to do your due diligence before signing on with a lender (of course, keeping in mind that refinancing to private loans, even with reputable lenders, can strip you of certain federal benefits).

7 Red Flags for Student Loan Scams

In the midst of the current student loan debt crisis, there’s tons of confusing information on the internet. How can you suss out a student loan debt scam? Here are a few tips to help you spot potential scammers:

1. You get requests for sensitive information over the phone.

A legitimate private lender will need your Social Security number and other info to process your refinance application, but they are unlikely to cold call you. If you’re working with an online lender, do a little homework by researching the company and reading consumer reviews.

And if you’re really unsure, you can contact your state attorney general’s office to see if complaints have been lodged against the company. The rule of thumb here? Never share any personal information until you are 100% certain you are dealing with a legitimate lender.

2. The company requires direct payment immediately.

A major indication that you’re dealing with a student loan scam is the requirement of an upfront fee. Once they get the fee, many scam companies simply take your money and disappear, leaving your loans in forbearance (or worse, default), and you none the wiser. Debt counseling firms are not allowed to charge you any fees until after they renegotiate, settle, or reduce at least one debt for you. Yes, a reputable lender will charge interest on your loan, but they will not ask you for cash upfront.

3. You are promised immediate loan forgiveness.

This is a classic case of too good to be true. Student loans are notoriously difficult to shake, even if you file for bankruptcy. There are a few situations that can qualify you for federal student loan forgiveness—for example, if under the Public Service Loan Forgiveness Program (PSLF), you’ve worked for an eligible employer, are on an income-driven repayment plan, and have made 10 years of qualifying payments.

So immediate loan forgiveness is likely a ruse. While it would be nice for all your student loans to be forgiven in an instant, this is unfortunately a pie-in-the-sky dream.

But if you do qualify for a federal loan forgiveness program, there’s no need to have a third party negotiate for you. Simply call your loan servicer for instructions on the process—free of charge. Just keep in mind that only 1% of those who have applied for PSLF have been approved.

4. You are encouraged to pay off your student loans to a third party directly.

This is just shady. Why would you want someone else making payments on your behalf? It begs the question: What are they hiding?

5. The company claims to be working with the U.S. Department of Education.

Some private lenders misrepresent themselves by using names, seals, and logos that give the impression they’re affiliated with the federal government’s student loan programs (hello, Obama Forgiveness Plan). However, the Department of Education does not solicit people to borrow money; so if it sounds like a sales pitch, it’s not coming from the government.

The Department of Education doesn’t work with private loan consolidation companies, but it does work with private loan servicer companies. A servicer collects payments and handles other services on the loan you already have, but it doesn’t offer private loan consolidation. The government offers its own Direct Consolidation Loan program (by application) for free, so if anyone tries to sell you this option, they are pulling one over you.

6. Someone is pressuring you to sign up under time constraints.

No legitimate loan program is only available for a short period of time. If they are overly insistent, and don’t go for an offer to call them back directly, this could be a red flag.

7. The company is charging a consolidation fee.

This is where things can get a little murky. As noted above, there are legitimate private companies that can help you consolidate and refinance student loans for a fee. As long as they don’t charge you any fees until refinancing has occurred, they’re most likely operating legitimately.

But be cautious. Again, if you want to apply to consolidate federal student loans through the Direct Consolidation program it’s a free process—so you don’t need a company to do it for you.

If you want to consolidate and refinance your private student loans on the other hand, know that the private company is probably refinancing your current loans into one new private loan. In that case, be sure to check the interest rate, any fees, and read the fine print to see if the new deal is actually better than your old one.

Is Consolidating Your Student Loans the Right Decision for You?

Spotting a student loan scam isn’t always easy, especially when companies go out of their way to convince you they’re legit. If your gut tells you a deal is too good to be true, then it probably is.

When choosing between a Direct Consolidation Loan (for federal student loans) and student loan refinancing (for federal and/or private loans), it’s worth taking some time to learn about all your options, as the terms and potential outcomes (savings vs. interest spend) can be very different. Check out our quick guide to student loan consolidation vs. refinancing for more details.

Refinancing student loans can be a great way to make payments more manageable, depending on what kind of student debt you have. However, not all refinance options are created equal. It’s important to do your homework before deciding to consolidate and/or refinance your student loans, because your individual circumstances will dictate whether consolidation or refinancing is right for you:

Direct Consolidation Loans from the federal government can only be used to consolidate federal loans. It’s essentially a way to package multiple loans into one, giving you a new, fixed interest rate that’s a weighted average of all your federal loans (rounded to the nearest eighth of a percent) and, sometimes, a longer term. This means your monthly payment amount doesn’t necessarily go down, nor does your interest rate—it just makes things more straightforward.

Refinancing means consolidating all your student loans—regardless of whether they’re federal or private. You refinance with a private lender, and typically do so if you think you might qualify for a lower interest rate. Refinancing may allow you to pay all your student loans off at a more competitive interest rate, which can save you over the life of your loan.

You can also typically change the term length on your refinanced loan—a longer term length could lower your monthly payments, while a shorter term length could help you pay off your student loans much faster.

In order to know how much you could gain from refinancing, you can start by verifying how much you owe and what your interest rates are across both private and federal loans. Once you know that information, you can use this student loan refinancing calculator to see your estimated savings.

And, again, it is important to remember that if you choose to refinance your student loans with a private lender you will lose access to federal benefits such as student loan forgiveness, Direct Consolidation Loans, and income-driven repayment plans.

SoFi is a leader in the student loan space—offering both private student loans to help pay your way through school or refinancing options to help you pay off your loans faster. See your interest rate in just a few minutes. No strings attached.

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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE
FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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Paying Off Credit Card Debt with a Personal Loan

People talk all day long about their workouts, favorite apps, and their love lives, but bring up the subject of money, especially credit card debt, and suddenly everyone clams up.

But just because we don’t talk about debt doesn’t mean it’s not an issue. After all, the average American household carrying a credit card balance has over $9,300 in credit card debt as of March, 2020. And it can cause a great deal of stress.

In fact, according to the American Psychological Association’s latest “Stress In America” report , money is the number two cause of stress—ahead of family and health concerns—and second only to work. Over 50% of Americans with debt who were surveyed in a 2017 American Institute of Certified Public Accountants poll said it had negatively affected their lives.

If you’re a Millennial, the same poll found that you might be twice as likely to worry about debt than Baby Boomers. While the poll found that 56% of people with debt said that it had a negative effect, that figure jumps to almost seven in 10 for Millennials. The study also found that Boomers and Millennials are equally likely to have debt.

So unless you’re expecting a windfall from a long-lost relative (who probably didn’t talk about money either), it’s likely up to you to come up with a game plan to manage your finances.

But how do you pay off credit card debt? There are many methods to choose from—here are just a few.

Budgeting Debt Payoff

Before embarking on paying off credit card debt, a good first step might be putting together a budget—which can help you better manage your spending.

There are simple options like an online spreadsheet and more advanced ones like pay services to track your spending. And you might even find money in your budget to put towards that outstanding debt.

If you’ve got more than one type of debt, say a mortgage, student loan, and maybe a car loan, you may want to think strategically about how you’re going to tackle them.

Some finance gurus recommend taking on the most expensive debt first—then the debt with the highest balance. Another approach is to pay off the smallest debts first, meaning the debts with the smallest balances.

Then you can take next month’s debt-paying money and funnel it into the next smallest balance. This method gives you some small wins early and over time can give you some room to make larger payments on some of your other outstanding debts. (Of course, for either of these strategies, keeping current on payments for all debts is essential.)

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Refinancing or Consolidating

Refinancing or consolidating debt are other strategies, especially for those in the post-grad plateau—the early stages of a promising career—if, for example, there’s a raise waiting just around the corner. In simple terms, refinancing is taking one loan or line of credit and replacing it with another (for instance, balance transfers). Consolidating is similar to refinancing, as it combines all your debt into one loan that you then have to pay off.

There are lots of reasons to consider refinancing. You may want to lower your monthly payment. Maybe you want to pay over a different period of time. Or maybe you just want to work with a new lender or loan servicer.

With fixed-rate credit cards becoming more difficult to find, and the average annual percentage rate (APR) for variable-rate credit cards hovering around 17%, you could potentially save by refinancing credit card debt (depending on how much you owe, of course) with a credit card consolidation personal loan—which, as of late 2019, had an average rate of 9.41%.

Fortunately, applying online typically doesn’t take more than a few minutes. And there are more options than ever with innovative fintech startups doing what they can to make the process of refinancing your credit card debt, quick and easy.

Again, there’s also the potential for saving. Of course, everyone’s situation varies, but you can use SoFi’s credit card interest calculator and personal loan calculator to do the math on your own.

So You’ve Decided to Apply for a Personal Loan. Now What?

The steps for paying off a credit card with an unsecured personal loan aren’t particularly complicated, but having a plan in place is important.

1. Getting the whole picture.

It can be scary, but getting the hard numbers—how much debt you have overall, how much you owe on each specific card, and what the respective interest rates are—gives you a sense of how big of a personal loan you’re aiming for.

2. Searching personal loan options.

These days, you can do most—or all—of your personal loan research online. What you’re looking for is a personal loan with an interest rate lower than what you’re currently paying on your cards. You’ll also want to keep an eye out for origination fees, which can cost you more and could throw off your payoff plan.

3. Paying off the debt.

Once you’ve chosen, applied, and qualified for your personal loan, you’ll likely want to immediately take that money and pay off your credit card debt in full.

The process of receiving the personal loan may differ; some lenders will pay off your credit card companies directly, others will send you a check that you’ll then have to deposit and use to pay off your credit cards yourself.

4. Hiding those credit cards.

One potential risk of using a personal loan to pay off your credit cards is that it makes it easier to accumulate more debt—after all, a $0 balance on a credit card can be a temptation. The purpose of using a personal loan to pay off your credit card debt is to keep yourself from repeating the cycle.

If possible, you can take steps like hiding your credit cards in a drawer and trying to use them as little as possible. This is where creating a budget comes in handy!

5. Paying off your personal loan.

A benefit of using a personal loan to consolidate your credit card debt is that you only have one monthly payment to worry about—instead of several. You’ll want to make sure you don’t miss any of those payments, so you may want to set up a monthly reminder or alert.

More Details About Personal Loans

So why would you consolidate credit card debt with a personal loan?

Most unsecured personal loans come with a fixed APR. A fixed APR is a rate that won’t fluctuate or change based on an index.

This doesn’t mean that your rate will never change over the life of your loan (for example, it could change if you missed several payments). But if it does remain the same, it means you’ll be paying the same amount monthly over the life of the loan.

Another pro is the ease of online applications and access to live customer support from many lenders. With online applications, the process for getting a personal loan can be quick and easy, and you don’t have to trudge to a post office or send certified mail or print out complicated tax documents. You also may be able to access live customer support to help you out with any questions.

Another possible benefit is pausing your payments in case of certain situations. Your loan(s) will typically have to be in good standing to be eligible for this benefit (among other requirements), but if you lose your job some lenders, like SoFi, may temporarily pause your payments and help you find a new job. (Note that interest accrues during the forbearance period and is added to principal when you resume repayment.)

SoFi’s Unemployment Protection Program is offered in three-month increments that can be renewed up to a maximum of 12 months over the life of the loan.

Borrowers looking to apply for this benefit may be eligible if they are (among other qualifications): a current SoFi member, have an eligible loan that is in good standing, certify that they have lost their job through no fault of their own (involuntarily), and actively work with Career Services to look for new employment.

Finally, there’s also the benefit of ending the vicious cycle of credit card debt, without resorting to a balance transfer card.

You may be among the 49% of Americans who know that balance transfer credit cards exist. Balance transfer credit cards are just credit cards that usually have an introductory offer of some sort to give you a lower rate (or a 0% rate) if you transfer your balance to the new card.

This might seem like an appealing offer. But if you don’t pay off the balance before the enticing offer is up, you could end up paying an even higher interest rate than you started with. You also may have to pay a transfer fee to the new cardholder.

Planning Debt Reduction

Armed with new information and a debt reduction plan, the next time the subject of money—specifically credit card debt—comes up, you’ll have plenty to talk about. You could now be able to confidently discuss APRs on personal loans compared to credit cards, the merits of no fees, and the plusses of a fast and easy user interface for a loan application.

And if you share this article with friends who want to cut up a few of their credit cards, they can join the conversation, too. Because chances are, based on the numbers, some of those friends might be among the 55% of Americans with credit cards who are also carrying other debt.

Maybe they’re as shy about their debt as you used to be and could use some handy advice from a friend or a solid five reasons why a personal loan might be worth investigating.

Remember, however, personal loans aren’t for everyone. While they typically have lower interest rates than credit cards, they are still debt and should be considered carefully and used responsibly.

Ready to get rid of your credit card debt? Look into a SoFi personal loan. You can check your rate in just a few minutes.


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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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Making Sense of the Rising Cost of Medical School

The costs of medical school are rising at an alarming rate. Thirty years ago, medical students graduated with an average of $32,000 in student loan debt —that’s about $70,000 in today’s dollars if you adjust for inflation.

In 2017, the median medical school debt for graduates was $200,000 , according to the Association of American Medical Colleges (AAMC) with 76% of students graduating with debt.

The rising cost of medical school, plus the daunting number of years of education and training is making some prospective medical students ask: Is an MD really worth it? That’s ultimately up to you.

But it’s worth noting that while medical school has traditionally been a path to a lucrative career, the steep up-front costs might be starting to make the endgame look less appealing.

This can be particularly true for would-be doctors interested in working in lower-paying fields like community medicine or general practice.

While it might be relatively easy to pay down student loan debt for those entering a higher-paying specialties like orthopedics or anesthesiology, a doctor going into general practice might take years (even decades!) to pay off their student loans.

To gain a better understanding of how much medical school actually costs, we’ll take a look at the costs of an MD, and some ways young doctors can get out of medical school debt faster after graduation.

How Much Does Medical School Cost?

The average medical school tuition varies greatly depending on whether you choose a public or private university.

The average annual cost of in-state tuition, fees, and health insurance for the first year of medical school at a public university was about $37,500 in the 2019 to 2020 academic year. At a private school, the average annual cost was about $60,650.

But that’s only the cost of tuition, fees, and insurance—there’s also living costs to consider which is why it’s also useful to consider the entire cost of attendance (COA).

Each school publishes the estimated costs of attendance for their program, which typically not only include tuition and fees, but also costs like room and board, textbooks and supplies, and travel.

The AAMC calculated that the median cost of attendance for four years of medical school amounted to around $232,800 for public medical schools and $306,200 for private medical schools. But these costs can vary a lot depending on whether you’re attending school in Kansas City or San Francisco.

Why is Medical School More Expensive Than Ever?

The rising cost of medical school tuition is part of a larger trend. It is estimated that the overall cost of college tuition and fees in America grew at a rate of just under 4% from the 2018-19 to 2019-20 school years. Keep in mind, this is larger than the annual inflation rate of 2%, making this price increase even more dramatic to students and graduates.

So what is driving the price increase? College tuition has increased eight times faster than wages over the last 30 years or so, and the cost of living has increased dramatically as well. But what’s behind the dramatic uptick in college prices? The potential answer is two-fold. One factor is the demand for a college education has also dramatically risen over the last three decades.

Another factor more pertinent to public universities: a decline in state funding. It’s been observed in multiple states that as the education budget gets stripped, tuition costs to students rises in turn. And while lawmakers likely understand such a correlation exists, as long as federal financial aid is so freely available for students, there is likely little incentive to digress from such cuts.

How Long Does Paying for Med School Take?

So why do med students often go into so much debt?

It’s partly because the grueling requirements of their programs don’t often allow for part-time work. As a result, many students apply for financial aid to cover their college price tag, which means they graduate with significant amounts of student loan debt.

So how long does it take to pay back the debt? A lot of this depends on you and the career path you take and the payments you make. However, the relatively low salaries young doctors earn during their residencies don’t typically allow for much opportunity to pay back loans until their first position after residency.

Let’s say, hypothetically, you have federal Direct Loans, such as Stafford, PLUS, Consolidation, or Perkins (if consolidation). And let’s also say you can prove you have partial financial hardship (PFH), and qualify for an income-driven repayment plan.

In that situation, your monthly repayment would be capped at 10% to 15% of your monthly discretionary income, for a period of up to 25 years. And, after 25 years, whatever you haven’t paid back will be forgiven (although that amount will be taxable).

However, if after your residency, you get a position with an income that takes you out of the PFH tier, you could move to the Standard Repayment Plan for federal student loans, and potentially pay off your loan sooner.

Can You Shorten the Medical Debt Payment Timeline?

Here are some tips if you’re interested and able to shorten your repayment timeline, which can lower the amount of student loan interest you pay over time.

Repaying Your Loans During Your Residency

It is possible to start paying down your medical school debt in residency. While some students may be tempted to put their loans in student loan forbearance in their residency years, doing so can add quite a bit in compounding interest to your bill.

Instead, you could consider an income-driven repayment plan to start paying back your federal loans with a payment you can afford. You could also look into SoFi’s medical residency refinance options to compare.

Making Extra Payments

Another tactic to help pay your student loans faster is via simple budgeting. When you get your first position post-residency, you could commit to living on a budget for just a few more years. By putting as much of your salary toward extra student loan payments as you can afford to, you can help cut years—and interest payments—off your repayment timeline.

Refinancing Your Student Loans

When you refinance your student loans with a private lender, you use a new loan with a new rate and terms to pay off your existing student loans.

Depending on your financial profile and credit score, among other factors, you might be able to get a lower interest rate or a lower required monthly payment, depending on the terms you choose if you refinance. A lower monthly payment can help you improve your cash flow in the present—and lower interest can help reduce how much you pay over the life of your loan.

While refinancing can save you money, it does mean you’ll have to give up the benefits that come with federal student loans like income-driven repayment, deferment, forbearance, and student loan forgiveness specific to physicians.

But if you don’t foresee needing these services, refinancing might be a viable option and could potentially save you a fair amount.

Wondering how much you could save by refinancing your student loans? Check out SoFi and see your rate in minutes.


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 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.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE
FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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Tips for When to Consider Refinancing Your Student Loans

When was the last time you took a close look at your student debt? If you’re like most borrowers, particularly those with six figures of student loan debt from graduate school or MBA programs, you probably shudder at the thought.

Chances are, you set up a student loan repayment plan after graduation and figured you’d revisit it “later”—say, when you’re making more money, when your career is more secure, when you have more time.

This approach is understandable, since after receiving your undergraduate or graduate degree your focus is on other things (like building a career that will help you pay off your loan balance).

But if you let that nebulous “later” date turn into “never,” the repercussions can be costly. At some point, refinancing your student loans could potentially save you a significant amount of money. You just need to figure out if it is the right move for you.

So how do you know when it’s time for a student loan debt check-in? Here are four factors that could prompt a second look:

1. Your current student loans have high interest rates.

The first thing you should look at is the interest rate that you’re paying on your student loans, particularly federal (Direct) Unsubsidized Loans (grad or professional), federal Graduate PLUS Loans and/or private loans.

These loans tend to have higher interest rates than federal subsidized student loans, and you may be able to find a lower interest rate private student loan option.

Depending on how high your loan balance is and how much you can cut that interest rate, your cost savings when refinancing may be significant.

2. Your financial situation has improved since you took out the loans.

Maybe you were a starving student when you first applied for your student loans, but ideally your financial situation has improved with time. This is great news for your bottom line, because a higher credit score and income level (among other factors) are typically key to helping you qualify for a lower interest rate.

And if you expect to stay on an upward financial trajectory, you might even consider refinancing with a variable rate student loan. Variable rate student loans typically offer lower interest rates than fixed rate loans; however, variable rates are tied to market fluctuations, which means rates that are very low today are likely to go up at some point.

The upshot is that these loans could be a solid option for qualified borrowers who intend to pay off their loans at a relatively fast pace.

3. You don’t get any advantages from federal student loan benefits.

Certain types of federal student loans offer perks that should not be overlooked before considering refinancing. Borrowers who are teachers, enter the military, or go to work in the public sector may qualify for federal student loan benefits (such as potential student loan forgiveness) before considering refinancing with a private lender.

Some federal loans also offer relief for borrowers that experience financial hardships (such as loan deferment and graduated/income-driven repayment plans).

If you expect your income to be unpredictable, or you’re looking into qualifying public service employment, it’s usually a safer bet not to refinance federal student loans that are eligible for these benefits. But if you aren’t able to take advantage of any of these federal student loan benefits listed above, refinancing could make sense.

Recommended: Looking for more guidance on your student loans? Explore SoFi’s Student Loan Help Center for tips, resources, guides, and more!

4. You’re about to take out a loan for a mortgage or other large purchase.

For loans like mortgage loans, lenders typically take a look at your credit report to see what type of mortgage a borrower may qualify for.

Buying a new home or taking out another loan for a large purchase could be a good time to refinance your student loans for a lower interest rate, because it could help you get into better financial standing to get a good rate on loans like a mortgage, too.

If you think that student loan refinancing may be a good option for you, the next step is to do a little research by checking out several private loan providers to compare interest rates and other features.

You can also consolidate federal and private loans with SoFi, whereas many lenders do not. On top of that, refinancing your student loans with SoFi is easy.

Simply go to SoFi’s student loan refinancing page to get started. You only need to give a little information about yourself to find out your new rate.

Additionally, SoFi also offers personalized career services and job search assistance, and access to our extensive member network through complementary member experiences like happy hours and dinners.

Which means you could gain more than cost savings when you refinance student loans.

Want to learn more about refinancing your student loans? See your rates in just two minutes.


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 Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE
FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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How to Leverage Home Equity to Pay Off Student Debt

Student loan debt can be difficult to manage. Trying to make ends meet when you are saddled with a monthly payment from your education can be a challenge. The burden can become overwhelming once you add a mortgage, a car, and other financial obligations. Stare at your owed balances long enough and you may start wondering just how illegal robbing a bank really is.

Fortunately, there’s another option available—that won’t end with you in handcuffs.
Fannie Mae offers a way for you to use the excess value of your home to pay off student loan debt directly. Some families may benefit from consolidating student loan debt into their mortgage with a new lower fixed rate applied and consolidated into one loan with one monthly payment.

It’s good to note that although the rate and payment may be lower, the term of the debt may be lengthened which would result in higher interest payments over an extended period of repayment.

Mortgage interest rates can run lower than student loan interest rates. Some homeowners may be able to use that to their advantage. Paying off multiple student loans with one loan means making only one payment per month, which not only simplifies life, but could also save borrowers money.

How much you can potentially save depends on things like the difference in interest rates —depending on your loan terms, it can be said, the bigger the gap, the better the savings.

For example, if you’re paying 7.08% interest on a Direct PLUS student loan for 25-years, but can lower the rate on your 30-year mortgage at say a 4.00% interest rate, you’ll not only pay off your student loans with less interest over the life of the loan, but can also refinance your mortgage to a lower rate, possibly saving you significant mortgage interest in the long run.

Working with SoFi, you can consolidate your student loans with your existing mortgage, refinance the total amount at a lower rate, and simultaneously pay off those student loans.

Under the student loan cash-out refinance program, student loans would be paid off directly through escrow after the loan funds which allows this loan program to avoid any additional pricing bumps for cashout to the borrower. Loans must be paid in full, no partial payments are allowed.

The Elements of Equity

Some cash-out refinance loans such as a student loan cash-out refinance is priced to be used for a specific purpose, consolidating your student loan debt and mortgage into better loan terms.

You can also take cash out of your home for most any reason with a vanilla cash-out refinance type loan or if you already have a low rate on your mortgage, you can opt for a 2nd mortgage such as a home equity line of credit (HELOC.)

When your home’s market value is higher than what you owe on your mortgage(s), you have equity in your home. The equity you earn in your home can be utilized as an asset. That means if eligible under the loan program you choose, you can draw upon the available equity, for a variety of reasons (e.g. to pay off your student loans).

You can gain equity in two ways. The first is by making payments on the mortgage; as you pay back what you owe the principal amount owing on your loan is reduced, and if your homes market value doesn’t decline, your equity increases. Say that you purchased a home for $350,000 and you took out a $250,000 mortgage 10 years ago, and have since paid back $50,000 of what you owe.

If your home value remains the same as when you purchased it, you may have $150,000 in available equity for an in-ground pool for the kids, a new car, or, best of all, to refinance and consolidate your student loans. The amount of equity that can be utilized will depend upon many factors, such as the lender, loan program, qualifying, etc.

Sound good? It may be even better. The second way to earn equity in your home is through price appreciation, so as your home gains market value, you earn equity.

If you’re a ladder-climbing professional, who’s great at financial planning, it’s possible that you bought that dream home in a growing market, and it’s now worth $400,000 or more. As of 2018, untapped home equity reached an all time high in the United States, reaching about $14.4 trillion . If your home’s equity is part of that sum, it could be used as a tool to help you further your financial priorities.

Deciding to Pay Off Student Loans with Home Equity

Using the equity you’ve earned in your home to pay off your student loans may sound like an easy fix. But before you commit to refinancing, you may want to weigh the decision carefully. While it may make sense for some, a student loan cash out refinance won’t work for everyone. Here are a few pros and cons to consider as you make your decision.

Benefits of Paying Off Student Loans with Home Equity

Like most financial decisions, paying off your student loans with the equity you’ve earned on your home is a multifaceted decision. Here are some of the ways you could find it beneficial.

Securing a lower interest rate is potentially the most appealing reason to use the equity in your home to pay off student loans. As part of your decision making process consider reviewing mortgage options at a few different lenders. While reviewing rate quotes from each lender do the math to determine if paying off student loans with home equity will truly reduce the amount of money you spend in interest.

If there are any fees or prepayment penalties, try to factor those in. Doing this leg work can help you determine if going through the process is worth it in the long run.

As you are reviewing options, consider the term length of the mortgages. The standard repayment plan for student loans has a 10 year term unless you consolidated them already, in which case you could have a term of up to 25 years. With a mortgage, term lengths can be as long as 30 years .

While repaying your debt over a longer time period could lower monthly payments, it may also mean you pay more in interest over the life of the loan, which could factor into your decision making process.

Another benefit may be reducing the number of monthly payments you need to keep track of. Instead of paying your mortgage and each of your student loans, those bills have all been consolidated into a single payment. Streamlining your payments could help you stay on top of your payments and make your finances a little bit easier to manage.

Downsides of Paying Off Student Loans with Home Equity

There are a few potential negatives that could impact your decision to pay off student loans with your home equity. Firstly, using your home equity to pay off your student loans could potentially put your home at risk.

You’re combining your student loans and mortgage into one debt, now all tied to your home. That means if you run into any financial issues in the future and are unable to make payments, in severe cases, such as loan default, your home could be foreclosed on.

Second, when you use your home equity to pay off your student loans, you’ll still owe the debt (now as a part of your mortgage), but you’ll no longer be eligible for borrower protections that are afforded to borrowers who have federal loans.

These benefits include deferment or forbearance, which could allow you to temporarily pause payments in the event of financial hardship, and income-driven repayment plans, which tie a borrower’s monthly payment to a percentage of their discretionary income.

If you are pursuing student loan forgiveness through one of the programs available to federal borrowers, for example Public Service Loan Forgiveness, consolidating your student loan debt with your mortgage would eliminate you from the program. If you’re currently taking advantage of any of these options it may not make sense to use the equity in your home to pay off your student loans.

As you weigh your options, you might consider comparing the available equity in your home to the amount you owe in student loans. In some cases, you may owe more in student loan debt than you have available to use in home equity under the various loan guidelines.

When It’s Time to Leverage Your Home Equity

Cashing in on your home equity isn’t as easy as withdrawing money from your checking account, but it’s also not as difficult as you might think.

A good first step is to contact a mortgage lender, who will order an appraisal of your home and get you started on paperwork. It could also be a good idea to check your credit score.

To secure a cash out refinance lenders guidelines will likely require a credit score of 620 or higher. The minimum score required depends upon many factors such as credit, income, equity and more. If you don’t meet the minimum fico score requirement for your chosen program, you might want to make a few changes to improve your credit score before applying for a cash-out refinance.

At the very least, you’ll likely need your latest tax filings, pay stubs, and bank statements. Lenders use those documents to evaluate whether you have the savings and cash flow to pay back a fatter mortgage, and they may ask for them every time you try to refinance. So it can be helpful to keep them handy.

When utilized responsibly, home equity can be a useful tool in helping to improve your overall finances. Home equity can be used for most any purpose such as consolidating higher interest credit card debt, student loan debt or home improvements.

Shop Smart

Interested in using your home’s equity to pay off your student loan debt? Take a look at SoFi. This student loan cash-out refinance option offers qualified borrowers competitive rates with no cash-out pricing add-ons applied.

Pre-qualifying takes just two minutes online, so you can get an idea of the rates and terms available to you. Loans are usually approved in about 30 days.

Unlike taking your chances with the lottery, the odds could be more in your favor when you leverage your home equity responsibly. Explore your rate and term options, and then get in touch with us to start the refinancing process. Learning is a lifetime commitment; student loan debt doesn’t have to be.

Learn more about borrowing a student loan cash-out refinance 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.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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
.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE
FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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