College students most likely want to make smart choices when it comes to money management in order to set themselves up for future financial success.
A favorable account for college students typically depends on personal financial needs, but the bank itself might be beneficial in more ways than imaginable.
While specific student bank accounts do exist, a beneficial account for any student will be the one that benefits them and their money the most.
How Do I Choose a Bank?
There are four main factors that might be helpful to research when choosing a new bank: fees, interest rates, location, and online access.
Something students may want to avoid is a bank that charges monthly fees for student or traditional checking accounts or requires a minimum deposit to open a new account.
Another fee to watch for is the overdraft fee, which currently averages just over $33 . For students who may not keep a lot of money in a checking account, an overdraft fee could end up being more than the total account balance.
One type of fee that might be forgotten until monthly reconciliation time is the ATM fee. Somesome banks and financial institutions will refund up to a certain amount (or sometimes all) of ATM fees each month when using another bank’s machine to withdraw cash.
If the evening’s entertainment is somewhere that only accepts cash, having an easy option to access funds could mean the difference between having fun with friends or having to sit the night out.
College students might also want to consider researching interest rates. If building up a savings account for post-college expenses or loan payments is a priority, it could be helpful to look into a bank that offers high-yield savings accounts, which typically earn a higher interest rate than checking accounts.
College location might be one of the biggest determining factors when looking for a bank. For students attending college away from home, researching banks near campus may turn up some convenient options.
Many banks and credit unions have local branches. Having an ATM nearby might also be an important factor to consider.
Some colleges may offer an on-campus bank branch or a few ATMs. Choosing a well-known bank with locations across the country may offer an advantage to being able to find a physical branch, but if that isn’t an important factor, considering which banks are near campus could be an alternative.
Another piece of the puzzle, and one that some students might seek for convenience, is online banking. Especially when choosing a bank that does not have a location near school, making sure the bank’s app or website is up to snuff could make banking transactions that much more convenient.
Some banks may offer mobile check deposit through an app, which could mean even fewer trips to a physical bank branch.
How Many Bank Accounts Should I Have?
Learning to manage money is part of becoming an adult. College students are most likely living on their own for the first time and might have little to no experience opening and using a bank account.
Having just one checking and one savings account might simplify keeping track of funds earmarked for spending and those meant for savings.
For students interested in saving for longer-term goals—maybe tucking money away for future student loan payments or emergency funds—opening another savings account could be one strategy to help reduce the temptation to think of that as available, spendable money.
Having too many accounts could become a problem if keeping track of those separate accounts becomes too much to handle on top of an already busy school schedule.
What Kind of Account Works For College Students?
Besides looking into which financial institution might work well for college students, something else to consider might be the type of institution to do business with.
Credit unions, for instance, tend to be smaller but still offer many of the same services as a big bank. They may also offer more flexibility and lower fees.
As nonprofits, credit unions are designed to serve their members, and typically pay higher interest rates on deposits and offer a more personalized experience and better customer service.
If you don’t need a brick-and-mortar bank location every two blocks, a credit union could be the right fit for college. Some credit unions also offer online and mobile banking options.
Plus, if you are using a credit union savings account, odds are you will earn higher interest, and avoid some of those other larger bank fees along the way.
Though some bigger financial institutions do offer special, college student-only accounts with lower fees or certain bonuses to help maintain a healthy budget as well.
A money management account could be another option to amp up savings and avoid fees. SoFi Money® is a cash management account that enables members to spend, save, and earn an interest rate all in one place without paying account fees.
Funds can be managed and accessed from anywhere—complete with mobile transfers, photo check deposit, and customer service available through the app.
College students looking for a flexible money management experience might find SoFi Money® to be the right option. Learn more.
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SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank.
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.
Check out what kind of rates and terms you can get in just a few minutes.
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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. 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.
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.
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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 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.
Student loans can have a way of making you feel like a hamster in a wheel—spinning like crazy but getting nowhere fast. And while knowing that around 44 million Americans carry student loan debt might offer some comfort in a “misery loves company” kind of way, the magical loan-forgiveness fairy is still—as far as we know—a myth.
In the meantime, though, there’s a bit of good news—you may have more control than you think. We are here to help illuminate some options available to student loan holders, so they can make decisions that fit best with their financial goals.
Have you been considering one of those options—choosing whether to consolidate or refinance student loans?
But what is consolidation, what is refinancing, and how do you know which one (if either) may be right for you?
This could be a somewhat complicated question, especially since these terms are sometimes used interchangeably. For example, consolidation simply means combining multiple student loans into one loan, but you have different options and can end up with different results by consolidating with the federal government vs. consolidating with a private lender.
Student loan refinancing is when you receive a loan with new terms and use that loan to pay off one or more existing student loans.
Consolidate vs. Refinance. Let’s break it down.
Here’s a simple overview of the different types of student loan consolidation, how they differ from student loan refinancing, and some tips for evaluating whether one of these options might work for you.
Federal Student Loan Consolidation
Federal student loan consolidation is offered by the government and is available for most types of federal student loans—no private loans allowed. When you consolidate with the government, your existing federal loans are combined into one new loan with a new rate, which is a weighted average of your old loans’ rates (rounded up to the nearest eighth of a percent).
This option may not save you any money, but there are still a few potential benefits:
1. Fewer bills and payments to keep track of each month.
2. The ability to switch out older, variable rate federal loans for one, new, fixed rate loan, which could protect you from having to pay higher rates in the future if interest rates go up. (Note: the last variable rate federal student loans were disbursed in 2006. Since then, all federal student loans have been fixed-rate.)
3. Lower monthly payments. But beware—this is usually the result of lengthening your repayment term, which means you might pay more interest over the life of the loan.
Private Loan Consolidation
Like federal consolidation, a private consolidation loan allows you to combine multiple loans into one, and offers some of the same potential benefits listed above. However, the interest rate on your new, consolidated loan is not a weighted average of your old loans’ rates.
Instead, a private lender will look at your track record of managing credit and other personal financial information when deciding whether to give you a new (ideally lower) interest rate on your new consolidation loan.
Bottom line: when you consolidate student loans with a private lender, you are also in fact refinancing those loans. When federal student loans are consolidated or paid off using a private loan, however, it’s important to know you will lose access to certain benefits such as income-driven repayment plans, forbearance and deferment options, and Public Service Loan Forgiveness (among others).
Student Loan Refinancing
As noted above, student loan refinancing is when a new loan from a private lender is used to pay off one or more existing student loans. If your financial situation has improved since you first signed on the dotted line for your original student loans(s), you may be able to refinance student loans at a lower interest rate and/or a different loan term, which could potentially allow you to do one or more of the following:
1. Lower your monthly payments.
2. Shorten your loan term to pay off debt sooner.
3. Reduce the money you spend in interest over the life of the loan.
4. Choose a variable interest rate loan, which can be a cost-saving option for those who plan to pay off their loan relatively quickly.
5. Enjoy the benefits of consolidation, including one simplified monthly bill.
Unlike federal loan consolidation, student loan refinancing is only available from private lenders. However, SoFi will refinance both private and federal student loans, so well-qualified borrowers can consolidate all of their loans into one with loans and/or terms that work better for them.
Things to Consider
While there are advantages to both consolidation and refinancing, sometimes the answer—depending on timing, your budget, or other outside factors—could be to leave well enough alone. As you research your options, consider asking yourself these questions:
What kind of student loans do you have?
Refinancing federal student loans through a private lender might result in a lower interest rate, but you will also lose access to the benefits that come with federal loans, such as Public Service Loan Forgiveness (PSLF), flexible repayment plans, the ability to pause payments, and an interest rate that’s determined by Congress—not your credit score.
If your loans are private, they were issued based on creditworthiness to begin with, so a refinanced loan will follow similar qualifications, and each private lender will have its own underwriting criteria.
What is the loan payoff amount?
While the amount of a monthly payment is important, especially if a refinance could reduce it, it’s wise to read through all the terms of the loan to understand the big picture.
Are the monthly payments lower because the loan is now on a 20 year-year term instead of a 10-year term? Are there loan origination fees rolled into the payment? Knowing the full, total repayment amount can help ensure that short-term gains don’t bite you in the long run.
What’s the goal?
Consider your reasons for a refinance or consolidation—lowering monthly payments, keeping better track of due dates, or paying off debt as quickly as possible will likely lead to different strategies.
Your monthly budget and what you can (and can’t) afford to put toward your loan repayment will also play a factor here. One way to help ensure the right decision for you is to play with your budget a bit to see which loan options might benefit you most.
What factors do lenders review?
This isn’t typically an issue when it comes to consolidating loans through the federal government. But people interested in refinancing student loans with a private lender will likely need to meet various lender requirements, much like they would for a mortgage or personal loan.
Lenders generally review information like the borrower’s credit history, income, debt-to-income ratio, and other factors to determine what type of interest rate and loan terms they may qualify for.
You may not be able to change the fact that you have student loans, but you can make smart decisions about them. And that’s what ultimately gives you power over your debt. For more information about student loans, you can explore SoFi’s student loan help center to find guidance and gain knowledge to help point you in the right direction.
Ready to refinance your student loans? Start today!
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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 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.
If the most exciting part of finally graduating from law school and passing the bar is getting your bar card in the mail, the least exciting part may well be making the first payment on your student loans.
Despite the fact that law school may be a sound investment—after all, the median lawyer salary in the United States was $120,910 annually in 2018, according to the Bureau of Labor Statistics —it certainly comes with a hefty price tag.
The average young lawyer now carries over $140,000 in student debt, and figuring out how to set up a loan repayment plan can be daunting. After all, a six-figure debt is nothing to take lightly.
Finishing law school already comes with a lot of responsibility: you may find yourself moving or changing cities, starting a new job, or just adjusting to the new responsibility of dishing out legal advice for a living.
On top of that, starting to pay off your student loans can feel like a challenge. Unfortunately, student debt is not an uncommon barrier to face after graduation; in fact, it’s becoming the norm. And yet, there are reasons why being a newly minted lawyer with debt could put you in a better position than graduates in other fields.
For one, the good news is that you’ve chosen a profession where even your starting salary likely puts you well above the median American household income —which was at $61,937 annually for 2018.
Not just this, there are a ton of debt repayment options available to law school graduates, including attractive student loan repayment programs and forgiveness programs that could have you saying goodbye to your debt—if you’re in the right sector.
Ultimately, once the initial sticker shock of your student loan debt wears off, you may realize that you have numerous options at your fingertips that could help you move out of the situation you’re currently in and into one that’s much more financially comfortable.
Sure, tackling student loan debt is a challenge—for anyone. But it is a challenge you can rise to, especially with the help of other lawyers who have been in your shoes.
Whether you’re a legal services attorney or a first-year associate, a good first step on your road to career fulfillment could be creating a plan to tackle your student debt.
Ahead, we take a look at some of the options that may be available to you and uncover some tips for those attorneys who are saddled with high student loan debt—plus ways to move forward.
Taking Advantage of Your Law School’s Loan Repayment Program
New graduates with large debt loads may find themselves obsessing over the amount of debt they owe, instead of focusing on available repayment options. It’s basically the same advice that driving instructors give to new drivers: If you spot a car wreck on the side of the highway, the best way to avoid it is to keep your eyes on the road—not on the accident.
So, how can you shift your thinking and develop a more solutions-based approach when you’re facing a mountain of debt? When it comes to significant student loan debt, the answer may lie in taking the time to do your research and focusing your attention on the resources you may already have at your disposal:
One option to explore is the sort(s) of loan assistance offered by your law school. Some schools may have helpful loan repayment programs, including Loan Repayment Assistance Programs (LRAPs) , which can make it easier for law school graduates to work at public interest jobs, which typically pay less than private firms, by offering income-based repayment assistance.
That said, it’s important to pay careful attention to your student loan terms. For instance, Columbia University suggests a 10-year repayment term is the best option to take advantage of their LRAP, which would likely mean bigger monthly payments, but over a shorter period of time.
Looking Into Federal Loan Forgiveness Programs
Imagine this: You find your dream fellowship, internship, or job right after graduation, and not only does it put you on a path towards gaining valuable experience in your field, but it also comes with an unexpected added perk—debt payoff assistance.
Student loan forgiveness programs aren’t altogether uncommon for those in the legal field. In fact, there are many possible scenarios in which you could find yourself getting some help paying off your debt—or having the remainder forgiven altogether.
Typically, law school loan forgiveness is reserved for lawyers working in the public sector. Many times, public service lawyers earn lower salaries than those in the private sector, and so forgiveness programs are usually geared towards lower earners who may need more help shouldering their debt.
Public Service Loan Forgiveness (PSLF), for example, is a federal loan forgiveness program that eliminates federal student loan balances for eligible borrowers who make on-time loan payments for 10 years while they’re working for a qualifying nonprofit or in a government sector.
In addition to this, some states also offer loan forgiveness for attorneys through LRAPs. LRAPs typically require that you graduate from the academic institution that awarded you LRAP initially, work around 30+ hours per week, and start paying off your loans immediately.
These aren’t the only options available. Added bonus: Typically, loan forgiveness programs can be used as long as you qualify, so you may be able to “double-dip” if you qualify for more than one. Be sure to check the criteria for each program to confirm; there are some, such as teacher loan forgiveness programs, that do not allow “double-dipping.”
One tip: Search for and fit your repayment plan to your personal circumstances and situation. For instance, if you’re going into public interest law, there are loan forgiveness, assistance, and deferral programs. And you’ll want to ensure that your job meets the requirements for those programs.
Considering Consolidating or Refinancing Your Student Loans
If you find yourself dealing with more than one student loan, a possible option may be to consolidate or refinance your loans so that you can just worry about paying off one lump sum.
Depending on your exact circumstances, student debt consolidation may provide some peace of mind and the ability to more easily manage your repayment, given that consolidation means combining existing student loans into one.
(Note: If you refinance federal loans with a private lender, you will no longer qualify for federal loan benefits, such as PSLF, discussed above, or federal income-driven repayment plans.)
If you decided to consolidate your federal student loans into one Direct Consolidation Loan, you can always consider refinancing in the future once you are in the market for a better interest rate.
One tip: instead of treating your repayment plan as if it’s set in stone, consider ways it may need to (and could) change if your financial situation changes.
Reallocating Your Debt (If Possible)
Depending on which stage you are at in your debt repayment process, there may be options available for you to reallocate your debt. Sometimes, if you come to own property, you can use this to your advantage by borrowing or reallocating existing debt against the value of the property.
However, converting unsecured debt (like a student loan) into debt on a secured lien such as your home can come with risks. For example, if you were unable to pay your mortgage and went into loan default, you could lose your home. So, as with anything, it’s important to weigh the costs and benefits.
One tip: Take the time to research and fully understand ways to tackle law school debt. And if you have the opportunity to borrow money from, for instance, home equity, you may be able to obtain more favorable terms on your mortgage while paying off your student loan at the same time. Some mortgage lenders actually offer loans specifically tailored to pay off student loan debt.
And a Favorite Tip: Throw Some Extra Money at Your Loans When You Can
If you’re looking to find tips to conquer your student loans the old-fashioned way, you can always tighten your belt and put every available dollar towards your debt. Of course, this strategy can be used in conjunction with just about any other plan, and it’s a valuable thing to consider. After all, extra money can add up quickly. And you can always make prepayments on student loans—federal or private—you have the right to pay off your student loans as fast as you want .
Debt can be an overwhelming thing to face, but by being proactive and funneling any and all extra cash into your student loan repayments—yes, that includes that unexpected bonus or inheritance money—before you know it, you may realize that your mountain of student loan debt has, over time, become a molehill.
Here are some tips to get started:
When you’re still in school, if you have leftover loan money at the end of the semester, you can pay it back into your loans to avoid compounding interest.
If you’re doing pretty well financially for a few years out of school, you might allocate some of your high salary to pay off your loan, or pay as much extra as possible. Ditto with getting a raise: although it may be tempting to upgrade your lifestyle, sticking to the same budget and using that money to pay down your law school loan debt might be a good option—potentially saving you money and worry.
If you’re ready to get ahead and tackle your debt from law school, SoFi is here for you. Refinancing your student loans with SoFi may even save you money in the long run.
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