Will There Ever Be a Student Loan Bailout?

Will There Ever Be a Student Loan Bailout?

It’s been more than a decade since the Great Recession. Remember how it brought multibillion-dollar financial corporations to their knees and nearly chased the big American automakers right out of Detroit?

Instead, both industries got a bailout, to the tune of $634 billion, according to ProPublica’s Bailout Tracker.

So if the giants of capitalism got a pass, will the students paying loans to get a bailout as well? Will there be a student debt cancellation plan for you and your former classmates?

A Rising Tide of Student Loan Debt

When you earned your degree, you also most likely earned your way into a not-so-exclusive club. Forty-five million people owe $1.73 trillion in student loans in America. For comparison, that’s $740 billion higher than the outstanding credit card debt in the country.

Student loan borrowers owed about $845 billion in late 2010. This means that in the past decade, student debt has grown by over 100%.

How Many Would Benefit From a Bailout?

Forgiving just $10,000 per person would wipe away the federal student loan debt of 15.3 million borrowers, Insider reported.

Proponents of student loan cancellation say a bailout would:

•  Minimize the wealth gap

•  Inspire the creation of small businesses

•  Encourage homeownership

•  Help people feel more confident starting families

Here are two more things backers argue that student loan forgiveness would do.

Spark an Economic Upswing

Bharat Ramamurti, a member of the COVID-19 Congressional Oversight Commission, tweeted what he sees as benefits of student loan forgiveness: “Broad student loan debt cancellation via executive order is good economics and politics.”

He added, “One study has found that canceling all debt would have a big stimulative effect. Of course, the impact would be less if less debt were canceled, but debt cancellation is one of the relatively few ways to stimulate the economy without Congress.”

Benefit All Federal Student Loan Borrowers

Upper-income households owe almost 60% of the outstanding education debt and make almost three-quarters of the payments, the Brookings Institution noted. Lowell Ricketts, a lead analyst for the Center for Household Financial Stability at the St. Louis Fed, agreed that loan forgiveness would disproportionately benefit affluent graduates .

But he pointed out that forgiving $10,000 of student debt would help many low-balance borrowers as well and resolve the problem of overdue payments that 19% of that group has.

The Price of Student Loan Debt Cancellation

While it might sound like a good idea in the face of high debt balances and delayed dreams, one reason it might not come to fruition is the price tag.

Erasure of $10,000 for all 43 million borrowers would cost $377 billion . Canceling $50,000 for all 43 million would cost over $1 trillion, according to The Conversation, which publishes pieces by academics well-versed in these areas.

Additionally, the optics of a student loan cancellation aren’t necessarily good. For example, law and dental school grads may have high debt balances but also might start lucrative careers immediately.

The issue of wiping out student loan debt may have another fairness factor. Former students who successfully paid off their loans may not appreciate seeing millions of current borrowers let off the hook.

And while you can default on a mortgage or get rid of most credit card debt by filing for bankruptcy, most student loans are owned by the federal government, and are extremely difficult to get discharged except for all but the most extreme circumstances.

Student Loan Cancellation FAQ

Q: Did the Stimulus Bill Forgive Student Loans?

A: No. The $1.9 trillion coronavirus relief bill passed in March 2021 doesn’t forgive student loans, but the legislation does mention them: Any federal or private student loan balance that’s forgiven will be tax-free through 2025.

Before the bill, participants of the Public Service Loan Forgiveness (PSLF) Program and income-driven repayment plans were required to pay taxes on any remaining loan balance that was forgiven.

With this change, borrowers who receive any loan forgiveness before Jan. 1, 2026, won’t have to pay taxes on the forgiven loan amount.

It’s unclear if private student loan borrowers will see any gain. Since the only options for repayment aid are refinancing and deferment or forbearance (if offered by the lender), they may not benefit from this bill. However, there has been some buzz about the Biden administration helping private student loan borrowers more.

Q: Are Student Loans Being Forgiven?

A: President Joe Biden had vocalized his support of $10,000 in student loan forgiveness but has not acted on it. The future of student loan forgiveness is still up in the air, as of this writing.

Q: Will They Take Away Stimulus Money for Student Loan Borrowers?

A: Collection agencies can seize stimulus payments for defaulted student loans in some cases.

Paying Down Your Student Loans

Even without a student loan bailout plan, options exist for dealing with your debt.

Federal and Other Programs

If you work in a qualifying public service field or as a teacher and you have federal student loans, you may be able to qualify for the Public Service Loan Forgiveness (PSLF) Program, which is supposed to forgive any remaining loan balance after 120 qualifying monthly payments. Unfortunately, the pool of people qualifying for loan forgiveness has been small.

Specific state and federal loan forgiveness options exist for health care professionals, veterinarians, lawyers, and teachers who work in underserved areas of the country.

In addition to the forgiveness options, qualified federal student loan borrowers may be able to take advantage of delayed payments .

Another way some borrowers seek to ease student loan debt is through income-driven repayment plans. The amount you pay is based on your family size and income, usually 10% of your discretionary income. It’s intended to make the monthly payments more affordable by stretching out the repayment term, which usually results in more interest accumulating over the now-longer life of the loan.

Refinancing

If you refinance your student loans with a private lender, you may qualify for a lower interest rate, which could shave off a significant sum over the life of your loans.

Some lenders refinance both private and federal student loans.

If you decide to refinance, you’ll typically have a choice between a fixed or variable rate, both of which carry their own risks and rewards. A fixed-rate stays the same for the life of the loan, so you always know what your monthly payment will be.

Variable-rate loans can fluctuate as the economy roars or slumps. They’re usually tied to a well-known index, so your payment amount may fluctuate over time. The potential benefit, however, is that initially, the variable rate is sometimes lower than the fixed rate.

You may also have term options if you refinance your student loans. You can shorten your loan term, which can help get you out of debt faster or extend your term, which could ideally lower your monthly payment but, again, means more interest accrues over the life of your loan.

Just know that if you’re refinancing your federal loans into private loans, you’ll be giving up federal benefits and protections such as federal deferral, forgiveness options, and income-driven repayment plans.

Recommended: Student Loan Refinancing Calculator

The Takeaway

Question marks swirl around student debt cancellation. Amid all the noise about the topic, it may be a good idea to take measures of your student loan rates and terms and plot a smart course.

Given up on the idea of a student loan bailout? Check your rate on refinancing your student loans with SoFi.



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


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

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

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5 Key Pieces of Finance Advice for All Med School Grads Starting Residency

5 Financial Tips for Med School Grads Starting Residency

Congratulations! After years of rigorous studying, training, and overall hard work, you’ve graduated from medical school. At this point, you’ve likely made it through Match Day and are ready to start a residency, even closer to becoming a fully fledged doctor.

Though the relief of graduation is certainly well deserved, medical school isn’t going to disappear from your rearview mirror soon. If you’re like most medical students, you likely finished school with a considerable amount of debt.

According to the Association of American Medical Colleges , 84% of medical students in the graduating class of 2020 had education debt (premedical and medical) of $100,000 or more, with 54% of graduates owing $200,000 or more and 20% owing $300,000 or more.

And while doctors can potentially make quite a bit of money—pediatricians earn an average of $232,000 and orthopedic specialists make $511,000, according to Medscape’s 2020 annual compensation report , for example—the average resident does not.

So, what’s a resident to do? Unfortunately, for some, finances may continue to be a challenge in the years immediately after graduating from medical school, so it could be helpful to take steps to lessen the financial anxiety that can accompany such a significant debt load.

The good news is most physicians could be on track to pay off their debt quicker than those in other fields with lower earning potential. But, even once you make the big bucks as a doctor and negotiate a sizable physician signing bonus, you’ll likely look to maintain your financial well-being.

Here, we take a look at some steps that may help you to get the most out of your money post-med school-and manage your student loans.

Making a Post-Med School Budget and Sticking to It

Residency can feel like a time when you’re struggling to make ends meet while working 12-hour shifts on your way to becoming a doctor. Being placed in a city with a high cost of living only increases the challenge.

The average resident salary in 2020 was $63,400, according to Medscape’s 2020 annual report . This may not go as far as it would seem to someone who has been in school earning no money.

Creating a budget that makes sense for your current circumstances and sticking to it will help. This might not include a fancy car (yet), and unless you’ve already signed a medical contract to stay in the same city after your residency, then it may not include buying a house either—even if you might be tempted by a mortgage loan.

Budgeting doesn’t end once you’re done with residency, either. If you can stick to your resident budget for an extra year or two, you may be able to save up money to pay down more on your student loans and start your medical career with some cash.

After all, the rate at which you are able to become debt-free may largely depend on your budget and lifestyle, not just your income.

Having an Emergency Fund and a Retirement Account

Typically, a good financial wellness rule of thumb is to aim to have a few months’ worth of your income saved up for an emergency fund. And yes, this is even applicable for doctors, who, like everyone else, could have something happen that ends up being a huge expense.

Given this, one good idea may be to start stashing away money whenever you can, and putting this emergency money into a separate account from your regular checking account. This way, you can know that it’s there but not be tempted to use it.

Though retirement may seem like a lifetime away—especially after recently finishing up school—saving for retirement as soon as is practical is a common financial goal. It’s also helpful to get into the habit of putting away something regularly. With a solid budget in place, you may be less likely to have to pick between paying down student loans and setting aside for retirement: it’s possible to do both.

Depending on your situation and goals, you may want to invest your money in a 401(k), 403(b), or a traditional or Roth IRA. It may be helpful to keep in mind that one easy way to up your retirement savings is by contributing enough to your employer-sponsored plan to max out on any company match. If your work doesn’t offer a retirement savings plan, consider opening an IRA with SoFi and get access to a broad range of investment options, member services, and a robust suite of planning and investment tools.

Considering an Income-Driven Loan Repayment Plan

You might find yourself feeling tempted to put your medical school student loans (if they’re federal student loans) on hold or into forbearance while you finish residency, but that move could still rack up interest and leave you further in debt.

Instead, you might consider an income-driven repayment plan that establishes monthly payments based on your income and family size.

It may not be as fast as sticking with traditional repayment plans, but if it’s necessary, this method could potentially help you avoid ballooning interest payments while you’re in residency, and typically lowers your monthly payments by lengthening your loan term. (Repayer beware: longer loan terms mean more interest payments, so it’s likely you’ll pay more for your loans overall.)

For med school graduates, there are a few federal income-driven repayment plans you may want to consider: income-based repayment (IBR), income-contingent repayment (ICR), and Pay As You Earn (PAYE).

The eligibility requirements will vary for each type of plan, and you may have to pay more once you sign a medical contract or earn more as a doctor, as income for plans such as PAYE is reviewed on an annual basis. Still, it’s helpful to consider the different options out there and choose what works best for you. And if you choose to practice medicine in underserved communities—as we’ll explain in more detail below—an income-driven repayment plan may be part of that picture.

Checking out Student Loan Forgiveness Programs

Another potential option you may want to look into is going into a public service program. This option allows for a particularly attractive perk for doctors: student loan debt forgiveness.

Public Service Loan Forgiveness (PSLF) is one such program run by the U.S. Department of Education that forgives the remainder of federal loans after participants have met certain eligibility requirements, such as ten years’ worth of on-time, eligible monthly payments and working for a qualifying employer, which typically includes government or certain nonprofit organizations.

The good news is that these programs may tie in nicely with the work you already want to do as a doctor. If you’ve always wanted to go into public service and also find yourself feeling overwhelmed by the prospect of paying off all of your debts, then this may be a great option.

Even if you’re not entirely sure, it may be a good idea to get started with the process now because you will need to ensure your repayment plan is on track in order to qualify later—and that may require one of the income-driven plans mentioned above.

To set yourself up financially for this situation, first you may need to consolidate your federal loans into a Direct Consolidation Loan, but it’s wise to carefully review the PSLF program requirements first.

Additionally, the National Institutes of Health (NIH) and the National Health Service Corps (NHSC) also have med school loan repayment programs for doctors who are interested in doing medical research for a nonprofit organization (through NIH programs) or health care work in a high-need area (via the NHSC program).

Many states also run their own loan forgiveness and repayment programs for doctors, which are worth looking into if you’re interested in this route. Keep in mind, there may be several different options that can help you get your loans forgiven.

Looking into Refinancing Your Student Loans

Dealing with student debt can be one of the most stressful things people experience in their lifetime. After years of hard work, graduating into a world of six-figure debt can sometimes feel anti-climatic, but rest assured that there are options.

Even if the above strategies aren’t a fit for you, there are other ways to move forward. Depending on your exact situation and needs, you may be a good candidate for student loan refinancing, which allows you to consolidate outstanding loans and may reduce your interest rates, as well as your stress levels.

(Keep in mind that refinancing your student loans with a private lender will mean that federal loan benefits, such as PSLF and income-driven repayment, will no longer be available to you.)

Refinancing your loans at a lower interest rate can be a fairly simple way to save money on the lifetime cost of your loan. SoFi has a number of student loan refinance options for medical school graduates, with variable or fixed interest rates and no application fees.

Don’t let your loans keep you from financial wellness. Consider refinancing your medical school student loans with SoFi, and see if you can save yourself money in the long run.



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.

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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.


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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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The Most Affordable MBA Programs to Help Avoid Student Debt

If your master plan involves climbing the corporate ladder you may be considering heading to grad school to get your MBA. It’s a serious investment—business school doesn’t come cheap.

But an MBA could help you advance your career and increase your income potential by a fairly substantial amount. If you decide to go to business school, part of your search will likely involve finding the most affordable MBA program for you.

The Cost of Getting an MBA

Tuition costs for MBA programs can vary dramatically. At the lower end, tuition starts around $27,864 per year, and at the higher end, it’s closer to $80,000 per year. At Elite schools students can expect tuition costs over $100,000.

On top of tuition costs, there are other fees and expenses associated with attending school: You’ll have to account for housing, or room and board, plus books and other supplies; some clubs, which are important for networking, have fees that you may want to cover; and certain MBA programs offer study-abroad opportunities, also at an additional cost.

For example, at MIT, the estimated cost of tuition, housing, books, and other fees for the 2020-2021 school year was $120,846 .

Affordable MBA Options

Finding an affordable MBA program may require some research, but there are options out there. Here are a few avenues to consider when looking for one of the most affordable business schools.

Affordable Full-Time MBA Programs

Take the time to do a quick search and compare the going rates of MBA programs. Attending a state school where you qualify for in-state tuition could ultimately lower the cost of earning your MBA.

For the 2020-2021 school year, in-state residents at Oklahoma State University Sears School of Business pay a tuition of $18,814.80 per year, while tuition for out-of-state students is $42,069.00. The University of Central Arkansas offers online, on-campus, and hybrid programs with a base tuition rate of $325.00 per credit hour .

Online MBA Programs

There are a variety of universities that offer online-only MBA programs , at relatively low costs. Tuition for some online MBA programs under $10,000. Online programs can also offer flexibility for students who are still working while pursuing their degree.

Depending on the program courses may be offered synchronously, at-set times where lectures take place live, or asynchronously, where lectures are recorded and students may be able to set their own schedules.

However, some online programs (especially ones that are not accredited) aren’t as well regarded by industry professionals as full-time or in-person programs, which may mean less return on investment after you graduate.

Another potential downside to an online-only education is there is limited opportunity to network with other students in the program.

Part-Time MBA Programs

Part-time MBA programs allow students to complete their MBA while still working full- or part-time. This allows students to continue earning an income and supplement what they are learning in their classes with the real-life experience they are getting from their work. Many of these programs can take two to three years to complete.

Depending on the school, the part-time MBA program may also be on the expensive side, so read the details on tuition and fees at the schools you are comparing.

One-Year MBA Programs

While two year, full-time programs are traditional, one-year MBA options are popular in Europe. These are accelerated courses of study where students enroll in an intensive program to earn their degree. The cost of tuition may be less than for a full-time MBA program since students spend just one year taking classes and out of the workforce.

More programs in the U.S. are starting to offer one-year MBA options, including Northwestern University and Cornell University .

Cost-Benefit Analysis of MBA Programs

When it comes to applying to an MBA program, the cost of tuition (and books, housing, other fees, etc.) will likely all factor into the equation. It’s also worth reviewing the average salaries of graduates from specific programs you are considering.

Some programs have a fairly low salary-to-debt ratio (highest average salary, with lowest debt incurred), while others leave their student under a mountain of debt with less than ideal income prospects after graduation.

Beyond just the cost of tuition, there are other intangible factors that may come into play, like the network you are (hopefully) building as you make your way through your MBA program plus other transferable skills you’ll hopefully gain.

It can be difficult to place a monetary value on these items, but it’s not a bad idea to consider them when making your decision. For example, if there is a strong alumni network, it could help you find a job after graduation.

How you plan on paying for your MBA should also be factored into your decision-making process. Some companies may offer to cover a portion or all of the program’s tuition.

This can be a great benefit for those able to cash in, but review company policies because there may be some strings attached: You may be required to work for a specified number of years at your current firm, which could be unappealing if you’re interested in exploring a new industry.

Another option is MBA student loans, either private or federal. While federal student loans come with attractive protections, like deferment, forbearance, or income-driven repayment plans, private student loans could be an option as well.

In general, private student loans are borrowed as a last-resort option. Federal student loans, scholarships or grants, and other fellowships are generally preferable to private student loans.

Review the loans you are eligible for, including their terms, student loan repayment plans, interest rates, and any additional fees. Take the time to see how much you could be paying in interest over the life of the loan to get an idea of what your degree could truly be costing you.

When it comes right down to it, to help ensure you’re getting an affordable and valuable degree, do your research. Finding the best program for you may take a little time, but if you’re passionate about advancing your education and pursuing a career in business, the right MBA program can be a great step in the right direction.

The Takeaway

An MBA can be a solid step for those pursuing a career in business. Graduates learn valuable skills for the workplace and could improve their earning potential.

What may be a disadvantage to some considering graduate school is the cost of some MBA programs. There are alternatives that may make getting your MBA a more affordable goal. These options include part-time, online, one-year, or even some full-time in-person MBA programs.

MBA grads with student loans may find themselves in a position where they’re interested in refinancing after entering (or re-entering) the workforce.

Student loan refinancing lenders use criteria like borrower credit history and earning potential (among other financial factors) to determine the new interest rate and terms.

As a newly minted MBA holder, you’re on the path to upward mobility and may benefit from refinancing your student loans. Refinancing any federal student loans will eliminate them from federal benefits, things like income-based repayment plans or Public Service Loan Forgiveness. But, a lower interest rate could mean you’ll pay less money over the life of the loan. To see what your new loan could look like, check out our easy-to-use student loan refinance calculator.

Check out what kind of rates and terms you can get in a few minutes.


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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.


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

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4 Tips for Repaying Federal Student Loans

Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

Even though common sense might suggest that repaying any loan should be straightforward—that all you have to do is send money until you don’t owe any more—there is actually a fair amount of strategy involved. When it comes to repaying federal student loans, there are many ways to think about taking them on.

Having a game plan for eradicating student loan debt is a good idea: In the United States alone, 45 million borrowers hold more than $1.6 trillion in student loan debt, and payments to tackle that mountain of debt have been slowing, on the whole. Those numbers and that trend underline the necessity that a borrower knows how to shoulder debt while reducing it.

So here’s a guide that offers tips for repaying federal student loans. Are you the calculating sort? Our student loan payoff calculator is a good tool for getting an idea of your loan payoff date. (The Education Department also has a calculator if you want to play around with your numbers.)

As outlined in the CARES Act, and extended by executive order, both the suspension of loan payments and the 0% interest rate on loans held by the Department of Education are set to expire after Aug. 31, 2022.

Repaying Federal Student Loans

1. Taking Advantage of the Grace Period

An important factor to determine your strategy to pay off a federal student loan is when you are expected to make your first loan payment. This deadline can dictate the rest of your actions. According to the Federal Student Aid office , for most student loans, there is a set period of time after a student graduates, leaves school, or drops below half-time enrollment before payments begin.

This grace period could be six to nine months, depending on the program a student received a loan through. As the date of the first payment draws closer, the loan servicer should let the borrower know when the first payment will be due—but it helps to think of how to take advantage of the grace period in advance.

While it might be tempting to view the grace period as a time when you can sink your extra money into other things you want or need, it’s probably smarter to save up for when those payments will start coming due.

If you have a subsidized federal student loan, your loan will not accrue interest while you’re in school or during the grace period, so it helps make paying it off in the longer run less burdensome.

If you have an unsubsidized federal student loan, interest has been accruing since the loan was disbursed, so you could consider taking the time when you do not have to make principal payments to pay down some of the interest that accrued.

For more information on ways to pay off student loans, this link includes tips for budgeting during a grace period and others you can mull over in that time. Interest has a way of sneaking up on borrowers because they might have in mind only the principal amount when thinking about monthly payments.

Also be aware that some federal student loan programs can have an up-front interest rate reduction, which requires making a number of monthly payments on time to prevent the rate from increasing.

So, just as studying is important to one’s academic life, studying up on student debt strategies is important to your overall life.

Borrowers can also learn to harness momentum to pay off student loans faster.

2. Selecting the Right Repayment Plan

Federal student loans come with many options for repayment. The options that might be open to you will depend on the type of loan you took out.

This Federal Student Aid office brochure drills down on the most common plans and loans they apply to, and offers bullet points of comparison.

It also links to information on consolidating federal student loans. Refinancing loans is something else to consider.

Generally speaking, the most popular repayment plan for federal student loans is the Standard Repayment Plan. Part of the reason it’s the most popular is—wait for it—is that it’s the default plan borrowers will be designated for unless they request otherwise.

The Standard Repayment Plan affords borrowers up to 10 years to repay, with an expectation of fixed monthly payments of at least $50 during that time.

There’s also the Graduated Repayment Plan, which starts with lower payments that increase every two years. Under the plan, a borrower makes payments for up to 10 years.

With the Extended Repayment Plan, a borrower can take up to 25 years to pay the loan. There are specific eligibility requirements. The plan requires lower monthly payments than the 10-year Standard plan, though you will wind up paying more in interest for your loan than you would have over 10 years.

Then there are income-driven repayment plans, which are geared toward monthly payments that are intended to be affordable based on discretionary income and family size. These are meant to further lighten the financial burden for individuals who have additional ongoing expenses or obstacles.

As such, they offer a greater degree of flexibility on their terms—like the Income-Contingent Repayment Plan. With that plan, any outstanding balance will be forgiven if the borrower hasn’t repaid the loan in full after 25 years. (Income tax may still be owed on the amount that was forgiven.) Again, more details on each of these payment plans—and others—can be found in this Federal Student Aid office publication .

Some of these plans are good options if you are seeking Public Service Loan Forgiveness—circumstances that apply if you are employed by a U.S. federal, state, local, or tribal government or nonprofit organization.

Many of the income-driven repayment plans may be good options if Public Service Loan Forgiveness is a light at the end of your federal student loan debt tunnel.

The Income-Based Repayment Plan is worth a mention, as monthly payments would be 10% to 15% of discretionary income, and payments are recalculated each year to factor in family size and discretionary income.

It’s normal to feel a little confused with so many numbers being thrown around. Our guide on fast ways to pay off debt makes a good addition to everything discussed so far.

3. Student Loan Consolidation

A Direct Consolidation Loan allows a borrower to consolidate multiple federal education loans into one loan at no cost. It’s just a way to minimize the headaches—and ulcers—that can stem from the obligation to make monthly payments on different loans.

It’s not usually a way to save money, as the new interest rate you get with a Direct Consolidation Loan is a weighted average of all your loans’ interest rates rounded up to the nearest eighth of a percentage point.

There is another asterisk in considering this option: Private student loans cannot be consolidated with federal student loans into a Direct Consolidation Loan. You can, however, pursue refinancing both types of loans with a private lender.

If you have solid credit and a stable income, among other personal financial attributes, it’s possible to qualify for a new loan at a lower interest rate.

But there’s an asterisk to this asterisk, which is that refinancing with a private lender can make you ineligible for the federal benefits and protections offered to qualified federal student loan borrowers, like Public Service Loan Forgiveness, income-driven repayment, deferment and forbearance.

4. Paying More Than the Minimum

A strategizer knows that there’s more to it than paying the lowest amount required every month on student loans.

A big reason to pay more than the monthly minimum is that student loan repayment is structured around amortization—a word you heard if you took an accounting or economics class that basically means a portion of fixed monthly payments goes to the costs associated with interest (what the lender gets paid for the loan) and reducing your loan balance (paying off the total amount owed).

Paying more than the minimum means you can accelerate reduction of the amount you owe rather than covering the interest—which is effectively the lender charging you for the privilege of having the loan in the first place.

That privilege isn’t exactly bragworthy, so it’s smart to make more than the minimum payment—however little more it might be.

One plan of attack for borrowers to consider is signing up for automatic payments through their federal loan servicer so the payments are taken directly from their bank account as they’re due.

The payment amount to be withdrawn can be customized, and there’s a discount for doing so: Those who have a Direct Loan will get an interest-rate reduction while participating in automatic debit.

Getting Student Loans Under Control

Nobody really enjoys thinking about student loans, but the upshot of that is the pain points associated with them are well known—and there are proven strategies to ease the pain and manage the process of repaying government student loans, whether going for a special payment program, consolidating, or refinancing.

All it takes is a little planning and a willingness to adapt those plans to the ways your life unfolds after you have that degree.

SoFi student loan refinancing offers flexible terms and low fixed or variable rates. There are no application or origination fees. And getting prequalified online is easy.

Check your rate today.


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.


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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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What Is the Student Loan Forgiveness Act?

Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

With Americans facing over $1.6 trillion in combined student loan balances, many borrowers are on the hunt for ways to ease their debt burden. One option you may have seen was called the Obama Student Loan Forgiveness Plan, which according to some websites, was a way for some borrowers to escape their debt for a small fee.

This offer might sound appealing, but there’s one problem: It’s fake. It’s just one example of real ads that scammers have used to target and bilk borrowers.

Fraudsters have used lines like this to lure in their marks, then charged them hefty fees to fill out forms they could’ve filled out themselves for free. In the worst cases, people end up paying for nonexistent services.

Here are some answers to your burning questions on student loan forgiveness, so you can get a better idea of how the program works:

Does Any Student Loan Forgiveness Act Exist?

Yes. The Student Loan Forgiveness Act (SLFA) was a congressional bill introduced in 2012 intended to help borrowers with paying down their student debt.

In addition to capping interest rates for all federal loans, the proposed law would have introduced a repayment plan that allows borrowers to have their loans forgiven after 10 years if they made monthly payments equivalent to 10% of their adjusted gross income. The bill also would have made borrowers in public service jobs eligible for loan forgiveness after five years, instead of 10.

Sound too good to be true? It was. The bill never made it out of committee.

So, What is Obama’s New Student Loan Forgiveness Program?

Even though you may have heard about it, “Obama’s new student loan forgiveness program” doesn’t exist. During his tenure, President Obama did expand the reach of federal loan forgiveness programs. A bill he signed in 2010 allowed students who took out certain federal loans to have their balances forgiven in 20 years, rather than 25.

The same bill capped annual payments at 10% of adjusted gross income, rather than 15%. It also ushered in loan forgiveness after 10 years for borrowers working in qualified public service jobs.

Those changes preceded the introduction of the Student Loan Forgiveness Act (SLFA), and was never officially called “Obama’s Student Loan Forgiveness Program.” Likewise, there is no “new” student loan forgiveness program in Obama’s name, either, obviously.

Then Why Have I Read About Obama’s New Student Loan Forgiveness Program?

Because it’s a term that debt relief companies use to confuse student loan borrowers. The name seems convincing since President Obama did take action on federal student loans and legitimate federal loan forgiveness programs exist. That’s why some borrowers have been duped into paying high fees for pointless—or nonexistent—services. Don’t be fooled: The program isn’t real!

Debt relief companies advertising the “Student Loan Forgiveness Act” or “Obama’s New Student Loan Forgiveness Program” are bad news. Understanding which programs are real and which are fake can help you avoid being scammed—and find legitimate ways to actually have some of your student loans forgiven.

What Are Some Legitimate Options for Student Loan Forgiveness?

No, Obama’s Student Loan Forgiveness Act never passed. However, there are several real options for having federal student loans forgiven.

In fact, in response to the coronavirus epidemic, the CARES Act suspended federal student loan interest and payment suspension through September 2020. (Update: The pause on federal student loan repayment has been extended through Dec. 31, 2022)

The pending HEROES Act (narrowly passed by the House in mid-May, 2020) proposed $10,000 each of federal student loan AND private student loans forgiveness initially but may have more stringent eligibility requirements if passed by the Senate. While it’s definitely something to keep an eye on, here are some existing programs that may be helpful.

Income-Driven Repayment Plans

The government currently offers four income-driven repayment plans for federal student loans that can forgive borrowers’ balances after 20 or 25 years.

There are eligibility requirements, like making required monthly payments for a designated period of time, which are tied to a person’s income. The plans a borrower qualifies for will depend on the types of loans they have and when they took them out.

These student loan repayment plans are based on borrowers’ discretionary income, or the amount they earn after subtracting necessary expenses like taxes, shelter, and food. Here is a brief overview of each one:

•   Revised Pay As You Earn Repayment Plan (REPAYE): Borrowers’ monthly payment is typically 10% of their income. If all loans were taken out for undergraduate studies, they’ll make payments for 20 years; if they also took out loans for graduate or professional studies, they’ll make payments for 25 years. At the end of 20 or 25 years, the remaining amount will be forgiven.
•   Pay As You Earn Repayment Plan (PAYE): People pay up to 10% of their discretionary income each month, but they never pay more than they would under the 10-year Standard Repayment Plan. After 20 years, the remaining debt will be forgiven.
•   Income-Based Repayment Plan (IBR): People will pay 10% of their discretionary income for 20 years if they became a new borrower on or after July 1, 2014, and 15% for 25 years if they were a borrower before July 1, 2014. They will never pay more than they would under the 10-year Standard Repayment Plan. Borrowers’ debt will be forgiven after either 20 or 25 years.
•   Income-Contingent Repayment Plan (ICR): Borrowers choose whichever repayment plan is cheaper—20% of their discretionary income or what they would pay if they spread their payments out equally over 12 years. Any remaining balance will be forgiven after 25 years.

These four plans are designed to help borrowers make monthly payments they can actually afford. Some people may assume that an income-driven repayment plan that results in forgiveness is best for them, when in reality, this might not be the case.

Note that if the remaining balance of your loan is forgiven, you may be responsible for paying income taxes on that amount.

A repayment calculator can be a useful tool to help determine enrolling in an income-based forgiveness program that would be beneficial. After a borrower plugs in their information, they could discover that they would pay less, in the long run, should they enroll in, say, the government’s Standard Repayment Plan.

Public Service Loan Forgiveness

Borrowers can have their loans forgiven in 10 years under the Public Service Loan Forgiveness (PSLF) program. To potentially qualify, they must work full-time for a qualified government organization, nonprofit, or certain public-interest employers, such as a public interest law firm, public library, or public health provider.

Over those 10 years, borrowers must make 120 qualifying monthly payments, and the payment amount is based on their income. Those 120 payments don’t necessarily have to be consecutive. For example, let’s say a borrower works for the local government for three years, then switches to the private sector for a year.

If they decide to go back into public service after that year, they can pick up where they left off with payments rather than start all over.

The PSLF program can be difficult to qualify for, but some people have successfully enrolled. As of March 2020, 145,758 borrowers had applied for the program. Only 3,174 applications were accepted. 171,321 applications had been rejected, and the remaining applications were still processing.

Teacher Loan Forgiveness Program

Qualifying teachers can also get up to $17,500 of their federal loans forgiven after five years teaching full-time under the Teacher Loan Forgiveness Program. The American Federation of Teachers has a searchable database of state and local loan forgiveness programs.

To qualify for the full amount, teachers must either teach math or science at the secondary level, or teach special education at the elementary or secondary level. Otherwise, borrowers can have up to $5,000 forgiven if they are a full-time teacher at the elementary or secondary level.

NURSE Corps Loan Repayment Program

Health professionals have access to other loan assistance programs. The federal government’s NURSE Corps Loan Repayment Program pays up to 85% of eligible nurses’ unpaid debt for nursing school.

To receive loan forgiveness, borrowers must serve for two years in a Critical Shortage Facility or work as nurse faculty in an accredited school of nursing.

After two years, 60% of their nursing loans will be forgiven. If a borrower applies and is accepted for a third year, an additional 25% of their original loan amount will be forgiven, coming to a total of 85%.

Borrowers interested in the NURSE Corps Loan Repayment Program can read about what qualifies as a Critical Shortage Facility or an eligible school of nursing before applying.

Indian Health Services’ Loan Repayment Program

The Indian Health Services’ Loan Repayment Program will repay up to $40,000 in qualifying loans for doctors, nurses, psychologists, dentists, and other professionals who spend two years working in health facilities serving American Indian or Alaska Native communities.

Once a borrower completes their initial two years, they may choose to extend their contract each year until their student loans are completely forgiven.

In 2019, the Indian Health Service’s budget allows for up to 384 new awards for two-year contracts, and around 392 awards for one-year contract extensions. The average award for a one-year extension is $24,840 in 2019.

Even those who aren’t typical medical professionals, like doctors or nurses, may still qualify. The IHS has also provided awards to people in other fields, such as social work, dietetics, and environmental engineering.

The National Health Service Corps

The National Health Service Corps offers up to $50,000 for loan repayment to medical, dental, and mental health practitioners who spend two years working in underserved areas.

Loan forgiveness programs are generally available for federal loans, as opposed to private ones. In rare cases, such as school closure while a student is enrolled or soon after, they could qualify to have their loan discharged or canceled.

Health Professional Shortage Areas (HPSAs) include facilities such as correctional facilities, state mental hospitals, federally qualified health centers, and Indian health facilities, just to name a few. Each HPSA receives a score depending on how great the site’s need is.

Scores range from 0 to 25 for primary care and mental health, and 0 to 26 for dental care. The higher the score, the greater the need.

Borrowers have the option to enroll in either a full-time or part-time position, but people working in private practice must work full-time. Full-time health professionals may receive awards up to $50,000 if they work at a site with a score of at least 14, and up to $30,000 if the site’s score is 13 or below. Half-time employees will receive up to $25,000 if their site’s score is at least 14, and up to $15,000 if the score is 13 or lower.

Interested in learning more about your options for student loan repayment? Check out SoFi’s student loan help center to get the answers you need about your student debt. The help center explains student loan jargon in terms people can understand, provides loan calculators, and even offers student loan refinancing to hopefully land borrowers lower rates.

Refinancing student loans through a private lender can disqualify people from enrolling in federal loan forgiveness programs and loan forgiveness programs, and disqualifies them from CARES Act forbearance and interest rate benefits.

Check out SoFi to see how refinancing your student loans can help you.


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


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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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.

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