top view working on desk with flowers

How to Get the Student Loan Interest Deduction

If you’re tackling school debt and looking for ways to maximize your tax refund, one avenue to consider is the student loan interest deduction. This benefit allows you to take a tax deduction for the interest you paid on student loans that you took out for yourself, your spouse, or your dependents. The deduction can lower how much of your income is taxed, which could result in a lower overall tax bill.

However, there’s a limit to how much you can deduct each tax year, and you must meet certain criteria in order to get the deduction. Let’s look at how the student loan interest deduction works and how to qualify for it.

Are Student Loan Payments Deductible?

Typically, when you repay a student loan, your monthly payment goes toward the original amount you borrowed plus origination fees (the loan principal) and the amount a lender charges you to borrow it (interest). With the student loan interest deduction, you are only allowed to deduct the amount you paid in interest, not the full amount of the loan payment.

Is Student Loan Interest Deductible?

The student loan interest deductible allows you to subtract up to $2,500 or the total amount of interest paid on student loans — whichever is lower — from your taxable income. Private and federal loans may qualify for this benefit. The deduction is considered “above the line,” which means you don’t have to itemize your taxes to take advantage of it.

Note that there are income phaseouts based on your modified adjusted gross income (MAGI). A borrower can claim the full credit if their MAGI is $80,000 or less ($160,000 or less if you’re filing jointly). The deduction is gradually reduced if your MAGI falls between $80,000 and $90,000 ($160,000 and $180,000 if you’re filing jointly). The deduction is eliminated for borrowers with a MAGI of more than $90,000 ($180,000 or more if you’re filing jointly).


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

Who Can Deduct Student Loan Interest?

Not everyone is able to claim the student loan interest deduction. In order to be eligible for it, you must meet certain criteria:

•   You paid interest on a qualified student loan for you, your spouse, or your dependents in the previous tax year. (A qualified student loan is a loan taken out to pay for qualified education expenses like tuition, housing, books, and supplies. The loan must be used within a “reasonable period” after it’s taken out.)

•   You’re legally required to pay interest on a qualified student loan.

•   Your MAGI in the 2023 tax year is less than $90,000 (or less than $180,000 if you’re filing jointly).

•   Your filing status is anything except married filing separately.

•   If you’re filing taxes jointly, neither you nor your spouse can be claimed as a dependent on someone else’s tax return.

Your eligibility may be impacted if your employer made payments on your student loans as part of a work benefit.

What to Know About the Student Loan Interest Deduction Form

If you pay $600 or more in interest on qualified student loans during a tax year, your loan servicer should send you IRS Form 1098-E. This student loan tax form is usually sent out around the end of January.

If you don’t receive a 1098-E form, you should be able to download it from your loan servicer’s website. To find out who your loan servicer is, log on to the Federal Student Aid website, and the information will be listed in your dashboard. You can also call the Federal Student Aid Information Center at 800-433-3243.

Keep in mind that if you didn’t make payments on your federal student loans because of the Covid-related payment pause — or if you didn’t pay $600 in interest during the tax year — you may not get a 1098-E form. However, you can contact your servicer to find out how much interest you paid during the year if you’re planning to report it on your taxes.

Recommended: How Student Loans Could Impact Your Taxes

Additional Education Tax Breaks

The student loan interest deduction isn’t the only benefit worth knowing about. You may also want to see if you qualify for certain education tax credits, which represent a dollar-for-dollar reduction in your overall tax burden. They can directly lower the tax amount you owe. Here are two to consider.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is a credit for tuition and other qualified educational expenses paid during the first four years of a student’s college education. The credit is worth up to $2,500 per eligible student. Once your tax bill hits zero, you could earn 40% of whatever remains (up to $1,000) as a tax refund.

You must meet certain requirements in order to qualify for the AOTC. You must:

•   Pursue a degree or other recognized education credential

•   Be enrolled at least half time for at least one academic period beginning in the tax year

•   Have no felony drug convictions at the end of the tax year

•   Haven’t claimed the AOTC for more than four tax years

As with the student loan interest deduction, your income matters. To claim the full credit, your MAGI must be $80,000 or less ($160,000 or less if you’re filing jointly) in the 2023 tax year. The credit amount begins to decrease if your MAGI falls between $80,000 and $90,000 (over $160,000 but less than $180,000 if you’re filing jointly). The credit is eliminated if your MAGI is over $90,000 ($180,000 if you’re filing jointly).

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) works a little differently. The credit is worth 20% of the first $10,000 of qualified educational expenses, or a maximum of $2,000 per year. Unlike the AOTC, which only applies to the first four years of a student’s college education, the LLC includes undergraduate, graduate, and professional schools, and courses needed to acquire job skills. There’s no limit to the number of years you can claim it.

However, the LLC has a lower income limit, which means it could be more difficult to qualify for. For instance, in 2022, the credit amount gradually decreased if your MAGI fell between $80,000 and $90,000 ($160,000 and $180,000 if you filed jointly) in the 2022 tax year. The credit was eliminated if your MAGI is $90,000 or more ($180,000 or more if you filed jointly).

Strategies to Lower Monthly Student Loan Payments

Borrowers looking to save beyond tax time may want to explore ways to lower their monthly student loan payments.

One option to consider is a Direct Consolidation Loan. This loan is offered through the Department of Education and lets you combine different federal student federal loans into a single loan, resulting in one monthly payment. It can also lower your monthly payment amount, allow you to switch from a variable to a fixed interest rate, and help set up loans that are eligible for forgiveness.

Another strategy to think about is refinancing your student loans with a private lender, resulting in one new loan, hopefully with a lower interest rate. Just realize that if you refinance a federal student loan, you will lose access to federal protections and programs, such as the Covid-related payment pause, the Public Service Loan Forgiveness program, and income-driven repayment plans. And if you’re refinancing to get a lower monthly payment, know that you may pay more interest over the life of the loan if you refinance with an extended term.

Recommended: 7 Tips to Lower Your Student Loan Payments

The Takeaway

The student loan interest deduction can lower how much of your income is taxed, which could result in a lower overall tax bill. Depending on your income, you can deduct up to $2,500 of the interest paid on your loans. If you earn more than $90,000 a year (or $180,000 if you’re filing jointly), you are not eligible. Education tax credits, like the American Opportunity Tax Credit and the Lifetime Learning Credit, could also help lower your tax bill. Like the student loan interest deduction, you must meet certain criteria to be eligible.

There are different strategies that may help you lower your monthly payments so you can save outside of tax time. A Direct Consolidation Loan, for example, lets you combine multiple federal loans into a single loan and switch from a variable to a fixed interest rate.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


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


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


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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOSL09230677

Read more
student on laptop

How Do I View My Federal Student Loans?

Whether you’re a new grad who wants to get a grip on how much you owe and set up a payment plan or a working professional who wants to find out how much you’ve paid off of your total balance, keeping tabs on your student loan numbers is an important part of financial wellbeing. But for something that is so important, it can be surprisingly confusing to locate all your student loan information.

Student loan holders can view their federal student loans via the Federal Student Aid website (FSA), which is run by the Office of the U.S. Department of Education. It offers a convenient option for getting a comprehensive picture of all federal loans.

The FSA website can show you information on your federal student loans like:

•  The number and types of loans you have

•  The initial amount of your loans

•  Your current loan balances

•  The interest rates on your loans

•  If any of your loans are in default

•  The name of your loan service provider and their contact information

Using the Federal Student Aid website

In order to see your loan information on FSA, borrowers will need to create a new account; current registrants can log in with their email, phone number, or FSA ID username and password. In addition to student loans, the site also has valuable resources including repayment plans and loan counseling.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Where Do I Pay My Student Loans?

Even though you can obtain all the information about your student loans through the FSA website, that is not actually where you pay your student loans. Once you’re logged in, borrowers should be able to see the name and contact information for their student loan service provider. The student loan service provider is the entity charged with collecting loan payments.

Once you know who your student loan servicer is, you should be able to set up an online account directly with the loan servicer. Some student loan servicers also offer the option to set up automatic bill pay.

If you’d rather go old school, don’t worry, your student loan servicer’s website should also have information about making payments in other ways, like check or bank transfer.

Looking to save money on your
monthly student loan payments?
See how refinancing could help.


How Do I Pay My Student Loans?

Once you know how to view your federal student loans, you may still be wondering how exactly to pay them off. Viewing your federal loans is just the first step; next, you need to strategize your student loan repayment. One of the first things you may want to do is consider your different repayment plan options. As a note, you can use our student loan calculator to get estimates of what your monthly payments could look like under the various plans.

The federal government offers a handful of options when it comes to federal student loan repayment. These repayment plans are designed for people with different types of financial situations and priorities, from those who want a straightforward way to pay off their loans in a 10-year period to those looking for income-driven repayment plans.
Here’s a quick rundown of the repayment options offered for federal student loans:

•   The Standard Repayment plan is the default loan repayment plan for federal student loans. Borrowers pay a fixed amount every month within 10 years in order to pay off their loan(s).

•   The Extended Repayment is similar to the Standard Repayment plan but instead of making payments over 10 years, the payments are extended up to 25 years.

•   The Graduated Repayment Plan also offers a 10-year repayment option. Under this plan, monthly loan payments start at a lower amount and are then increased every two years for up to 30 years.

There are also four income-driven repayment plans–— Pay As You Earn (PAYE), Saving on a Valuable Education (SAVE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Under these plans, monthly payments are determined as a percentage of the borrower’s monthly income. Depending on the plan, borrowers have up to 25 years to repay their loans.

If you’re just starting to pay back your student loans after graduation, you’ll likely be automatically assigned to the Standard Repayment plan. You can change the repayment plan you are enrolled in at any time.

The federal government may also have options for you to consolidate your student loans into a Direct Consolidation Loan, which would allow you to group all your loans together into a single loan from the government, with an interest rate that’s the weighted average of all your loans’ interest rates, rounded up to the nearest eighth of a percent.

In addition to the repayment plans offered by the federal government, you might also consider refinancing your student loans with a private company. Loan refinancing pays off your current federal and private student loans with a new loan from a private lender.

The private lender will review factors like your credit history and income potential to determine your new terms. For some borrowers, student loan refinancing may result in a lower interest rate, lower monthly payments, or even a shorter repayment term—which could mean you spend less money in interest over the life of the loan. Conversely, if you refinance with an extended term, you may pay more interest over the life of the loan.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


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


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


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.

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.

SOSL09230675

Read more
graduates throwing caps

What Is a Student Loan Grace Period and How Long Is It?

As you prepare for life after graduation, one important step is figuring out whether you’re required to make monthly student loan payments right away or you have what’s called a “grace period.” The same question applies to students taking a break from going to school full time.

Below, we’ll explain what a grace period is, when it starts, and how you might extend yours. You’ll also find a simple financial to-do list to tackle before you start making student loan payments.

What Is a Grace Period for Student Loans?

A student loan grace period is a window of time after a student graduates and before they must begin making loan payments. The intent of a grace period is to give new graduates a chance to get a job, get settled, select a repayment plan, and start saving a bit before their loan repayment kicks in. Most federal student loans have a grace period, as well as some private student loans.

Grace periods also apply when a student leaves school or drops below half-time enrollment. Active members of the military who are deployed for more than 30 days during their grace period may receive the full grace period upon their return.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

How Long Is the Grace Period for Student Loans?

The grace period for federal student loans is typically six months. Some Perkins loans can have a nine-month grace period. When private lenders offer a grace period on student loans, it’s usually six months, too.

Keep in mind that, as noted above, not all student loans have grace periods.

Does My Student Loan Have a Grace Period?

Whether you have a grace period depends on what kind of loans you have. Student loans fall into two main buckets: federal and private student loans.

Federal Student Loans

Most federal student loans have grace periods.

•   Direct Subsidized Loans and Direct Unsubsidized Loans have a six-month grace period.

•   Grad PLUS loans technically don’t have a grace period. But graduate or professional students get an automatic six-month deferment after they graduate, leave school, or drop below half-time enrollment.

•   Parent Plus loans also don’t have a grace period. However, parents can request a six-month deferment after their child graduates, leaves school, or drops below half-time.

Keep in mind: Borrowers who consolidate their federal loans lose their grace period. Once your Direct Consolidation Loan is disbursed, repayment begins approximately two months later. And if you refinance, any grace period is determined by your new private lender.

Private Student Loans

The terms of private student loans vary by lender. Some private loans require that you make payments while you’re still in school. When private lenders do offer a grace period, it’s usually six months for undergraduates and nine months for graduate and professional students.

Here at SoFi, qualified private student loan borrowers can take advantage of a six-month grace period before payments are due. SoFi also honors existing grace periods on refinanced student loans.

If you’re not sure whether your private student loan has a grace period, check your loan documents or call your student loan servicer.

Recommended: Student Loan Forgiveness for Current Students

Does Interest Accrue During the Grace Period?

During the student loan payment pause, which lasted from March 2020 to September 1, 2023, interest did not accrue on federal student loans. However, that’s not the way it usually works.

For most federal and private student loans, interest is charged during the grace period — even though you aren’t making payments on the loan. In some cases, this interest is then added to your total loan balance (a process called “capitalization”), effectively leaving you to pay interest on your interest.

In July 2023, federal regulations changed so that the interest that accrues during a borrower’s grace period is not capitalized. According to the federal student aid website, “the interest that accrues during your grace period will be added to the outstanding balance of your loan, but it will not be capitalized.”

How to Make the Most of Your Student Loan Grace Period

If you are in a financially tight spot after you graduate or during your break from school, a student loan grace period can offer much-needed breathing room. Here’s how you can put your grace period to good use:

Get Your Finances in Order

Take this time to create a new post-grad budget. Which approach you use is up to you: the 70-20-10 Rule, the Kakeibo method, zero-based budgeting. The important thing is to determine your monthly income and expenses, setting aside enough to pay down debts and save a little.

Set Up Autopay

Missed loan payments can incur penalties and hurt your credit score. Setting up autopay means one less thing you have to remember. Some student loan lenders will even discount your interest rate for setting up automatic payments (like SoFi!).

Consider Making Payments Ahead of Time

Just because you don’t have to make payments toward student loans during a grace period doesn’t mean you can’t. If you are in a financial position to make payments — even interest-only payments — during a grace period, you should. It can help keep your loan’s principal balance from growing if you have private loans and the accruing interest is capitalizing during your grace period. (Learn more in our take on making minimum student loans payments.)

Look into Alternative Repayment Plans

Once your grace period is over for your federal loan, you’ll be automatically enrolled in the Standard Repayment plan. However, if you’re concerned about making your payments, several income-driven repayment plans are available. These plans reduce your payment to a small percentage of your discretionary income. The Department of Education introduced a new IDR plan recently called the Saving on a Valuable Education (SAVE). With SAVE, borrowers get the lowest monthly payments of all the IDR plans — sometimes as low as $0. (Note that the lowest payments will arrive in July 2024, when the minimum payment for SAVE participants drops from 10% to 5% of discretionary income.)

Consider Consolidating or Refinancing Your Student Loans

These two terms are often used interchangeably, but there are important differences between them. Both consolidation and refinancing combine and replace existing student loans with a single new loan.

A Direct Consolidation Loan allows you to combine several federal student loans into one new federal loan. The resulting interest rate is the weighted average of prior loan rates, rounded up to the nearest ⅛ of a percent. However, as noted above, borrowers who consolidate their federal loans lose their grace period.

Student loan refinancing is when you consolidate your student loans with a private lender and receive new rates and terms. Your interest rate — which is hopefully lower — is determined by your credit history.

Can You Extend Your Student Loan Grace Period?

If your loan doesn’t qualify for a grace period or you want to extend your grace period, you have options. You may still delay your federal student-loan repayment through deferment and forbearance.

What’s the difference? Both are similar to a grace period in that you won’t be responsible for student loan payments for a length of time. The difference is in the interest.

When a loan is in forbearance, loan payments are temporarily paused, but interest will accrue during the forbearance period. This can lead to substantial increases in what you’ll pay for your federal loans over time. You’ll want to consider forbearance very carefully, and look into other options that might be available to you, like income-driven repayment plans. (The good news is that the interest that accrues during forbearance no longer capitalizes.)

During deferment, by contrast, interest will not accrue – at least, not for Direct Subsidized Loans, Subsidized Federal Stafford Loans, Federal Perkins Loans, and subsidized portions of Direct Consolidation Loans or Federal Family Education Loan Program (FFEL) Consolidation Loans. Other types of federal loans may still accrue interest during deferment, and that interest will capitalize upon exiting deferment unless you were enrolled in an income-driven repayment plan.

While grace periods are automatic, you’ll need to request a student loan deferment or forbearance and meet certain eligibility requirements. In some cases — during a medical residency or National Guard activation, for example — a lender is required to grant forbearance.

The Takeaway

Federal student loan grace periods are typically six months from your date of graduation, during which you don’t have to make payments. Most federal student loans have grace periods (though sometimes they’re dubbed “deferments” instead). Private student loan terms vary by lender. However, some lenders, like SoFi, match federal grace periods for undergrad loans.

During your grace period, you may want to make payments anyway, even interest-only payments, to prevent your balance from growing. The grace period is a good time to create a new budget, choose a repayment plan, and set up autopay. Student loan payments and interest were on pause between March 2020 and September 2023, but they have resumed.
If you have trouble making your payments, you have options, from income-driven repayment to consolidation to refinancing.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


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


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


Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOSL09230676

Read more
desk with imac and calendar

How Long Do You Have to Pay Off Student Loans?

The standard time to pay off federal student loans is 10 years, but terms can range from five to more than 20 years depending on the type of loan and repayment program. Your situation will also determine how long it takes to pay off student loans, including how much you owe in student loans and how much of a payment you can afford to make each month.

Paying Back Student Loans

You need to start paying back student loans after you graduate from college, withdraw, or drop below half-time enrollment. Most federal loans, including Direct Subsidized and Direct Unsubsidized Loans, and many private loans, come with a six-month grace period, meaning your payments won’t actually be due for six months until leaving school.

When it comes time to pay back your student loans, one of the most important things you can do is make sure your payments are on time each month. Making late student loan payments or failing to make your payments can have serious consequences, including student loan default.

How Long to Pay Off Student Loans

Once your loans become due, you’ll have the option of choosing a student loan repayment plan. Options for federal student loans include the Standard Repayment Plan, Extended Repayment Plan, Graduated Repayment Plan, and income-driven repayment (IDR) plans. These various repayment options come with their own pros and cons, so it’s important to understand your needs and which one makes the most financial sense.

If you don’t make a choice, your federal loans will automatically be enrolled in the Standard Repayment Plan. Here, the length of your repayment period is set to 10 years.

If you have private student loans, your repayment period is what you agreed to when you signed the loan. These will vary by lender and your personal situation. Those that can make larger monthly payments are typically able to pay off their loans in a shorter amount of time, assuming the debt loads are similar.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Standard Repayment Plan: 10 Years

You have 10 years to pay off your student loans under the Standard Repayment Plan. You’ll pay a set amount every month (minimum $50) and may pay less overall for the student loan because of the relatively short loan term. (Many income-driven repayment plans, for comparison, can have terms of up to 25 years!)

For most federal student loans, the standard repayment option includes a six-month grace period that allows recent graduates to get a head start on finding a job. The clock starts ticking the moment you graduate, leave school, or fall below half-time enrollment. Loans that offer a student loan grace period include:

•  Direct Subsidized Loans

•  Direct Unsubsidized Loans

•  Subsidized Federal Stafford Loans

•  Unsubsidized Federal Stafford Loans

While having extra time before making your first payment sounds nice, be aware that interest continues to accrue during those months on unsubsidized loans and will be added back into the loan, increasing the principal. Direct Subsidized Loans do not accrue interest during the grace period.

Public Service Loan Forgiveness

Standard Repayment Plans might not be a good choice for you if you’re trying to qualify for Public Service Loan Forgiveness (PSLF). Borrowers pursuing this program agree to work in underserved areas for a government entity or certain nonprofits and must meet rigorous requirements to have their loan forgiven after 120 qualifying payments. To qualify for this program, you’ll have to change to an income-driven repayment plan as opposed to the Standard Repayment Plan.

Direct Loan Consolidation

Combining your federal student loans on the Standard Repayment Plan into a Direct Consolidation Loan could open up several repayment options. Consolidation combines your federal loans into one loan with a single interest rate, which could simplify the repayment process. The interest rate is the weighted average of the loans you are consolidating, rounded up to the nearest one-eighth of a percentage.

Your loan term will depend on the amount of student loan debt that you have, ranging from 10 to 30 years. Extending your loan term may lower your monthly payment, but keep in mind that you’ll most likely end up paying more in interest over the life of the loan.

Recommended: Student Loan Repayment Calculator

Graduated and Extended Plans

Graduated Repayment Plans: 10 Years Standard; Up to 30 Years Consolidated

Generally, all federal loan borrowers can opt for the Graduated Repayment Plan. This plan could be an option for borrowers who expect their income to rise over time. It starts off with low monthly payments that gradually increase at two-year intervals. The idea is that recent graduates’ salaries at entry-level positions may start off low, but will rise over 10 years via promotions or new jobs.

The downsides of the Graduated Repayment Plan are that you could be paying more over the life of the loan, and if your salary doesn’t increase as anticipated, the later payments can become burdensome. The bright side — you could switch to an income-driven plan or the Extended Repayment Plan (below) which may make loan payments more affordable.

So how long do you have to pay back your student loan under the Graduated Repayment Plan? Borrowers have between 10 and 30 years to pay off the loan.

Extended Repayment Plans: Up to 25 Years

Like the Graduated Repayment Plan, the Extended Repayment Plan allows qualified applicants to extend the term of the loan, making monthly payments smaller. Borrowers may end up paying more in interest the longer the loan term, but there are options for a fixed monthly payment or a graduated payment that will rise throughout the term.

Extended Repayment Plans are geared toward borrowers who owe sizable sums. To qualify, you must owe $30,000 or more in federal student loan debt.

Neither Graduated Repayment Plans nor Extended Repayment Plans qualify for Public Service Loan Forgiveness.

Income-Driven Repayment Plans

Income-driven repayment plans are designed to make repayment easier if you can prove that paying back your student loans is a significant financial burden. This is based on factors including your discretionary income and family size. However, the longer terms mean you could easily pay more in interest over the life of the loan.

How long do you have to pay back student loans under income-driven repayment plans? Each of the following four plans has a different payback period. Under all four plans, remaining balances on eligible student loans are forgiven after making a certain number of qualifying on-time payments.

Saving On A Valuable Education (SAVE) — 10 to 25 Years

This is the newest IDR plan that replaced the Revised Pay As You Earn (REPAYE) program. Currently under SAVE, monthly payments are capped at 10% of your discretionary income. In July of 2024, that threshold will fall to 5% for borrowers with undergraduate loans. Graduate borrowers will pay a weighted average between 5% and 10% of their discretionary income.

Also starting next year, borrowers with original principal loan balances of $12,000 or less can have their remaining balances forgiven after 10 years of payments. For each additional $1,000 borrowed above $12,000, you’ll continue to make payments for another year, up to 20 or 25 years, depending on the degree.

Pays As You Earn (PAYE) — 20 Years

Your monthly payment is roughly 10% of your discretionary income and you’ll make 20 years of payments.

Income-Based Repayment (IBR) — 20 or 25 Years

Again, your monthly payment will be about 10% of your discretionary income. You’ll have 20 years to pay back the loan if you’re a new borrower on or after July 1, 2014. If you borrowed before that date, you will have 25 years to finish making payments.

Income-Contingent Repayment (ICR) — 25 Years

Under ICR, your monthly payment amount will be either 20% of your discretionary income, or the amount you would pay on a repayment plan with a fixed payment over 12 years, whichever is less. Any remaining balance is forgiven after 25 years.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans

Which Repayment Plan Is Right for You?

Choosing a student loan repayment plan is a personal decision that will depend on factors such as the amount of student loan debt you have, the industry you work in, your current income and expenses, your estimated future income, and your career goals. For example, if you plan to work in the nonprofit industry and are pursuing PSLF, switching to an income-driven repayment plan may make the most sense.

Are Repayment Terms the Same for Private Student Loans?

Private student loans are not required to offer the same benefits or repayment plans as federal student loans. The term and repayment plan available to you will be determined by the private lender at the time you borrow the loan. This is based on your credit profile and debt-to-income ratio, among other factors. If you have private student loans and have questions about your loan term, contact your lender directly.

Can You Shorten Your Student Loan Repayment Term?

It is possible to shorten your loan term. Borrowers can do this by refinancing their student loans and selecting a shorter term. Shortening the loan term can also decrease the total amount spent on interest over the life of the loan, especially if you qualify for a lower interest rate, too.

However, keep in mind that refinancing federal loans means you are no longer eligible for federal protections or payment plans. If you’re interested in using federal benefits like an income-driven repayment option or student loan forgiveness, refinancing may not make sense.

You can also indirectly shorten your student loan repayment term by making extra payments toward your loan, either monthly or as you can. Before making an extra payment, make sure to contact your lender and have them apply the extra payment to the principal amount. If you don’t do this, the payment may go toward your next month’s payment, which would include interest.

The Takeaway

How long you have to pay off student loans depends on the types of loans you have, the student loan repayment option you choose, and how large of monthly payments you can make.

Options for paying off student loans include the Standard Repayment Plan, Extended Repayment Plan, Graduated Repayment Plan, and income-based repayment plans. You can also choose to consolidate your federal loans into one loan with one monthly payment or refinance federal and/or private student loans into a new loan with a new interest rate.

If you choose to refinance your student loans, the benefits include the potential of a lower interest rate or a lower monthly payment. If you choose a shorter loan term, your monthly payment will be higher but you’ll most likely pay less in interest over the life of the loan. A longer loan term will get you a lower monthly payment, but you’ll pay more in interest overall.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Is there a time limit to pay off student loans?

There is a time limit for paying off student loans. This is determined by the loan term and repayment plan selected by the borrower. For example, under the Standard Repayment Plan, borrowers repay their student loans over a period of 10 years. On some income-driven repayment plans, the repayment period is extended up to 25 years.

Do student loans go away after 25 years?

For borrowers enrolled in an income-driven repayment plan, the remaining balance is forgiven or canceled at the end of the loan term, which may be 20 or 25 years. This forgiven balance may be considered taxable income by the IRS, so be sure to understand if that is the case for you.

Are student loans forgiven after 7 years?

No, student loans do not go away after seven years. There are no federal programs offering loan forgiveness after seven years.


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


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


Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOSL0923061

Read more
man on laptop

When Do Student Loan Rates Increase?

Federal student loan interest rates are set by Congress. Each spring, they determine the next school year’s interest rates based on the high yield of the last 10-year Treasury note auction in May. The new rates apply to loans disbursed between July 1 and June 30 of the next year.

For private student loans, the lender determines the interest rate, and it may vary depending on which financial institution you’re working with as well as your own financial profile. Unlike federal loans, the decision to change rates on a private student loan rate can happen more than once a year. A private lender might change rates monthly, quarterly, or annually — it’s up to them to decide.

If you already hold student loans, then the rates of those loans may or may not change. It depends on whether you have a federal or private loan, and if that loan has a variable or fixed interest rate.

Learn more here about the federal student loan interest rate in 2023-24, what’s being proposed for the future, and options you have if your loan has a variable interest rate.

Federal Student Loan Interest Rates Change Annually

Under a law adopted by Congress in 1993, the federal government pegged federal student loan interest rates to the longer-term US Treasury rates, and those interest rates are adjusted annually for new federal student loans.

Your interest rate will also depend on the type of loan you take out. Direct Subsidized Loans and Direct Unsubsidized Loans tend to have the lowest rates, while Direct PLUS loans have the highest. Sometimes, Congress will lower interest rates, but they raised them in 2022 and 2023. We won’t know federal student loan interest rates for the 2024-25 school year until May 2024.

Each year, the new rates take effect on July 1 and apply to federal student loans taken out for the following academic year. The federal student loan interest rates rose from the 2017–2018 to the 2018–2019 school years, but decreased for the 2019–2020 and 2020-2021 school years. For the 2021-2022 and 2022-2023 school years, student loan interest rates increased again.

Note, though, that these changes only apply to new student loans. Once you’ve taken out a federal student loan, the rate of that loan will stay the same unless you pursue consolidation or refinancing.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Student Loan Rates for the 2023–2024 School Year

So what will student loan interest rates be in 2023?

For the 2023-2024 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 5.50%, the rate on Direct Unsubsidized loans for graduate and professional students is 7.05%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 8.05%. The interest rates on federal student loans are fixed and are set annually by Congress.

In an effort to keep the interest rates on federal student loans from skyrocketing, Congress has set limits on how high-interest rates can go. Undergraduate loans are capped at 8.25%, graduate loans can’t go higher than 9.5%, and the limit on parental loans is capped at 10.5%. Since 2006, the highest interest rates reached for Direct Subsidized Loans and Subsidized Federal Stafford Loans was 6.8%.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Private Student Loan Rates Can Change at Any Time

Private student loans are from banks, credit unions, and other financial institutions, and they get to set the interest rates on the loans they disburse. Some private loans have fixed rates, which means you lock in an interest rate and it doesn’t change for the life of the loan. Other private loans have variable rates, which means the interest rate might go up and down over the course of the loan.

As of July 2023, financial institutions use Secured Overnight Financing Rate (SOFR) to help with pricing corporate and consumer loans, including business loans, student loans, mortgages, and credit cards.

Private lenders can raise or lower interest rates at any time, but any changes usually have to do with changes in the economy, such as the Federal Reserve deciding to raise or cut interest rates.

If Your Loan Has a Variable Interest Rate, a Hike Could Be in the Cards

If you take out a federal student loan, the loan’s interest rate is fixed. This means the interest rate stays the same over the life of the loan. But since you need to re-apply for federal aid every year you attend college, you may end up with four loans with four different interest rates.

When you apply for a private student loan or refinance an existing loan, borrowers can typically choose between a fixed and variable interest rate.

When you take out a private student loan, the original rate depends on your credit score, employment history, and current income level — among other factors, which vary by lender.

If your private loan has a variable rate, the rate may fluctuate as the economy changes. In the past year, the Federal Reserve has increased benchmark interest rates numerous times to try to help control inflation. Rates may rise again, but it’s impossible to say for certain.

Recommended: Student Loan Refinancing Guide

What to Do if You Have a Variable-Rate Loan

If your private student loan has a variable interest rate and you’re worried that interest rates might increase, you may have some options. Student loan refinancing involves taking out a new loan with a new interest rate. By refinancing, borrowers have the opportunity to make only one monthly payment instead of balancing multiple payments, and they may be able to lock in a fixed rate so they no longer have to be concerned with rate hikes.

Individuals whose financial situation has improved since originally borrowing their loan(s) may qualify for a lower interest rate.

The Takeaway

Should you refinance your student loans if you’re worried interest rates will change? If you have federal loans, you’ve already locked in a fixed interest rate so you don’t need to worry about interest rate changes. Plus, it’s important to remember that when federal student loans are refinanced, they are no longer eligible for federal borrower protections. But if you have a private loan with a variable interest rate, it may be worth exploring loan refinancing.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.


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


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


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.

SOSL09230674

Read more
TLS 1.2 Encrypted
Equal Housing Lender