Student Loan Mistakes that Could Make Interest Soar

If you’ve taken out student loans to invest in your education, you know that paying interest on those loans is simply part of the deal. But while “interest” can seem like an abstract notion when you first take out loans, over time it can become a force to be reckoned with—particularly for the many MBA, law, and med school grads with six figures worth of education debt to repay.

For example, using a student loan calculator to get a rough estimate, you can see that a borrower with $100K in student loan principal at a 6.8% weighted average interest rate and a 10-year term can expect to pay an estimated $38K in interest over the life of the loan. And that’s if they make every payment on time.

Paying interest on student loans may be unavoidable, but there are a few mistakes that can cause some borrowers to pay more interest than they need to. Read on for tips on how to help prevent these blunders from affecting your bottom line.

Mistake #1: Using Forbearance When It Isn’t Absolutely Necessary

Most federal loans and some private loans may allow borrowers to use forbearance to temporarily reduce or suspend loan payments in the event of qualifying financial or medical difficulties.

But in most cases interest continues to accrue while payments are on pause—which means that the longer borrowers remain in forbearance, the more they may have to pay in the long run. (See Mistake #5 below.)

So if the goal is to minimize interest expenses, forbearance is typically an option best reserved for extreme financial hardship. Resuming regular payments as quickly as possible could be another way to minimize accrued interest.

If the borrower has federal student loans, enrolling in an income-driven repayment plan might be another option to consider. The monthly payment for an income-driven repayment plan is based on the borrower’s discretionary income and family size.

In certain cases (qualifying unemployment or the inability to work because of an illness, for example) payments could be as low as $0. After the period of financial hardship has passed, the borrower re-certifies the loan using new income information. (Recertification is required every year.)

Mistake #2: Unnecessarily Extending the Repayment Period

Federal student loan consolidation with a Direct Consolidation Loan allows borrowers to combine two or more eligible federal loans into just one loan, helping to streamline their monthly bills.

When borrowers consolidate, they’re typically given the option to lower their monthly payment by extending their repayment period. (With federal loan consolidation, the new interest rate is the weighted average of the borrower’s existing loans, rounded up to the nearest one-eighth of a percent. So extending the repayment period is the only way to lower the payment.)

For those who are struggling to make payments, that may be tempting. However, those smaller monthly bills can come at a price. Extending the payment term from 10 to 30 years, for example, would mean the borrower has to pay considerably more interest over the life of the loan. (Because the borrower would be accruing 20 additional years of interest.)

Mistake #3: Not Prepaying When Possible

All education loans, whether federal or private, allow for penalty-free “prepayment,” which means borrowers can pay more than the minimum required and pay off their loan balance early, without incurring any extra fees. Even paying an extra $100 per month could go a long way.

Whether it’s increasing monthly payments after receiving a raise or putting half of a bonus toward student loans each year, every little bit helps to drive down total interest.

Student loans are amortized, which means a portion of each payment is applied to the principal each month and a portion goes toward interest.

Early on, a larger portion typically goes toward interest, so the principal balance goes down pretty slowly. Usually, it isn’t until the borrower has made years of payments that a noticeable amount starts being applied toward the principal. One way to speed up that progress—and knock down the debt faster—is to pay more than is required each month.

(Borrowers should be sure to tell their lender what they’re doing and verify that their prepayments will be applied to their loan principal.) Borrowers can use this calculator to see how prepayment could help them get out of student loan debt sooner.

Mistake #4: Starting Accelerated Repayment Efforts with the Wrong Student Loan

Borrowers who have more than one student loan may choose to make extra payments on one loan at a time. It can be tempting to start on the loan with the smallest balance, put extra payments toward it while making timely minimum payments on other loans, get the emotional boost from eliminating that bill, and then move on to the next.

This approach is sometimes referred to as the “snowball method,” and it can be useful for borrowers who need the gratification of a faster payoff to stay motivated. But it might not save the most interest.

Prioritizing the loan with the highest interest rate (the “avalanche method”) can make more sense mathematically and might be more efficient for those who have the discipline to stick with it. And borrowers still can be excited as they watch the balance on that high-interest student loan go down.

There are a few online calculators that could be used to compare the avalanche method to the snowball method . Comparing the estimated interest payments and debt free dates could help borrowers determine which method will work best for them.

Mistake #5: Underestimating the Impact of Interest Capitalization

Deferment and forbearance periods may feel like a helpful option to escape making federal student loan payments when a borrower is struggling financially. But taking a break can be tricky.

The federal government will pay the interest on subsidized loans during deferment periods, but it won’t pay the interest on unsubsidized loans during deferment or on any loans during forbearance.

Unpaid interest also may accrue if a borrower is repaying federal student loans under an income-driven repayment plan and the monthly payment is less than the amount of interest that accrues between payments.

If a borrower doesn’t pay the interest as it accrues, that interest can be capitalized, or added back onto the principal balance of the loan. And any interest payments made after that will be calculated based on this new balance.

Interest also can capitalize when a student loan enters default, or when the six-month grace period ends. So, if it’s at all possible, borrowers who choose to press pause on their loans may want to try to make interest-only payments during that time.

Mistake #6: Failing to Claim the Student Loan Interest Deduction

OK, technically, this isn’t a way to save money on interest. But it can help alleviate some pressure for borrowers with qualifying student loan debt, since this student loan interest deduction can potentially reduce the amount of income that is subject to tax. (Reminder: Taxes can be tricky, and we are not here to provide tax advice. This is just a high-level look at a potential tax deduction, and isn’t a definitive accounting of the information available. Always consult with a tax professional about tax deductions and any questions around them.)

Borrowers may be able to deduct up to $2,500 on federal and student loans on their federal return each year. That’s $2,500 per return, so those who are married and file a joint return have the same $2,500 cap even if both spouses have student debt.

The deduction begins to decrease at a certain income threshold, depending on the taxpayer’s filing status. For the 2019 tax year, the deduction starts to phase out at a modified adjusted gross income (MAGI) above $70,000 for single and head of household filers, and it’s eliminated entirely at a MAGI above $85,000.

For those who are married filing jointly, the phase-out starts at a MAGI above $140,000 MAGI and is eliminated for those with a MAGI above $170,000.

For a student loan to qualify under the IRS’s rules , it must have been obtained with the sole purpose of paying for qualified education expenses for the taxpayer, the taxpayer’s spouse, or someone who was the taxpayer’s dependent at the time he or she took out the loan.

The person for whom the loan was taken must have been enrolled at least half-time in a program that leads to a degree, certificate, or other credential. The loan can’t have been from a relative. Qualified education expenses can include things like tuition, books, supplies, equipment, and, in some cases, room and board.

Because this deduction is claimed as an adjustment to income, taxpayers don’t have to itemize to take it, but it does require proper documentation. If the loans are officially referred to as student loans—whether they’re federal or private student loans—the lender would send a Form 1098-E, Student Loan Interest Statement. Borrowers can claim the interest from some other types of loans but will have to track those amounts on their own.

Again, taxes can be tricky, so definitely consult with a licensed accountant or tax professional to get the low-down on all the details of this or any other tax deduction.

Mistake #7: Not Signing Up for Autopay

With automatic payments, student loan payments are transferred directly from a borrower’s bank account to the lender, which reduces the chances of a late payment and gives the borrower one less thing to worry about.

There’s often another important perk: Some lenders will reduce the interest rate on the student loan by a certain percentage.

For those who keep enough funds in their account to cover their bills every month, it’s another potential way to save. And if the situation changes, and a manual approach becomes necessary, a borrower should be able to stop automatic payments at any time.

Borrowers who like the idea of making extra payments could set up their autopay to make a half payment every two weeks, or 26 half payments each year. That option adds up to 13 full payments instead of 12—or one extra payment. (This can be done manually, as well—it’s just that autopay typically makes it easier.)

Mistake #8: Making Late Payments or Going into Default

Failing to make payments can have several negative repercussions, including legal consequences if the borrower defaults on the loan. Both delinquency and default can also negatively impact the borrower’s credit score.

A lower credit score may reduce a borrower’s chances of getting a competitive interest rate on a refinancing loan, or on other types of loans or credit cards in the future.

Mistake #9: Neglecting to Explore Refinancing Options

Another opportunity that could allow borrowers to stick it to student loan interest is to refinance student loans at a lower interest rate and, possibly, a shorter repayment term. And some lenders, including SoFi, offer both variable and fixed rate loans, so borrowers can choose what best suits their needs.

Refinancing can typically be an attractive option to borrowers who have a solid financial situation—for example, a comfortable debt-to-income ratio (among many other possible considerations). However, before refinancing federal student loans, borrowers should check to see if they qualify for any forgiveness programs or other federal benefits (like income-driven repayment plans) and other repayment options that are forfeited when refinancing federal student loans with a private lender.

Bottom line: Refinancing to a shorter term with a lower interest rate can help eligible borrowers take a big bite out of total interest.

If you’re interested in seeing what your student loan interest rate could be after refinancing, you can check in two minutes or less with SoFi.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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Veterinarian in purple scrubs with dog

How to Pay Off Your Veterinary School Debt

Finishing veterinary school is an incredible achievement. After so much training and dedication, it’s finally time for new vets to turn their passion for improving animal health into a rewarding and meaningful career. But one thing might be standing in their way: student loan debt.

Veterinarians graduating in 2018 had an average student debt load of $183,014, including vets who didn’t take out any loans.
That’s a pretty steep hurdle for anyone starting out in a career. Based on these numbers, it’s no wonder that recent Doctors of Veterinary Medicine, or DVMs, might be struggling to find a healthy balance between loan repayment, saving for retirement, and helping their furred and feathered patients.

Luckily, there are more than a few repayment options out there that cater specifically to veterinarians. Some programs offer tuition repayment assistance in exchange for short-term work, while others offer student loan forgiveness for long-term service. In addition to these, there are a few often-overlooked refinancing options that might also help borrowers reduce their debt. Let’s take a look to see which financing options might fit different vets’ unique career needs.

Veterinary Loan Repayment Programs

If a vet specializes in large animal or veterinary agricultural medicine, there are a few loan repayment programs that might reduce their debt in exchange for a few years of work.

For a student still in the process of researching and applying to veterinary schools, it might be worthwhile to take note of which state universities offer student loan repayment assistance to their students in exchange for several years of post-graduate service in local agricultural veterinary medicine. Some schools offer a wide range of loan repayment assistance for veterinary students. Here are just a few:

The Veterinary Medicine Loan Repayment Program

The Veterinary Medicine Loan Repayment Program (VMLRP) is a federal program established in 2003 by the USDA. In exchange for three years of service in a location where there is a shortage of veterinarians, a borrower can receive up to $25,000 each year (up to three years) in loan repayment assistance.

State Veterinary Loan Repayment Program

Some individual states also offer loan repayment programs to attract large-animal vets to remote areas. While some of these programs are tied to specific state university veterinary programs, others are designed to attract recent graduates.

For example, North Dakota offers up to $80,000 in repayment assistance for four years of service working with food supply animals, and Maine provides up to $100,000 for up to four years of service. On the other hand, Pennsylvania only forgives a maximum of $10,000.

Veterinarians might want to contact their state before accepting a job solely because they believe their loans will be forgiven. Funding sometimes varies from year to year in certain states, so it can be helpful to double-check that the state is participating in loan forgiveness at the time they want to enroll.

The U.S. Army Medical Department

The U.S. Army Medical Department (AMEDD) also offers loan repayment as a benefit to qualifying veterinarians. For active-duty servicemembers, vets are eligible for up to $120,000 in student loan repayments over a three-year period, receiving $40,000 per year. For those who enter the reserves, up to $50,000 is offered over three years, receiving $20,000 the first two years and $10,000 the third year.

The Federal Faculty Loan Repayment Program

If someone comes from a disadvantaged background and plans to go into academia, the Federal Faculty Loan Repayment Program offers up to $40,000 in repayment for veterinarians who serve on the faculty of eligible universities for two years. The program also offers funds to offset the taxes associated with repayment assistance. In 2018, 164 veterinarians applied for the repayment program, and 23 received awards.

The National Institutes of Health (NIH) Loan Repayment Program

The NIH Loan Repayment Program is for veterinarians or other health professionals who focus on research, rather than practical medicine.
The NIH provides eight awards total—five are extramural, meaning they’re given to people who aren’t employed by the NIH, and three are intramural, or for researchers who are employed by the NIH. DVMs qualify for both extramural and intramural awards.

Most contracts last for two years. The repayment amount will total one-quarter of a researcher’s eligible student loans, up to $50,000. People can receive up to $100,000 if they owe more than $200,000 in student loans. Researchers do have the option to renew their awards if they meet certain qualifications.

Intramural General Research awards, which are open to researchers in any field, last for three years. Borrowers who receive the competitive General Research award will have one-quarter of their eligible student loans forgiven, or up to $50,000 per year. Those who receive the non-competitive General Research award will receive one-quarter of their eligible student loans, up to $20,000 annually.

Veterinary Loan Forgiveness Programs

For vets who specialize in areas outside of agriculture, there are fewer well-funded repayment options. However, loan forgiveness programs could be a potential benefit if a vet wants to pursue a career in public service, helping animals in need.

The Public Service Loan Forgiveness Program (PSLF) is a program meant for qualifying federal student loan borrowers working full time in a qualifying position in government, social work, or education, or if they work for a qualifying tax-exempt nonprofit like the American Society for the Prevention of Cruelty to Animals (ASPCA). After they have made 10 years’ worth of on-time monthly payments under a qualifying repayment plan, they could have the balance on their federal Direct loans forgiven.

To anyone who thinks having their vet school loans be forgiven in just 10 years is too good to be true—well, they might be right. It can be difficult to qualify for this program. As of 2019, 110,729 borrowers had applied for PSLF and only 1,216 had been approved.

Reasons for denial range from applicants failing to make payments correctly to working for ineligible employers to attempting to qualify for
ineligible loans.

In President Trump’s 2020 budget proposal, he explains that he wants to eliminate PSLF altogether. If the budget passes, borrowers who take out student loans after July 1, 2020, cannot enroll in PSLF.

Income-Driven Repayment (IDR) Plans

The federal government offers four types of income-driven repayment plans for federal student loan borrowers with eligible student loans. These programs consider a borrower’s discretionary income, which is the amount someone earns after subtracting taxes and essential living expenses. People who enroll in one of these programs could have their vet school loans forgiven after 20-25 years.

•   Income-Based Repayment (IBR): Those who are new borrowers on or after July 1, 2014, will pay 10% of their discretionary income for 20 years. People who were not new borrowers by July 1, 2014, will pay 15% for 25 years. After a borrower has paid for the designated amount of time, their remaining loan balance will be forgiven.

•   Income-Contingent Repayment (ICR): When a borrower enrolls in ICR, they may choose the lesser of two options. They can either pay 20% of their discretionary income each month or whatever they would pay if they spread their loan payment evenly across 12 years—whichever is cheapest. After 25 years, the remaining amount will be forgiven.

•   Pay As You Earn (PAYE): People pay up to 10% of their discretionary income monthly. However, they’ll never pay more than they would had they enrolled in the 10-year Standard Repayment Plan. The remaining balance will be forgiven after 20 years.

•   Revised Pay As You Earn (REPAYE): Borrowers typically pay 10% of their discretionary income. People whose loans were solely for undergraduate studies would make payments for 20 years before the remainder is forgiven. However, people who took out loans for graduate or professional studies (like veterinarians) will make payments for 25 years.

Income-driven repayment plans can be amazing solutions for some borrowers, but they aren’t necessarily the best fit for everyone.

Veterinarians can use a repayment calculator to determine which type of plan is the best match for their needs. Some will discover that one of these income-driven programs will save them the most money, while others may choose to enroll in a standard or graduated repayment plan.

Refinancing Veterinary Student Loans

There’s one other option that might give vets the freedom to design the ideal payback schedule: refinancing their loans. If borrowers have a good credit score and financial profile, they might be able to refinance their loans with a bank or student loan refinancer to get a lower interest rate. Over time, a lower interest rate could potentially save a vet thousands over their repayment period.

Refinancing student loans involves taking out a brand new loan with a new interest rate, and using that loan to pay off existing loans. Lower rates and/or term could help vets pay less in the long run and/or pay off their debt more quickly.

Not only could borrowers improve their loan terms, but making only one payment per month (rather than a separate payment for each individual loan) has the potential to simplify their lives.

When a borrower refinances federal loans, it’s important to keep in mind that they will no longer have access to federal loan benefits, like the PSLF, income-driven repayment, or deferment and forbearance.

But if they don’t plan on taking advantage of these benefits, have a steady income (among other positive personal financial factors), and want better loan terms, refinancing could be the best fit for their needs.

By refinancing with SoFi, vets can refinance both federal and private student loans into one new loan. SoFi members even have access to bonus features, including live customer service and career coaching—at no extra cost!

Those ready to refinance can quickly apply online for free. SoFi offers competitive rates and doesn’t charge application fees, origination fees, or pre-payment penalties.

SoFi offers refinancing with competitively low interest rates. Get started today.


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

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

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Can Refinancing Your Student Loans Lower Your Interest Rate?

You’ve probably heard the statistic that total outstanding student loan debt in the U.S. is over $1.5 trillion. As of late 2019, nearly 70% of students in America graduated with student loan debt, the average balance hovering around $30,000. The figures can be so shocking that they almost don’t seem real—until you have to make your monthly student loan payment, which is an average of $393 per month.

For some, student loan debt can be paralyzing. The hefty monthly payment can weigh down on borrowers, making it difficult to make ends meet. Student loan debt has also been attributed to Millennials delaying major life milestones like getting married, buying a house, or even having kids. It’s a burden that can, at times, feel like it’s too much to bear.

The good news is, thanks to student loan consolidation and refinancing, borrowers don’t have to be stuck with that nearly $400 a month student loan payment. Consolidating student loans or refinancing them might give borrowers the opportunity to get new terms and a new (hopefully lower) interest rate on their student loans.

Depending on the type of student loans you have, you can choose between two consolidation options. The first is for federal loans, which can be consolidated through the federal government. The second is consolidating and refinancing your loans through a private lender. Both options have their merits and drawbacks, so let’s dig into the details.

Consolidation versus Refinancing: How They Differ

For federal loans, consolidation means that your existing federal loans are combined into one new loan with a new rate that’s the weighted average of your old loans’ rates, rounded up to the nearest eighth of a percent.

Those who opt to consolidate their federal loans do so via a Direct Consolidation Loan through the government, which (depending on their original loan type) allows them to keep many of the protections their federal student loans offer, such as deferment, forbearance, or income-driven repayment plans.

But because the new interest rate is the weighted average of the existing interest rates, rounded up, consolidating loans through the government often doesn’t result in cost savings.

Typically, if lower monthly payments are the result of consolidation, it’s because of extending the term of the loan. This may mean paying more in interest over the life of the loan.

When you consolidate federal loans with a Direct Consolidation Loan, they’ll still be considered federal loans. This means a Direct Consolidation loan will still qualify borrowers for federal benefits like Public Service Loan Forgiveness (PSLF) and those mentioned above.

It’s important to note, however, that there are some drawbacks with a Direct Consolidation Loan. For instance, if you have started paying towards PSLF, you’ll have to start your qualifying payments over. And if you have a Perkins Loan, you could lose out on those benefits as well. Additionally, you can only consolidate once.

For those with private student loans, consolidation is the practice of combining your student loans into one single loan with a private lender. This is also often referred to as student loan refinancing, because existing student loans are paid off with a new loan from a private lender. The borrower then repays this new loan, under new terms with a new, potentially (and hopefully) lower interest rate.

Refinancing with a private lender may lead to savings, but it might not be right for every borrower. For those with federal loans, refinancing means losing all federal benefits. So for individuals pursuing student loan forgiveness or benefiting from income-driven repayment plans, refinancing might not be the best option.

Both options could help borrowers streamline their monthly payments, since both options allow borrowers to combine multiple loans into a single loan with one monthly payment. For people who are already juggling a lot of responsibilities, only having one student loan payment can make managing payments easier.

Deciding Whether or Not to Consolidate Student Loan Debt

Student loan consolidation might save you money and shorten your loan term, or may also make your monthly payment more manageable by lengthening your repayment term.

For example, you might have graduated with multiple loans that all come with varying interest rates and loan terms. But if you consolidate, you replace all of your loan bills with just one bill (with, of course, one term and interest rate).

You can even consolidate your private and federal loans together (but only through private student loan refinancing, which unfortunately means you need to give up the benefits of federal loans).

The option is to refinance your student loans which, if you receive a lower rate, could potentially help you cut the cost of interest over the life of the loan. You can refinance private or federal loans, though once again, you lose the benefits of federal loans when you refinance with a private lender.

If you’re considering consolidating your student loans, it’s important to weigh all of your options carefully. Part of this will likely be reviewing different lenders with your federal repayment options and comparing the terms and rates you qualify for.

This can be a time-consuming, and at times confusing process, but may pay off if you’re able to get a reduced interest rate on your student loans.

Before you start browsing interest rates, take a look at your current loans. How much do you owe? What are the average interest rates? Are you enrolled in any federal benefits? Are you eligible for any—or hoping to be?

Having this information at the ready can provide valuable insights as you start gathering information on different lenders. Some lenders, like SoFi, offer a convenient student loan refinancing calculator that can give you an initial idea of how much you could stand to save when you refinance.

A quick internet search about student loan consolidation will result in a number of companies popping up. If you’re trying to figure out what the best student loan consolidation companies are, a comparison of all the rates, terms, loan amounts they accept, and fees can be useful.

Understanding Your Options

While each of these refinancing companies advertise rate ranges and other terms, the loan terms you qualify for will be determined based on a variety of personal factors. To find out what a loan with each company might look like, you may want to get a few different quotes.

Each lender may review different criteria in order to make a lending decision, but most will likely review your credit score and credit history. While a strong credit history can help borrowers qualify for more competitive interest rates, it’s likely not the only factor lenders are considering.

Quotes can be useful tools as you consider refinancing your student loans. Many lenders allow potential borrowers to pre-qualify. This process usually involves a “soft” credit inquiry, which won’t impact your credit score1, to determine the initial interest rates for which you might qualify.

Understanding what rates you actually qualify for can be used to compare and contrast different lenders and terms. In addition to different rates, lenders will have different fees associated with the loan, so it may be helpful to review the fine print closely as you weigh your options.

After you’ve done the math and determined how much you could potentially save in interest by refinancing, consider looking at other benefits offered by the lender. Ideally, you’ll find a lender you feel confident working with as you pay off your loan, since depending on the refinancing terms, you could be working with them from anywhere from five to 20 years.

Some lenders may offer additional benefits. For example, SoFi members can benefit from perks like live customer service 7 days a week and access to exclusive member events.

Members who lose their job through no fault of their own may qualify for unemployment protection, which means they’re able to pause loan payments while they look for other employment. SoFi’s career services team can even help you through your job search.

There are absolutely no hidden fees when you refinance with SoFi and the application process can be completed online. If you’re ready to take the next step in refinancing your student loans, you can get a quote from SoFi in just about two minutes.

Essentially, it’s all about matching the right student debt consolidation company to your specific financial needs.

Take a look at your current interest rates, terms, and loan amounts for your student loans to assess what makes sense for your situation, and remember to consider whether you qualify for federal student loan benefits before consolidating and refinancing with a private lender. Then you can get started on the ultimate goal: paying off student debt sooner.

Learn more about how refinancing with SoFi could help you cut your interest rate and tackle your student loans. You can get a quote to find out what rates you pre-qualify for in just two minutes.


Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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Should You Take Advantage of Your Student Loan Grace Period?

With graduation comes a fair share of celebration and changes. From grad parties to finding your first job to possibly a major move, life moves pretty fast during that first year out of school. While you’re busy setting up a new life, you may not even have time to think about those student loans you might’ve taken out for school.

When it comes to student loans, however, it’s not as easy as out of sight, out of mind. You might be busy setting up the next phase of your life, but don’t forget that your loan repayment will come calling, and likely sooner than you think.

Graduate students and undergrads currently leave school owing $29,200 on average, but the total amount you’ll pay back will depend on things like the interest rates on your student loans, the length of the loan term, and any loan forgiveness you may be eligible for. If you used student loans to get through college, you’re one of the 45 million Americans sharing the load of the country’s $1.6 trillion-plus student loan debt.

These figures are certainly daunting, especially for students who may face uncertainty about job prospects or find themselves having to leave school unfinished due to financial hardships or other reasons.

But one possible avenue for debt relief is that many student loans come with a grace period. A grace period is the length of time before you have to start student loan repayment, and the clock typically starts six months after you:

•   graduate
•   leave school
•   drop below part-time credit hours

Typically, you can use a grace period once per loan. During the grace period, you’re not required to make payments on your student loans. Most federal student loan grace periods are six months, but the Federal Perkins loan has a grace period of nine months. Some federal student loan grace periods can be extended even longer, for active duty military for instance. PLUS loans do not offer a grace period.

A grace period is different from other loan payment delays, such as deferments or forbearance, which have to be requested (grace periods typically begin automatically for those loans that have them)..

One important note: Grace periods are usually only available on federal student loans, and not all federal student loans have grace periods.

If you take out a private student loan some lenders, such as SoFi, may allow those with existing student loans in pre-repayment grace period status to align their first payment date with the soonest scheduled first payment date of those existing loans (up to a maximum of 180 days from the date of approval). In other cases, you may have to start repayment as soon as you graduate or leave school.

Theoretically, the grace period is there to give you time to get yourself financially settled and solidly employed, and for many students who are just leaving the campus life, a grace period feels like a no-brainer.

That said, there are other options during your grace period: You can get a jumpstart on your student loans and start paying them immediately, or start saving up to pay them. As with any financial decision, though, there are pros and cons to consider.

Here are some questions to consider during your grace period.

Some Advantages of Student Loan Grace Periods

The biggest advantage of the grace period is that you have a cushion of time before you have to start making loan payments, usually around six months after graduation/leaving school/dropping to part-time enrollment. Under certain circumstances, you may qualify for an extension.

Exceptions for most federal student loans include:

•   Active military duty. If you’re called for duty more than a month before the end of your grace period, you’ll have a full six-month grace period when you return.

•   Going back to school. If you go back to school before the end of your grace period, even just part-time, your grace period will reset to six months after you stop attending school.

•   Consolidating the loan. If you choose to consolidate your eligible federal student loans before your grace period ends, you’ll forfeit the rest of your grace period. In that situation, your payments will begin in about two months after the consolidation loan is disbursed.

Federal loans that have a six-month grace period include:

•   Direct Subsidized Loans
•   Direct Unsubsidized Loans
•   Subsidized Federal Stafford Loans
•   Unsubsidized Federal Stafford Loans

If you received a Federal Perkins Loan before the program expired, the average grace period is around nine months. You may want to check with your school to be certain.

The only federal loans that don’t offer a grace period are PLUS loans, which are reserved for:

•   graduate students
•   professional students
•   parents of dependent undergraduates

PLUS repayment begins immediately, but borrowers may be eligible for deferment. (Not sure what type of loan you have? Check the National Student Loan Data System .)

Used wisely, the grace period can serve its intended purpose — to give you some breathing room to find your first job, get settled, and build up a bit of income.

The bills come quickly during that first foray into post-college life, including moving costs, rental deposits, utility setup, groceries, decorations, and business attire. The grace period may give you adequate time to take care of all those necessities and get a few paychecks into your bank account before starting to pay back your loans.

Some Disadvantages of Student Loan Grace Periods

Even when you’re not required to make payments during your grace period, you’ll likely still accrue interest on your federal student loans. If your loan was large to begin with, this accumulation of interest could put you at even more of a disadvantage right out of the gate.

The exception to this rule is if you have federal Direct Subsidized Loans—these will not accrue interest during the grace period.

To make matters even more complicated, some loans simply accrue interest, while others capitalize unpaid interest into the principal balance of the loan, which means you effectively pay interest twice. Making interest payments on a student loan, even if you decide to use the grace period, may help you avoid any unpleasant surprises.

On top of that, graduation, moving, and getting a job can come with a bunch of unexpected spending. While emergencies and unanticipated bills come up, especially during your first year out of school, it’s encouraged to keep expenses down.

Remember when the grace period is up, you’ll have to start making monthly payments, or risk penalties such as delinquent marks on your credit report and late fees.

Choosing How to Handle Your Grace Period

If you decide that the pros of the student loan grace period outweigh the cons, you could use that payment-free time to start setting aside funds for later. During your grace period you can:

•   Use a student loan calculator to determine your monthly payments.
•   Work with your lender/servicer to see what your payments will be.
•   Make it a goal to try and put away at least a partial amount each month.

If you get used to living on a budget that doesn’t include your student loan payment, you may be setting yourself up for future stress. Instead, you could consider:

•   Waiving the grace period and starting student loan payments immediately. If you have enough wiggle room in your budget, you can start paying your loans down immediately. Since your loan wouldn’t be accruing unpaid interest during the grace period, it could lead to savings in the long term.

•   Setting aside a part of your monthly paycheck to start paying down the interest. If your budget doesn’t allow for monthly payments yet, you could try saving what you can to pay off some of the interest on your student loans during the grace period. Even a small contribution can make a difference.

But if your budget doesn’t allow for any payments during your grace period, don’t sweat it. Your grace period is there for a reason, to give you some breathing room while you sort things out financially.

Some Ways Refinancing Can Help

Although you might be stuck with the debt, you aren’t necessarily stuck with the terms of the original loan you took out. It may be possible to refinance your student loans to terms that work better for you. Refinancing lets you take out a brand-new loan with a new interest rate and new loan terms.

When refinancing, you may be able to qualify for a lower interest rate than the one you are currently paying. Refinancing student loan debt could also offer you the opportunity to shorten your term length or lower your monthly payment (possibly by extending your term).

If you are managing a number of student loans, refinancing may help to simplify your life by giving you one loan to pay, instead of multiple loans to remember.

Keep in mind that if and when you refinance your federal student loans, you will be losing out on potential benefits that come with them.

These benefits, like Public Service Loan Forgiveness (PSLF), income-driven repayment plans, or deferment or forbearance, can also save you money and stress, so make sure to do your research before deciding to refinance.

If you choose to refinance your student loan, you might consider doing it with SoFi. With flexible terms and low- or fixed-variable rates, SoFi can make it easy to save while repaying your student loans. There are no application or origination fees, and you can do it all online.

Don’t let your grace period’s end catch you off guard. If you plan ahead, and plan for future payments, you could end up on more solid financial footing.

About SoFi

SoFi offers student loan refinancing which may help you lower your monthly payments or shorten your loan term. Discover the different student loan refinancing options to see if refinancing could be a good option for you.


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

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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The Rising Cost of Grad School Debt

Despite all of the conversation the student loan crisis has inspired in recent years, one important piece of the puzzle is often missing from the dialogue. While most headlines have focused on undergraduate borrowers and their student debt, the percentage of graduate student loan debt has been steadily increasing.

Today people take on a larger amount of debt for master’s, MBA, law, and medical programs than ever before. So what do borrowers need to know about the current state of graduate student loans? Here are some essentials:

The Increase in Graduate Borrowing

According to a 2018 report from the New America Foundation, debt for students who earned a range of master’s and professional degrees has surged in recent years. There isn’t one specific reason for this, of course, but one impetus for going back to school seems to be that some regard a master’s degree as the new bachelor’s degree.

It should come as no shock then that the average graduate student loan debt has skyrocketed. In the 2017 to 2018 school year, graduate school loan disbursements accounted for more than a third of the total federal loan program. In fact, more than $37 billion was disbursed to grad students that school year.

And for those pursuing professional degrees, including those studying law or medicine, the current average debt load was around $145,000 (for law) and around $196,000 per student in 2018. But the increase in graduate student debt isn’t necessarily due to a higher number of borrowers—it’s that students are borrowing more for graduate school.

And while people with graduate degrees tend to earn higher salaries and experience lower unemployment rates than their counterparts with undergraduate degrees, the earning potential for each type of degree can vary widely.

As with any investment, borrowers may want to consider their likely return on investment (in the form of future salary potential) when choosing how much debt to take on for higher education.

Grad Students Are Taking on More Debt than Undergrads

While undergrads have limits on how much they can borrow in federal loans, qualifying students pursuing graduate or professional degrees can use federal Grad PLUS loans to cover the entire cost of attendance (determined by the school), minus any other financial assistance received.

Students in professional degree programs have the “highest rates of annual borrowing, taking on an average of $40,624 from all sources for a single academic year.”

Graduate Loans Come with Higher Interest Rates

According to Sallie Mae’s report, “How America Pays for Graduate School,” 53% of graduate students borrow money to help cover graduate school costs. Graduate students have two options available to them through the federal Direct Loan program.

Graduate or professional Direct Unsubsidized loans have a 6.08% interest rate for the 2019-2020 school year. Direct PLUS loans currently available to graduate students through the federal government carry a 7.08% interest rate for the 2019-2020 school year. (There are also loan fees to factor in.)

Beyond this, some students may dip into higher-interest private loans. That’s compared with undergraduate federal loans, which are currently at 4.53% (until June 30, 2020).

The Cost of Going Back to School

Even with the staggering costs associated with graduate school, for some individuals it can be a beneficial step toward future success. Everyone’s situation is different, so whether or not you choose to pursue a graduate degree is a personal decision.

There are a number of different factors to sort through and evaluate as you determine if going back to school is worth the cost. Here are a few questions to help you navigate your decision making process.

Is the investment in this degree worth the cost?

One way to determine this is to calculate the financial return on education (ROE). An initial step might be to calculate the average lifetime earning potential for graduates in your chosen field of study.

If a graduate degree can lead to strong career growth, it can be well worth it. But that the market for graduate degrees can be inconsistent.

Programs can vary widely by cost, and schools have a lot of leeway to develop programs and price them with little oversight. So doing your due diligence on your school or schools of choice before going full steam ahead towards a graduate degree is probably wise.

Could the degree help your career path?

How will graduate school fit into your overall career goals? Sometimes it can further your current career. In other cases, a graduate degree can help you pivot into a related field.

There are a few ways to gather intel on this, such as talking to trusted friends and mentors in your desired field of study. Do they have any insight to share?

Another resource to check out is LinkedIn, where you can look at individual profiles of people who work for companies you admire. What was their career path?

While everyone’s journey is different, you may glean some valuable information about the type of experience and degrees those in positions you aspire to hold.

In some cases, a graduate degree will be required for a career in a certain field. Careers in medicine, law, and others may require some form of additional education.

Could a graduate degree improve overall life satisfaction?

If you’re interested in getting a graduate degree, you probably have some outcomes and goals in mind. Perhaps you want to improve your earning potential or get a promotion. Beyond financials, consider how an advanced degree might improve your overall happiness.

Much of what makes people happy at work is made up of intangibles—corporate culture, coworkers you enjoy, a boss you work well with and can learn from, work-life balance, and a sense of self-worth, which differs from person to person.

Will a degree move you toward a career that you’ll find more rewarding? These are all extremely personal factors that could influence your decision to pursue a graduate degree.

Financing Your Graduate Degree

If ultimately, you decide to go back to school to get a master’s or other professional degree, you’ll likely have to find a way to pay for it. Graduate degrees can be expensive—as we’ve shown above—here are a few ideas for financing your degree.

Looking for Scholarships and Grants

It may be worth searching for potential graduate school scholarships or grants available for grad students. Typically you can search by field, demographic, location, or even by school.

There are a variety of databases that aggregate scholarships online that can provide a starting point for your search. A good rule of thumb is to track your scholarship applications so you can streamline the process.

Keeping track of questions you’ve already answered so you can repurpose them for future applications may be helpful, since it could cut down the time it takes to apply. Tracking each application can help you easily keep tabs on where you’ve applied and who you’ve heard back from.

There are fewer scholarships available for graduate school than there are for undergrad degrees, covering just 15% of total grad school costs, according to Sallie Mae.

But since scholarships and grants don’t need to be repaid, even just a small sum can be helpful in making ends meet as you find a way to pay for grad school. Hey, $1,000 in scholarships is $1,000 less you’d need to borrow in loans.

Searching for Fellowships or Assistantships

Many schools offer fellowships or assistantships to graduate students. These are typically merit-based—things like a high GPA in college could help you qualify.

Graduate student assistantships are usually either research-based or teaching-based. The benefits may vary by school but could include help with tuition, a living stipend, or both. The assistantship typically requires students to work for 15 to 20 hours a week in their specified role.

Some schools also have graduate resident assistants. In this role, students generally work in an on-campus residence hall (often helping undergrads). In return, they might get free room and board or a stipend. Specifics will vary by school.

Fellowships are similar to assistantships but generally don’t require a set number of work hours on-campus.

Assistantship and fellowship opportunities vary by school and there are usually different application processes. You may want to review the websites of the schools you are planning on applying to for more information.

Taking Advantage of Employer Programs

Some employers offer education benefits to their employees. If available to you, this could be a valuable tool to help you pay for your graduate degree.

Tuition reimbursement programs will vary by lender, so you may want to check in with HR or the program administrator to get the details on the application process and how much you might qualify for.

Also, it may be worth finding out if there are any contingencies associated with the reimbursement. For example, some companies may require you to stay with the company for a certain period of time after graduation. Others may only provide assistance for select programs.

Borrowing Student Loans

When the above options aren’t enough, student loans can come into play. A good way to get started is to fill out the Free Application for Federal Student Aid (FAFSA®). This is how you can apply for federal aid including work-study and federal student loans. Federal student loans are the most common source of funding for graduate students.

In the case that federal student loans aren’t enough, private loans may be an option. Private lenders will review personal information like your credit history and more in order to determine the terms and interest rates you may qualify for. Borrowers with a strong credit history (among other financial metrics that vary by lender) could qualify for competitive rates.

How Refinancing Can Help

Many borrowers are aware that they can refinance private student loans, but it may come as a surprise to many that they may also be able to refinance federal student loans with a private lender.

Even a small change in interest rate can make a big difference in the long run. Refinancing student loans at a lower rate may allow borrowers to save money on interest or free up some cash flow by extending their loan term to lower their monthly payments.

Since federal loan benefits (like forbearance, income-driven repayment plans, and loan forgiveness) don’t transfer to private lenders, borrowers would be wise to first check to see if they’re eligible for one of the government’s loan benefits (should they want to take advantage) before deciding to refinance.

But for borrowers who are looking for a potentially lower interest rate and have improved their financial situations since leaving school, refinancing can be a great option.

For many grad school borrowers, student loans can be a powerful investment in their career and financial future. But a big loan balance means big responsibility, making it important to balance the cost of an advanced degree program with its related earning potential.

If and when the time comes, refinancing can help borrowers knock out more of their loans and move on to bigger and better things.

Ready to get ahead of your grad school debt? Learn more about how SoFi student loan refinancing can lower your interest rate or your monthly payment.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
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External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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