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Paying for college is one of the biggest expenses a parent plans for, and it can seem overwhelming. At times, you might find yourself saving up for your kid’s future education while also trying to save for your own retirement, fund a house down payment, and pay off your own debt.

With the average annual cost of tuition and fees for the 2019-2020 school year at $11,260 for public in-state students, $27,120 for public out-of-state students, and $41,426 for private school students, it’s no wonder parents are taking out loans to help pay for their child’s undergraduate education.

One popular federal parent loan program is the federal Direct PLUS Loan, but before you start comparing parent PLUS vs. private parent student loans, it’s important to understand what a parent PLUS loan is and why there’s been a 42% increase in the amount of PLUS loan debt parents have taken on from 2007 to 2017.

What Are the Different Loans for College?

There are four types of federal Direct Loans offered by the U.S. Department of Education:

•  Direct Subsidized Loans are loans offered directly to the student, where the interest on the loan is paid by the U.S. Department of Education while the student is in school and during a six-month grace period after graduation. Thus, they are subsidized.

•  Direct Unsubsidized Loans are also offered directly to the student, but the interest is not paid by the federal government and it accrues while the student is in school.

•  Direct PLUS Loans are loans for professional or graduate students, or for parents of undergraduate students.

•  There are also Direct Consolidation Loans, which allow you to consolidate all federal loans into one loan with an interest rate that’s a weighted average of all your federal loans’ interest rates, rounded up to the nearest eighth of a percent.

Note that the federal parent loans can go by a number of names: parent PLUS Loans, Direct PLUS Loans, Direct parent loans. Those are all the same thing.

The main difference between the Direct student loans offered to undergraduates and the Direct PLUS Loans offered to parents is that certain Direct Loans (Direct Subsidized Loans) for undergraduates are awarded based on financial need, whereas the PLUS loans are not awarded based on financial need, but do require a credit check when applying.

In addition to federal loans, there are also private student loans available both for students and for parents. Private student loans are loans from banks or private lenders, which set their own interest rates and terms.

What Can These Loans Be Used For?

When a student’s financial aid package and other sources of funding aren’t enough to cover the cost of college and other educational expenses, parent PLUS loans and private student loans can help fill in the gaps. They can be used to cover expenses like tuition, room and board, books, and other supplies related to the total cost of attendance.

While they can both be used to cover the same expenses, they each have different benefits and terms so it’s worth considering your options as you determine how to pay for your child’s college education.

Qualifying for a Parent PLUS Loan

The first step to qualifying for any type of federal loan is to fill out the Free Application for Federal Student Aid (known as the FAFSA®). It’s a required step to document your child’s financial need. Colleges use the FAFSA information to determine a financial aid package—which could include grants, work-study, subsidized loans, and/or unsubsidized loans.

If your child is offered a financial aid package, you can then figure out how much of their tuition will be covered by financial aid vs how much you might need to take out additional loans to cover any remainder. At that point, you can start to weigh the benefits of private student loans vs. parent PLUS loans.

Parent PLUS Loan vs. Private Parent Student Loan

Understand what a parent PLUS loan is before you start comparing it to private loan options.

Pros of a Parent PLUS Loan

A Direct PLUS Loan allows parents to borrow the remainder of their child’s costs not covered by financial aid. The interest rates on PLUS loans are set by the federal government and are fixed for the life of the loan. There are a few repayment options that borrowers may be eligible for.

Cons of a Parent PLUS Loan

Fees on PLUS Loans are also higher than on the other Direct Loans. Most income-driven repayment plans are unavailable to parent PLUS loan borrowers, although they may be eligible for an Income-Contingent Repayment Plan under certain circumstances.

And you’ll have to start making payments on the loan as soon as it is disbursed —though you can request a deferment while your student is in school, but the interest on the loan will still accrue and add up. Of course, the loan is taken out in the parent’s name, so responsibility for paying the loan back is on you, not on your kid.

Qualifying for a Private Parent Student Loan

Qualifying for a private parent student loan is usually similar to qualifying for most other types of private loan. Private lenders will review an applicant’s credit history and score, among other personal financial criteria, to determine the rate and terms they’ll qualify for.

This typically means applicants with good or excellent credit could stand to qualify for a better interest rate when taking out private parent student loan when compared to the interest rate on a PLUS loan.

There are a variety of private companies that offer parent student loans, so parents have the option to shop around to find an interest rate and terms that suit their needs.

Some private lenders, including SoFi, have a pre-qualification process that allows potential borrowers to see personalized interest rate estimates based on a soft credit pull (which means their credit score won’t be impacted).

After selecting the preferred lender, borrowers typically file an application for the private parent loan. The exact process will vary slightly by lender.

Pros of a Private Parent Student Loan

One of the biggest pros of private parent student loans is a potentially lower interest rate when compared to PLUS loan for well-qualified borrowers.

As you compare private parent loan quotes, pay attention to additional fees like origination fees. These will vary by lender. Some lenders, like SoFi, don’t charge an origination fee for their private student loans.

Once you have an idea of the rates and terms available for private student loans, you can compare them to PLUS loans. Note that parent PLUS loans currently have an origination fee of 4.236% of the total loan amount.

Private parent student loans may also offer borrowers increased flexibility when it comes to repayment options. Private lenders typically allow parents to take out the loan on their own, or share the loan with their child. PLUS loans can only be taken out by the parent and cannot be transferred to the student.

Cons of a Private Parent Student Loan

Private parent student loans don’t come with the same borrower protections as a federal PLUS loan. In the event a borrower runs into temporary financial difficulty, a PLUS loan might qualify for deferment or forbearance. While some private lenders, including SoFi, do have policies to help borrowers who might be struggling in place, not all do.
Further, private student loans could potentially have higher interest rates than PLUS loans, depending on a variety of personal financial factors.

The chart below illustrates some general comparisons between parent PLUS loans and private parent student loans:

	Parent PLUS Loan	Private Parent Student Loan
Who is the primary borrower?	Biological, adoptive, or stepparent of a dependent undergraduate student.	Many lenders allow any adult sponsor of that child (parent, grandparent, friend, etc.) to borrow for a student.
Credit criteria for the Borrower?	Parents may not have adverse credit history. Parents with adverse credit history can apply with a cosigner or submit documentation that outlines extenuating circumstances for adverse credit history.	Generally, a strong credit history and score are key factors. Exact requirements will vary by lender.
Is school certification required?	Yes	Yes
Is the FAFSA® required?	Yes	No
Interest Rate	For loans taken out during the 2020 – 2021 school year the interest rate is fixed at 5.30%.	Varies by lender and is based on an individual borrowers history and other factors. Rates can be fixed or varied.
Is there a rate reduction for enrolling in automatic payments?	Yes, enrolling in autopay can result in a 0.25% reduction.	Varies by lender; SoFi offers a 0.25% reduction for enrolling in autopay
Are there any loan fees?	PLUS loans have a loan fee of 4.236% for the 2019 to 2020 school year.	Varies by lender (SoFi has zero fees, including late fees and insufficient funds fees.).
Annual Loan Limits	Cost of attendance (COA) minus other student aid	Cost of attendance (COA) minus other student aid
Where are funds disbursed?	Funds are disbursed directly to the school	Funds are typically disbursed directly to the school.
Are there any grace periods?	Payments are required immediately upon disbursement.	Options vary by lender.
Forbearance Options	Yes, limits can vary. For a full breakdown on forbearance options available to PLUS loan holders, review the Federal Student Aid Website .	In terms of forbearance, many lenders offer 12 months of forbearance for the life of the loan. But this will vary by lender.
Repayment Terms	PLUS loans are eligible for the Standard, Extended, or Graduated repayment plans.	Repayment terms vary by lender (SoFi offers repayment terms of 5,10, or 15 years).
Death Discharge	PLUS loans can be discharged in the event the student or parent dies.	Some lenders offer death forgiveness if the student who receives the benefit dies while in school or after graduation. When a parent with a private parent loan dies, the estate is typically responsible for the loan.
Disability Discharge	Parent only	Disability discharge varies by lender. Some lenders allow for total discharge dependent on disability; however, the requirements vary by lender.
Can the loans be consolidated?	Yes. Can be consolidated through a Direct Consolidation Loan.	Yes, private loans can be consolidated and refinanced through a private lender. New rates and terms will vary by lender and based partially on a borrower’s credit history.

Choosing Between a Direct PLUS Parent Loan vs. Private Loan

When you’re deciding between a parent PLUS loan and a private loan, you’ll want to weigh all the costs and consider your other options too.

Besides the Direct PLUS parent loan, there are other ways to finance your kid’s college education. Many parents start a 529 savings plan when their kid is very young, which could potentially have enough set aside by the time they start college.

Another possibility is a home equity line of credit, if you own a home, which could potentially have a lower interest rate than a Parent PLUS Loan, but would also put your house on the line and extend your mortgage repayment.

You might even be weighing the possibility of taking out a 401(k) loan or withdrawing money from your retirement account. But both of those options come with penalties for early withdrawal, so you’ll likely want to compare the costs to private loans.

Borrowers with strong credit histories and income might be able to qualify for a lower interest rate on a private parent loan.

Depending on a variety of financial factors, you might also be able to secure a lower interest rate or a shorter term, which could be a boon if you’re willing and able to repay the loan on a shorter repayment plan than is available on PLUS loans — which can help you save money in the long-term.

Stretching out a loan repayment and using forbearance when you don’t need to are just a few of the common mistakes people make with student loans.

However, if you need to cover the costs of your kid’s education and you don’t qualify for a lower interest rate, then a PLUS loan might be the best option for you. Additionally, if you want to take advantage of federal benefits, such as income-driven repayment or deferment options, then you’ll likely want to consider a PLUS loan.

PLUS loans may allow you to defer repayment while your student is enrolled and for a grace period of up to six month after graduation, although the interest builds up during that time and you’ll end up paying more over the term of the loan.

Parent Student Loans With SoFi

Given how much college costs these days, it’s likely you and your child will have to take out some loans—whether student loans, parent loans, or both. SoFi offers low-rate, no fee parent student loans that are built to help you pay for your child’s education.

And when we say no fees, we mean no fees. That means no origination fees, no late fees, no prepayment penalties, and no insufficient funds fees.

Learn more about private parent student loans with SoFi today.

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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.
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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 Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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The college application process can be an exciting and stressful time for both the student and their parents. For your child, it may be one of the first times he or she has had to take action and make decisions that could have a lasting impact on his or her life.

As a result, you want to help guide your child and keep them accountable, but don’t want to push them too hard or do the work for them. For help on how to prepare your kids for college, here is a parent’s guide to college planning so you can support your child during the college application process without making things worse.

A Parent’s Guide to College Planning

It can be hard to know how much is too much, but things can also go south if you’re not involved at all. Here are some things to consider when preparing kids for college.

Avoiding Taking Over the Process

It can be tempting to do what you’ve likely done countless times in your child’s life: step in and solve the problem for them. While there are certainly times in their life when that’s a good thing, it’s important to allow your child to take the helm.

On the flip side, avoid being completely hands-off. You know your child, possibly better than they know themselves. If they’re prone to procrastination or might have a hard time talking about their strengths in an essay, take the opportunity to give them some guidance and gentle reminders.

Listening to Your Child

While the ultimate goal is to get all their applications in on time, it’s important to remember that the process can be overwhelming. Your child is making some big decisions about their future and may need someone with whom they can talk things through.

Take the time to listen to your child and be empathetic about their stress, fear, and anxiety. If possible, share your own experience and show that they can depend on you for ongoing support.

Knowing the Deadlines

Applying for college is serious business, and it’s unlikely colleges are going to accept late entries. While it’s important for your child to know when their applications are due, it’s also a good idea for you to have them on your calendar.

That way, you can follow up as the deadlines get closer just in case your child forgot. That said, be careful to avoid nagging or bringing it up too often.

Avoiding Focusing on Just One School

Parents want the best for their children, and that may include wanting them to attend a specific school. Maybe you like the idea of having your child attend your alma mater, or you have your sights set on an Ivy.

It may not hurt to make a suggestion about which schools your child should consider. But having your child put all their eggs in one basket can make it difficult if they don’t get accepted or they want more options later on.

Visiting Campuses

If your child’s top schools are close by, take a day off of work to visit the school campuses and meet with an admissions counselor. Being there and taking it in may help your child make the right decision about which school is the best fit.

If a college is far away, consider making a vacation out of it. Before you go, check with the colleges to see if they offer campus tours or college fairs where your student can get a better idea of the full experience.

Encouraging Them to Work With a School Counselor

If your child has a designated counselor at school, encourage them to meet with their counselor and talk about the process. While you can give good advice, the counselor may be more in touch with which school might be a good fit based on what your child wants to study.

They may also be able to give your child a better idea of what college admissions officers are looking for in an application, which can give your child an advantage.

Letting Your Child Do the Talking

It can be tempting to try to set up an appointment or communicate with prospective colleges on your child’s behalf. But by encouraging your child to do those things instead, you allow them to show initiative and independence, two traits that can give them a leg up on other candidates.

It will also give your child good practice, because they’ll likely need to do a lot more on their own in the coming years, and may not have you nearby to help.

Talking About Finances

In addition to providing support during the application process, knowing how to prepare your kids for college costs is essential. If you’ve managed to save enough in a savings account or some other way, talk with your child about how far it will go and what they can use the money for.

Also, talk to them about student loans, both federal and private, and how to make good decisions about borrowing for education and living expenses.

Encourage them to apply for scholarships and/or grants first, and to work during school to help reduce how much they may need to borrow.

Putting Your Child’s Needs First

Preparing kids for college is no easy task, especially if you feel like they’re dragging their feet. As you try to find the best way to support your child, take a step back and think about their needs versus your desires, and try to focus your encouragement based on their needs.

Doing this may require some patience, but it can help turn the process into a bonding experience rather than an alienating one. And whatever you do, avoid skipping the money conversation.

Teaching your child about the cost of college, as well as discussing options to finance their education, can help set them up for success for years to come.

If you are thinking about taking out private student loans for college, learn more about SoFi.

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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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In a perfect world, everyone would have a 529 plan—or another education savings account—full of funds to cover their children’s college years. But there are many reasons why that may not be the case for you. Don’t fret, there are other options for paying for college.

You may be considering dipping into your retirement funds. Depending on the type of retirement account you have, you may be able to take an early withdrawal or a loan from your retirement account, which you can use to fund your child’s education.

But using retirement funds to pay for college isn’t always the best move. Before you do it, consider both the benefits and the drawbacks, as well as some potentially less costly alternatives.

Before we jump in, it’s important that you know this article is a basic, high-level overview of some potential options when it comes to using retirement funds to pay for college. Further, because these topics (taxes and investments) are complex, none of what’s written here should be taken as tax advice or investment guidance.

Always talk to qualified tax and investment professionals with questions about your retirement accounts; never rely on blog posts (like this one) to make important financial decisions.

A Few Pros of Using Retirement Funds to Pay for College

If you already have the money saved up, getting money out of your retirement funds to prevent your child from having to take out student loans can have some upsides.

You Could Avoid an Early Withdrawal Penalty

If you have an individual retirement account (IRA), taking an early withdrawal typically results in income taxes on the withdrawal amount plus a 10% penalty. However, if you withdraw funds for qualified higher education expenses, the 10% penalty is waived .

That said, the withdrawn funds will be still considered taxable as income. Also, this tax break doesn’t apply to 401(k) accounts. But if you roll over your 401(k) into an IRA, the funds would be eligible to avoid the penalty.

You Could Avoid Taxes Altogether

If you have a Roth IRA, you can withdraw up to the amount you’ve contributed to the account over the years without any tax consequences at all.

You’re Paying Interest to Yourself With a 401(k) Loan

In addition to allowing you to take early withdrawals, some 401(k) plans also allow you to borrow from the amount you’ve saved and earned over the years.

If you borrow from a 401(k) account, that money won’t be subject to taxes like an early withdrawal. Also, the money you pay in interest goes back into your account rather than to a lender.

Drawbacks of Using Retirement Funds to Pay for College

Before you raid your retirement to pay for your child’s college tuition, here are some negative aspects to consider.

Tax Consequences

Even if you manage to avoid a 10% early withdrawal penalty on your retirement account, some or all of the money you withdraw from a retirement account may be considered taxable income. Depending on how much it is, you could face a huge tax bill when you file your tax return for the year.

401(k) Loan Rules

If you take out a large loan from your 401(k), then leave your job, you may be required to pay the loan in full right then, regardless of your original repayment term. If you can’t repay it, it’ll likely be considered an early withdrawal and be subject to income tax and the 10% penalty.

You May Have to Work Longer

Taking money out of a retirement account not only lowers your balance but it also means that the money you’ve withdrawn is no longer working for you.

Due to compound interest, the longer you have money invested, the more time it has to grow. But even if you replace it over time, the total growth may not be as much as if you were to leave the money where it is from the start.

Alternatives to Using Retirement Funds to Pay for College

Can you use retirement funds to pay for college? Absolutely. But before you do, consider these alternatives.

Scholarships and Grants

One of the best ways to pay for a college education is with scholarships and grants, since you typically don’t have to pay them back.

Check first with the school your child is planning to attend or is already attending to see what types of scholarships and grants are available.

Make sure your child fills out the Free Application for Federal Student Aid (FAFSA®) form. The information provided in the FAFSA will help determine their federal aid package, which typically includes grants, federal student loans, and/or work-study.

You and your child can search millions of scholarships from private organizations on websites like Scholarships.com and Fast Web . While your child may not qualify for all of them, there may be enough they do qualify for to help reduce their tuition bill.

Federal Student Loans

As mentioned above, filling out the FAFSA will give your child an opportunity to qualify for federal student loans from the U.S. Department of Education.

These loans have low fixed interest rates, plus access to some special benefits, including loan forgiveness programs and income-driven repayment plans.

With most federal student loans, there’s no credit check requirement, so you don’t have to worry about needing to cosign a loan with your child.

Parent PLUS Loans

If you’re concerned about the effect of student loan debt on your child, you can opt to apply for a federal Parent PLUS loan to help cover the costs of college.

Keep in mind that the terms aren’t usually as favorable with Parent PLUS loans as they are with federal loans for undergraduate students. The interest rates are currently higher, and you may be denied if you have certain negative items on your credit history.

Private Student Loans

If your child can’t get federal student loans or they’ve maxed out what they can borrow and pursued all their other options, private student loans may be worth considering to make up the difference.

To qualify for private student loans, however, you will need to undergo a credit check. If your child is new to credit, you may need to cosign to help them get approved by being a cosigner—or you can apply on your own.

Private student loans don’t typically offer income-driven repayment plans or loan forgiveness programs, but if your credit and finances are strong, it may be possible to get a competitive interest rate.

Balance Your and Your Child’s Needs

Using retirement funds to pay for college is one way to help your child. But you probably don’t want to risk your future financial security. Take the time to help your child consider all of their options to get the money they need to pay for school.

If you do decide a private student loan is the right fit for their education, SoFi is happy to help. In the spirit of complete transparency, we want you to know that we believe you should exhaust all of your federal grant and loan options before you consider

SoFi as your private loan lender. We offer flexible payment options and terms, and don’t worry, there are no hidden fees.

If you’re considering a private student loan, you can find your SoFi rate today.

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
Tax Information: 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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products
SoFi loans are originated by SoFi 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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Public Service Loan Forgiveness. The unicorn of student debt.

Its very existence is debated. Thousands of federal student loan borrowers pursue it. And for those who could prove they’d decided their lives to doing (the public) good—and followed all the eligibility rules—it was supposed to be attainable.

So far, however, the approval process has been grindingly slow—and difficult—which hasn’t helped borrower skepticism. The Department of Education’s Office of Federal Student Aid reported that of the 110,729 applications processed as of June 30, 2019, 100,835 had been denied—a whopping 91%.

And of the over 90,962 unique borrowers applying, only 1,216 have been accepted—about 1.3%. Although the numbers are improving, it seems that only the most tenacious and patient seekers will survive. The specifics are daunting, follow-through is a must, and a number of applicants don’t qualify from the start.

So is it even worth it to apply? Misinformation abounds. Here are some helpful things to know as you explore your options.

What Is the Public Service Loan Forgiveness Program?

The Public Service Loan Forgiveness Program, often referred to as PSLF, was introduced in October 2007 as a way for those working for a qualifying not-for-profit or the government to obtain forgiveness for their federal student debt after making a decade’s worth of payments. The program took effect in October 2007.

Under the plan, those who have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer may have their remaining balance on a federal direct student loan zeroed out.

That’s a lot of qualifying to be done, so let’s break it down.

What’s Considered Full Time, Qualifying Employment?

For starters, it’s not about the specific job you have, it’s about your employer. The following types should pass muster:

•   Government organizations at any level (federal, state, local or tribal)
•   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 under Section 501(c)(3), if their primary purpose is to provide certain types of qualifying public services
•   AmeriCorps or the Peace Corps (if you’re a full-time volunteer)

Student loan forgiveness is for eligible not-for-profit and government employees, so if you’re a freelancer or employed by an organization that is working under contract, that won’t count.

To be considered “full time,” you must work at least 30 hours per week. Or, if you work more than one qualifying part-time job at the same time for an average of at least 30 hours, you might meet this standard.

But any time spent on religious-type work (instruction, worship services, or any form of proselytizing) will not be included towards the 30 hours.

What Kinds of Loans Qualify?

Here’s where it starts getting complicated. OK, more complicated.

Only non-defaulted loans received under the William D. Ford Federal Direct Loan Program are eligible for PSLF. If you received a loan under the Federal Family Education Loan (FFEL) program or the Federal Perkins Loan program, you may be able to combine them into a Direct Consolidation Loan, which does qualify, but there’s a catch: Only the payments you make on your new consolidation loan will be applied toward the 120 payment requirement. The FFEL and Perkins payments you made before that won’t count.

And if you combine Direct loans and other federal loans when you consolidate, you’ll lose credit for the payments you already made on the Direct loans.

What Qualifies as a Monthly Payment?

Any payment made after Oct. 1, 2007 may qualify, as long as it’s for the full amount on the bill, is under a qualifying repayment plan, and was made on time (no later than 15 days after the due date) while you were employed full time by a qualifying employer.

Payments made while you were in “in-school status,” under a grace period, or in deferment or forbearance won’t qualify.

But here’s a bit of good news: Your 120 qualifying monthly payments don’t have to be consecutive. If you were out of work or worked for a for-profit company for a while, you won’t lose credit for the qualifying payments you made.

And there are special rules for lump-sum payments made by AmeriCorps or Peace Corps volunteers.

What’s a Qualifying Repayment Plan?

It’s important to know this: Even though the 10-year Standard Repayment Plan qualifies for PSLF, you aren’t actually eligible to receive forgiveness unless you enter into one of the income-driven repayment plans.

That’s because if you’re on a 10-year repayment plan, and you make all the payments, you won’t have a balance left to forgive at the end of that period. So if you plan to pursue PSLF, it may be in your best interest to switch to an income-driven plan ASAP.

What Does it Take to Apply?

First thing’s first. You won’t submit your PSLF application until after you’ve made your 120 qualifying payments. What you will need to complete first is the Employment Certification for Public Service Loan Forgiveness form annually or whenever you change employers.

In the ideal case, the government will use that information to let you know for sure that you’re making qualifying payments. (If you don’t stay on top of this, you can submit an Employer Certification form when you apply for forgiveness.)

After you submit an Employment Certification form and your loans have been transferred to FedLoan Servicing (if it wasn’t already your servicer), your form is reviewed and you’ll receive notification of the number of qualifying payments you’ve made. You can track that number by logging into your FedLoan account or by looking at your most recent billing statement.

When you have made enough qualifying payments, you can file your PSLF application . But you aren’t through yet: You must be working for a qualifying employer at the time you apply for forgiveness and when the remaining balance on your loan is actually forgiven. (We know—it’s complicated. Definitely review the Department of Education’s website to get all the details.)

What Happens if the Application Is Denied?

Don’t panic. You may still be eligible for forgiveness if you were denied because payments weren’t made under a qualifying repayment plan.

The U.S. Department of Education is currently offering Temporary Expanded Public Service Loan Forgiveness (TEPSLF) opportunity. (The word “temporary” means it won’t be around forever and it may be just as difficult to get a request approved as PSLF.)

You can get more answers at the Office of Federal Student Aid’s Q&A page . Or you can call FedLoan Servicing at 800-699-2908.

Pros and Cons of PSLF

Some of the basic pros and cons of going for PSLF are fairly straightforward.

If you took on tens of thousands of dollars in federal student loans, the prospect of losing at least a portion of that debt is likely huge.

And, as a bonus, the IRS isn’t going to ask you to pay federal income taxes on the loan amount forgiven under the PSLF program. (That isn’t the case with all student loan forgiveness programs.)
The big drawback, of course, is the time and effort required for the chance to get a PSLF application approved.

And if, after all that, you don’t receive forgiveness—because the government changes the rules, because you decided to go another direction with your career, et cetera—you may have missed out on other opportunities to pay down your debt.

Federal student loans come with lots of benefits and protections, but with an income-driven repayment plan, you’ll be looking at a 20- to 25-year loan term (depending on the federal student loans you have).

With income-driven repayment, your payments are lower, it’s usually because the loan term is longer, not because your interest rate has improved. Your interest rate will stay the same under this plan.

Applying for Public Service Loan Forgiveness could be worth the challenge, if you’re pretty sure you’ve got what it takes—both in mental fortitude and when it comes to fulfilling the requirements.
But it isn’t the only option for getting student debt under control.

Refinancing Your Student Loans

If you work through a private lender like SoFi to consolidate and refinance your student loans, you may be able to get a competitive interest rate and a better fit of loan term.

But it is important to remember that if you refinance with a private lender you will lose federal benefits such as Public Service Loan Forgiveness, income-driven repayment plans, and deferment.

With SoFi, there’s no prepayment penalty, and SoFi offers unemployment protection for qualifying borrowers who might run into a rough patch.

And with SoFi, you can combine all your federal and personal student loans into one manageable payment, so you can keep track of your debt.

Interested in refinancing with SoFi? Applying online is easy and takes just minutes.

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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 DECEMBER 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.
Tax Information: 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.
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’re having trouble paying your student loans, you’re not alone. More students are taking out more in loans than ever, and it can be hard to make those payments once you graduate—especially if you have other debt and financial obligations.

In 2018’s graduating class, 69% of students took out loans and those who did leave school with an average of $29,800 in debt. For a lot of those graduates, when their private student loan payments are too high, they end up missing payments and potentially defaulting.

A report on student loan default from the Urban Institute predicted 40% of borrowers will default by 2023. The odds of default vary based on background and amount of other debt carried—they found 32% of those who borrowed less than $5,000 defaulted within the first four years and 15% of borrowers with more than $35,000 defaulted in the same timeframe.

That’s still a good percentage of people who can’t pay their student loans. If you’re in the same position, make sure you understand your student loans, both federal and private.

For the purposes of this article, we’ll look at what can happen if you don’t pay private student loans. Then you can start to weigh some options if you can’t afford your student loan payments.

What Happens If You Don’t Pay Your Private Student Loans?

Each private student loan lender will likely be a little different, but generally, missing a student loan payment can put your loan into delinquency, and may incur late fees and/or penalties.

In addition, depending on the loan, interest can accrue on those penalties and on the unpaid principal loan amount, which then can get added to how much you owe. If you miss too many consecutive payments, you may be at risk of defaulting on the loan.

Each private lender has their own terms that trigger student loan default. That typically means multiple missed payments. Even if you declare bankruptcy, it’s unlikely your student loan debt goes away. It’s important to check the terms of your private student loans, since they vary by lender.

Once a student loan goes into delinquency or default, it will likely affect your credit score. That can possibly affect your ability to take out loans in the future or achieve other financial goals, like buying a house.

In addition, once a private student loan goes into default, the lender can send it to collections.

If you can’t pay your private student loans, you could ultimately face a judgment that could result in a garnishment of your wages. (There are, however, some protections and rights you have when it comes to debt collection on student loans.)

Ideally, if your student loan payments are too high, you might consider other options before risking delinquency or default.

What If You Can’t Pay Your Federal Student Loans?

The first thing you might consider is separating your federal and private student loans. Federal loans often come with more protections and options for repayment plans.

For example, federal loans typically offer income-driven repayment plans based on your income and family size, relative to the amount of student debt owed. There are also required forbearance and deferment clauses on federal loans available to qualified borrowers.

Even though federal student loans (both subsidized and unsubsidized) are government-backed and originated by the U.S. Department of Education, they’re administered by a student loan servicer, which is a private company in charge of the loan. This does not make these loans “private” student loans.

It means you might be making your payments to a private loan company, but it’s still a federal student loan and still comes with federal student loan protections.

Options If You Can’t Pay Your Private Student Loans

If your private student loan payments are too high, however, then the options are slightly different because every private loan lender sets its own terms and conditions. While there are fewer options if you can’t make your private student loan payments, there are still some things you can consider.

1. Talking to Your Lender

If your private student loan payments are too high, then it might be worth talking to your lender.
You could start by getting a copy of your promissory note so that you know all the terms and conditions of your specific loan.

Each private lender sets out its own repayment and deferment options, so your loan may differ from your friends’ loans.

Lenders, however, want to get paid, and it’s not in their interest for you to default. Once you have the terms of your loan in hand, then you can try talking to your private lender about potential alternative student loan repayment plans to see if they’ll work with you on what you can afford or even if you might be able to put your loan payments on hold if you need to.

For example, SoFi offers an unemployment protection plan on its loans, allowing eligible members to temporarily halt payments if they lose their job.

2. Deferment and Forbearance Options

In certain circumstances, deferment and forbearance are available to temporarily put payments for federal loans on hold. However, for private student loans, forbearance and deferment options are not required, but any specifics will be laid by your lender.

Private lenders may offer forbearance and/or deferment in certain circumstances, such as returning to grad school or entering active military duty. If you can’t pay your private student loans, then you may want to see if your lender offers these options.

It’s important to know, though, that in most cases, interest continues to accrue and compound during forbearance or deferment on private student loans. That means the interest on the amount you owe builds up and gets added to the loan principal (which then accrues its own interest), and could end up costing you more in the long run.

3. Making a Student Loan Repayment Budget

This may sound obvious, but it can be important to create a plan and budget for repaying your student loans. Cutting back on some expenses or looking for additional income to allocate towards student loan payments could pay off in the long run.

Because student loan interest accrues and compounds over time, every little bit paid off now can save more money later.

In addition, if a borrower makes as many payments as possible on time, it could save late fees or additional penalties.

There are a few principles for how to tackle student loan payment.

You could start with the loans that have the smallest balances and build momentum (Snowball Method), or start with the highest interest loans to save yourself the most money (Avalanche Method).

You can also benefit from prepaying more than the minimum monthly payment. If you allocate additional payment towards your loan principal, then you won’t accrue interest on that principal you paid down, and you could save yourself money.

4. Refinancing your Student Loans

If your private student loan payments are too high, one way to potentially lower your monthly payments could be to refinance your student loans by extending your term.

If you need lower monthly payments right away, extending your loan term is one way to accomplish this (keeping in mind that a longer-term means you’ll likely pay more in interest over the life of the loan).

Once you’re on more solid financial footing, refinancing could qualify you for a lower interest rate, which could save you money in the long run (since interest adds up and compounds over time).

Lowering Your Student Loan Payments

If you’re struggling to make your student loan payments, then refinancing your private student loans with a longer-term could lower your monthly payments—which could free up money you may need for bills and other necessities.

If your credit score or financial outlook have improved since you first took out student loans, however, then you might be able to qualify for a new loan with better terms and a lower interest rate. When refinancing with SoFi, there are no application or origination fees, and there’s no penalty for paying off the loan early.

Consolidating federal loans with private loans, even at a new interest rate, however, does turn the federal loans into private loans. That means you would lose access to federal benefits, such as deferment, forbearance, or income-driven repayment plans.

Refinancing just a private loan creates a new private loan with new terms, and you can keep your federal loans separate if you choose.

Looking to lower your student loan payments? Get pre-qualified online with SoFi to find out your rate and terms.

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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 DECEMBER 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.
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.
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.

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