Fresh Out of School Archives | Page 44 of 51

Jun

2019

Paying for College After Losing Financial Aid

By SoFi | Fresh Out of School, Student Loans, student_loan | No Comments

When you applied to college, you knew it was going to be expensive. For many students, paying for the cost of their college education out of pocket just isn’t an option.

Many turn to financial aid to fill the gap between what they can afford and the cost of tuition—the U.S. Department of Education awarded more than $120 billion in grants, work-study, federal student loans in 2018. So, you fill out the Free Application for Federal Student Aid (FAFSAⓇ) every year and plan on receiving a financial aid package that might help you make ends meet as you work your way to your degree.

Have you ever thought about what would happen if you lost your financial aid? Losing financial aid in college might be a stressful experience, but it doesn’t mean you have to give up your dream of getting a degree.

Federal student loans and grants aren’t the only way to pay for college, and knowing what options are out there could help you continue your college education without skipping a beat.

Losing Your Financial Aid

To qualify for federal student aid, you must meet specific eligibility requirements outlined by the U.S. Department of Education. While most college students don’t have a problem meeting them, there’s no guarantee you’ll maintain eligibility through the entirety of your college career. Requirements include:

• Demonstrating financial need

• Being a U.S. citizen or eligible noncitizen

• A valid Social Security number

• Enrollment as a regular student in an eligible degree or certificate program

• Demonstrating that you’re eligible to pursue higher education by showing a high school diploma or completion of other qualifying schooling

If you don’t meet one or more of these requirements at any time, you may potentially lose your financial aid. While it could be possible to gain that eligibility back, you may need to find other ways to pay for school in the meantime.

How to Pay for College After Losing Financial Aid

Whether you’re no longer eligible for financial aid or you weren’t eligible to begin with, there are several options that could help cover your education costs.

1. Applying for Scholarships

Most universities offer academic scholarships to students who meet certain minimum GPA requirements. If you’ve done well in school so far, you may qualify. If you’re already in a program, you may also have access to scholarships available only to students in your major.

You could speak with a financial aid counselor at your school or visit the college’s scholarship page on its website to find out what’s available.

Also, many private companies and organizations offer scholarships to diligent students. Websites like Scholarships.com , Fastweb , and College Board allow you to search for scholarships and even provide tips on how to improve your chances of getting one.

2. Getting a Job

Working even part-time while taking classes might sound like a surefire way to kill your social life or induce sleep deprivation. But after losing financial aid, it may be essential to staying in school.

Many colleges have on-campus jobs that allow you to work without needing to stray too far away. And in fact, some financial aid packages include work-study, which is often an on-campus job that can help you earn money toward your tuition and other school fees.

Being awarded work-study doesn’t guarantee you a job through your school or local community, but it typically helps you secure placement and a specific number of working hours consistent with your award. But if your school has thousands of students, the competition can be fierce. If you have a car or access to public transportation, you could consider looking off-campus. As you expand your search, you might want to compare wages, hours, and other benefits.

3. Seeking Help From Family

If you have a supportive family situation and your parents can help you without putting their own financial situation in jeopardy, it may be worth asking for assistance. They don’t necessarily need to cover your tuition costs for you.

Instead, they may be able to provide you with a place to live rent-free, or you could ask for a loan with clear terms for repayment. Whatever you do, you might want to be mindful of your parents’ or other family members’ needs and don’t assume you’ll receive help.

4. Considering Transferring

Depending on the cost of tuition and the amount of financial aid you lost, it might be worth transferring to a less expensive college to save on costs. While that won’t pay for your tuition on its own, it may give you access to more scholarship and grant opportunities.

5. Applying for Private Student Loans

While federal loans often carry lower interest rates and more benefits than private student loans, the latter can still be an option if you fall short with the alternatives, whether you’re an undergraduate or graduate student.

Several banks, credit unions, and online lenders offer private student loans. As a result, you might want to shop around to make sure you get the best terms for your needs.

Also, unlike most federal student loans, private student loans typically require a credit check. And unless you have a strong credit history, a reliable source of income, and can meet other lender requirements, you may have a hard time getting approved. Again, if you have supportive parents, another option is to ask them to co-sign a private student loan with you.

Getting Financial Aid Back After Suspension

If you’ve lost your eligibility , the decision isn’t necessarily final. For example, if you’ve defaulted on a federal loan, you may be able to regain your eligibility once you get the loan out of default.

Whatever the reason, you could talk with your school’s financial aid office and find out what you need to do to get it back. It may take some time, but it can be well worth it, especially if you have a few years left in school.

Practicing Smart Student Loan Habits

If you’ve taken out student loans or you’re planning to use student loans in the future to finance your education, you might want to use them wisely.

Before you borrow, for instance, you could make sure you’ve exhausted all of your other options to get money to pay for school, including getting a job and applying for scholarships and grants. Also, you could avoid borrowing more than you need to limit how much you’ll owe in the long run.

As you get closer to graduation, you might consider refinancing your student loans once your credit and income are in good shape. Refinancing could potentially help you score a lower monthly payment, a lower interest rate, or both.

Know that if you refinance federal loans, you’ll no longer be eligible for programs like Public Service Loan Forgiveness, income-driven repayment plans or other federal benefits. To see what your new refinanced student loan could look like, take a look at our student loan refinance calculator.

Learn more about refinancing your student loans with SoFi 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.

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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.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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Jun

2019

Which Student Loan Should You Pay Off First?

By SoFi | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

As a nation Americans are facing more student loan debt than ever before; the total debt is now around $1.5 trillion . According to the Pew Research Center , about four in 10 American adults hold student loans.

While the amount each individual holds varies greatly, on average those graduating from a four-year college have approximately $30,731 in student loan debt . If you have a graduate degree, that total could be even higher. Approximately 40% of all student loan debt is held by graduate students, which adds up to nearly $563 billion .

When crafting a plan to repay your student loans, it’s beneficial to start by making a budget. Outline all of your expenses, student loans, and any other debts you may have.

Then, tally up all of your income and investments. After cataloging all of that information, take a good look at your spending habits and see where you would be able to make any changes.

When you’re establishing your new budget, try to set aside extra funds to put toward paying off your student loans. And remember that student loans do not penalize you for prepaying on the loan.

What You Should Know About Interest Rates on Your Loans

Interest rates on federal student loans are set by Congress based on the 10-year treasury note. This means every borrower taking out a certain type of federal student loan, in a given year, will pay the same interest rate. These interest rates are fixed for the life of the loan.

Federal student loans also come with some limitations and are regulated by the Department of Education . For undergraduate students, the current aggregate (combined) limit of federal student loans as a dependent is $31,000; and no more than $23,000 of this amount may be in subsidized loans.

As an independent undergraduate student, your aggregate loan limit is $57,500; and no more than $23,000 of this amount may be in subsidized loans. As a graduate student, the aggregate limit for federal student loans is $138,500 for graduate or professional students; and no more than $65,500 of this amount may be in subsidized loans.

The graduate aggregate limit includes all federal loans received for undergraduate study. If the plan of study you’ve chosen requires you to exceed those limits, you may have to consider taking out a private student loan.

These loans come with different interest rates and payment plans. You can learn more about the difference between federal and private student loans at the Federal Student Aid website.

If you’re not sure what your monthly payments will be, you can check out our student loan calculator to get an idea of what your loan payments could look like.

Here are three methods to consider if you’re ready to get serious about paying off your student loan debt.

The Debt Stacking Method

Take a look at your student loans and the interest rates you’re paying. The debt avalanche method, also known as debt stacking, focuses on repaying the debts with the highest interest rates first. In regard to student loans, that means if you have a federal graduate loan with a 6.6% interest rate, plus an undergraduate loan with a rate of 5.05%, you would prioritize paying off the graduate loan first, since it has the higher interest rate.

As you make your minimum monthly payments on all of your loans, you’ll also be paying a little extra toward the loan with the highest interest rate. When that loan is paid off, you’ll redirect those funds to the debt with the next highest interest rate. Continue using this rollover method until all of your debts are paid off.

If you are disciplined and organized when it comes to repaying your debts, the avalanche method could work well for you. Using the avalanche method of debt repayment will likely reduce the amount of money you pay in interest.

The Snowball Method

Another option for debt repayment is the snowball method, which disregards interest rates. With this method, after making the minimum payments on your loans every month, you will focus on the additional funds you have budgeted toward paying off the loan with the lowest balance.

When you have paid off this debt in full, you then roll what you were paying on those monthly payments into the debt with the next lowest balance. You continue to do this until all of your debts are paid off.

One of the benefits of this debt payoff strategy are the early rewards of paying off your smallest loans first. This helps keep you engaged in continuing your repayment plan.

If you feel overwhelmed by the amount of student loans you have to pay off, the snowball method could work for you. Often times when paying off debt, it can be discouraging if you don’t see immediate progress.

The snowball strategy works to encourage you to continue paying off your debts by establishing more frequent rewards. When you pay off that first loan, the sense of accomplishment you feel is enough to keep you committed to your repayment plan and financial goals.

Refinancing Your Student Loans

Another option to consider while you are setting your student loan repayment strategy is refinancing your student loans. Before you do, it’s important to understand that if you have federal student loans, certain benefits like deferment, forbearance, or the option for a Direct Consolidation Loan will be eliminated if you refinance with a private lender.

Refinancing allows you to take out a brand-new loan, with a new interest rate, and new loan terms. Often times, if you have good credit and income, you can lower your interest rate or potentially reduce your monthly payments depending on the loan term.

Another plus to refinancing your loans—instead of managing a number of monthly payments with different interest rates, you only have to worry about one monthly payment with one interest rate. To see how your payments and interest rate could change when you refinance, take a look at SoFi’s student loan refinancing calculator.

Consider 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.

Jun

2019

What is Student Loan Refinancing?

By SoFi | Fresh Out of School, Student Loans, student_loan, Terminology | No Comments

With all the benefits that come with higher education, there’s one potential pain point that can easily sour the mood—paying for it. With the rising cost of college, more and more students are taking out student loans to finance their educations.

On average, students graduating from undergraduate programs carry approximately $33,310 in student loan debt . And for those students pursuing additional degrees, the student loan burden is even higher. But what options are available to those facing the reality of student debt?

One possible solution is student loan refinancing. At its core, student loan refinancing is the process of taking out a new loan to pay off your existing student loans. This leaves you with just one loan with a new interest rate, monthly payment, and loan terms.

What Does Student Loan Refinancing Do?

If you borrowed federal student loans, they were granted based on the information you filled out in your Free Application for Federal Student Aid (FAFSA®). All federal student loans since July 1, 2006 are fixed-rate loans, and the interest rate is determined by Congress. Those loans could have been either subsidized or unsubsidized, depending on your financial need at the time you filled out your FAFSA.

If you took out private loans, the interest rate was determined based on your or your parents’ credit scores and other financial factors. As a young student, it’s likely you didn’t have a long credit history or employment history (hence getting your parents to cosign). Because of this, most lenders would have considered you a risky borrower, which means you likely either applied with a cosigner or took out a loan with a relatively high interest rate.

Refinancing student loans gives you the opportunity to change that. When you refinance your student loans, you usually do so with a private bank or lender, like SoFi, who will review your credit history and earning potential (among other financial details) to determine your new interest rate.

Since you’ve graduated, you may have significantly improved your finances. And if you took the opportunity to build up some credit in college, you could qualify for a lower interest rate when you refinance.

This is one of the biggest potential benefits of refinancing your student loans. With a lower interest rate, you could stand to reduce the money you spend in interest over the life of the loan, especially if you also shorten your loan term. If, on the other hand, you lengthen your loan term, you’re unlikely to reduce the amount of interest you pay over the course of the loan.

When you originally borrowed your student loans, you likely agreed to a certain repayment term. Refinancing may allow you to adjust your repayment terms, though of course which terms you have access to is up to the lender’s discretion. On the other hand, you could also extend the loan term, which could get you lower monthly payments, but likely means you pay more in interest over time.

If you refinance your student loans, instead of having multiple loans and multiple monthly payments, you’d have one single loan payment.

If you refinance federal student loans, they’ll become private loans, which means you’ll lose access to federal repayment plans . This is especially important to note if you plan on taking advantage of programs like income-driven repayment or Public Service Loan Forgiveness (PSLF).

You’ll also lose access to federal borrower protections like deferment and forbearance , which allow you to temporarily pause your monthly payments if you are facing financial or personal hardship.

Choosing a student loan repayment plan and strategy is a personal decision. Take the time to carefully review your current loan terms and benefits before you decide to refinance. There are a variety of refinancing options out there and it’s important to do your research and find a reliable lender or stick with your original federal student loan repayment plan.

How Do You Refinance Your Student Loans?

The student loan refinancing process will vary slightly by lender. Before you make any decisions, you may want to check the rates at multiple lenders to make sure you are getting a competitive rate. Many online lenders and banks will let you check your interest rate online in just a couple of minutes.

If you meet the lender’s eligibility requirements, you’ll most likely see a few different options with varying repayment terms. You’ll also usually get to choose between a variable rate and a fixed rate loan.

After you get the quotes, you can compare the estimates and lenders. You may want to review things like the interest rate, any fees associated with the loan, and the lender’s reputation.

If you decide to continue with a lender, you’ll have to file a formal application to refinance your student loans. When you formally apply, lenders will conduct a hard credit check (which could affect your credit score). To apply, most lenders require the following items:

• Proof of citizenship

• Proof of income

• A valid ID number

• Official statements for all of your federal and private student loans

If you are applying with a cosigner, you’ll also need to submit their information—your lender should inform you about what you’ll need.

Refinancing Your Student Loans with SoFi

If you’re interested in seeing how refinancing can help you take control of your student loan debt, you can use SoFi’s student loan refinancing calculator. If you decide refinancing is the right choice for you, at SoFi, there are no origination fees or prepayment penalties.

When you’re ready, you can get a rate quote from SoFi in less than two minutes.

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.

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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May

2019

Does Student Loan Deferment Affect Your Credit Score?

By SoFi | Credit, Fresh Out of School, personal_loan, Student Loans, student_loan | No Comments

If you’re facing student loan debt, adding those monthly payments into your budget can be overwhelming—and for some, it can be a serious struggle to meet the monthly minimum on loan payments.

Of course, to simply stop making payments is pretty much the worst thing you can do. Before you go that route, there are several other options to consider—and the sooner you move to get back on track, the better.

One of the more popular alternatives for federal student loans—chosen by thousands of borrowers each year—is to just press pause by requesting deferment or forbearance . But that postponement isn’t necessarily the best choice for everyone.

The appeal is obvious—both deferment and forbearance offer a chance to catch your breath and protect your credit when you feel as though you’re drowning in debt. A recent Brookings Institution analysis found that nearly 40% of borrowers could be in default on their student loans by 2023.

The main difference is that with a student loan deferment, you may not have to pay the interest that accrues on certain types of federal loans during the deferment period. With a forbearance, no matter what type of loan you have, eventually you’ll be responsible for paying the interest that accrues.

Either way, the relief is only temporary: Unless you’re deferring your student loans because you are going back to school, enrolled at least half-time, there are limits on how long you can postpone paying your federal student loans. And in the meantime, there could be consequences to your current and future finances.

For example, when the loan is in deferment or forbearance, interest may accumulate on your loan balance and capitalize on the principal at the end of the deferment or forbearance period. This could ultimately mean paying more in interest over the life of the loan, which could take away from money you’d rather put toward a car or house.

How Does Student Loan Deferment or Forbearance Affect Your Credit

A number of factors determine your FICO® credit score , including payment history, how much you owe, how long you’ve had your debts, what your credit mix looks like and how much new credit you’ve asked for lately. Each factor is weighted differently, with payment history being the most important, making up about 35% of your FICO Score.

Though your loan status will be noted on a credit report , putting your federal student loan into deferment or forbearance shouldn’t directly affect your credit score, unless you miss a payment before your deferral or forbearance is granted.

But your total debt load likely will be reflected on your credit report—and if you aren’t paying it down, it could keep your score lower than you’d like. Just as defaulting can crash your credit, making monthly payments can help you build a positive credit history.

And your credit score isn’t the only thing new lenders look at when they’re deciding if you pass muster. Though education debt may be viewed more favorably than, say, credit card debt, because it can be regarded as an “investment” in your overall earning potential and comes with a lower interest rate that credit card debt, it still affects your debt-to-income ratio (DTI).

And that might determine if a lender will approve your application for a car loan or mortgage, if the jewelry store will sell you that engagement ring on an installment plan, or if a management company will rent you your dream apartment. A lender wants to see that you’re bringing in enough cash to cover your debt payments—hence, looking at your DTI for a sense of how much you’re earning versus paying out to existing debt.

What Are Some Other Alternatives?

Deferment is better than defaulting on your student debt—by a wide margin. But it’s a short-term solution.

Are you certain you’ll be better prepared to make the same payments in six months or a year—even three years? If you expect your economic prospects to improve in a relatively short period, a temporary delay could be the way to go.

A better option may be to check on your eligibility for one of several federal loan repayment programs, such as income-driven repayment . Income-driven repayment plans allow you to pay 10%, 15%, or 20% of your discretionary income to your loans—depending on which specific plan you chose. While this generally means extending your loan term and therefore paying more interest over the life of the loan, it also can lower your monthly payments and make them more manageable.

You also might be able to improve your interest rate—and, therefore, your long-term cost—by consolidating and refinancing all your federal and private student loans into one loan with one payment.

If you haven’t yet missed a beat as a borrower—if you’ve graduated, have a job and still have a solid credit and financial background—you may be able to qualify for a new student loan at a lower rate. Depending on how you restructure your debt, refinancing could help you pay off your student loans at an even faster pace than you planned.

Can Refinancing Affect Your Credit Report?

Every person’s credit story is different, so it’s hard to say exactly how any change might affect it. On the one hand, refinancing your student loans might help get you out of debt sooner, which could lower your overall debt, thus helping your credit score.

Similarly, if you’re currently struggling to make student loan payments on time (which could hinder your score), and refinancing allows you to make on-time payments each month, that could also help your score.

Ultimately, refinancing could have a different impact on every financial situation and credit history. And there are few better recipes for credit report improvement than diligently making your debt repayments on time.

That being said, here are a few other things that may help if you’re considering refinancing:

• Not waiting until you’re in default to shop for a refinancing loan. If you’re in default when you apply to refinance, it will likely make it more difficult for you to get a refinanced loan with a competitive interest rate

• Reviewing your credit report for errors—and speaking up if there is any misinformation on your report

• When looking into pre-qualify, you may want to be sure the lender will only do a soft credit inquiry to determine if you prequalify (which won’t affect your score)

• Making payments on your current loans until your new loan is in place. And once you start paying your refinanced loan, it’s just as important that you stay up to date on your payments. Some lenders offer hardship assistance in certain circumstances—if you lose your job, for example.

Every lender has its own criteria for determining which borrowers it will do business with. If you opt to check your rates, SoFi will conduct a soft credit pull* to determine the rates and terms for which you qualify and show those to you upfront. The process is done online and takes just a couple of minutes.

If you decide to refinance with SoFi, in addition to potentially getting a lower interest rate, you can take advantage of other perks, including complimentary career counseling.

But remember: The goal of refinancing is to get back on track and then stay on track. That’s a key way you can help build a solid credit record that will make borrowing easier and less expensive in the future.

When you’re ready to take control of your student loans, refinancing with SoFi may help you manage your debt.

*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.
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.

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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May

2019

Can You Serve in the Peace Corps With Student Loans?

By SoFi | Fresh Out of School, Life & Career, Student Loans, student_loan | No Comments

Joining the Peace Corps after college or grad school is a noble way to start your career. Volunteers in the government program deploy to more than 60 countries around the world for two-year stints of public service.

That can mean anything from teaching secondary school, to working with farmers, to promoting health awareness. If you’re considering following this path, you’d be joining more than 230,000 American adults who have served since the program was founded almost sixty years ago.

But if you’re like most students these days, you might be graduating with a significant amount of educational debt. Today, 70% of undergraduates finish school with debt, with the average borrower owing more than $37,000, and that’s before interest adds up over the years.

Committing to the Peace Corps, which pays only a local living allowance while you’re enrolled, can be daunting when you’re facing that burden. You may be wondering whether the Peace Corps will even allow you to join with a heavy debt load.

The answer is yes—he Peace Corps and student loans can go together. You’re still responsible for your loans if you become a volunteer, but you could be eligible for additional benefits as a result of your service that can make paying them off easier. If you’re seriously thinking about the Peace Corps, here’s what you need to know about managing your debt during and after your time abroad.

Options for Reducing Loan Payments During Your Service

If you join the Peace Corps right after school, you may not have to start repaying your loans immediately. That’s because anyone who has certain federal loans (Direct Loans and Stafford Loans) gets a six-month grace period before payments are due, although interest will might start accruing.

You don’t qualify for a grace period if you have a PLUS Loan, and with Federal Perkins Loan, you’ll have to check with the school that issued it. If you were enlisted in active duty military service, the grace period can be extended for up to three years. However, that doesn’t apply to the Peace Corps.

Still, like the military, the Peace Corps is considered a form of government service. As a result, if you have federal loans, you may be eligible for certain options to pause or reduce your payments while you’re a volunteer.

First, as a Peace Corps member you may qualify for deferment . This allows you to stop making payments, or reduce the amount you pay, during the time you’re in the field, for up to three years.

During deferment, you are not responsible for paying interest that builds up if you have certain kinds of loans, including Direct Subsidized Loans, Subsidized Federal Stafford Loans, or Perkins Loans. You are responsible for interest, however, if you have unsubsidized federal loans or Direct PLUS loans.

Note that your deferment will not automatically kick in when you join the Peace Corps—you’ll need to submit an application and documentation to your loan servicer.

Your loan servicer may also have you re-apply for deferment after a year, so make sure you turn in the necessary paperwork. If you’re still in the six-month grace period for any of your loans, ask your lender about the right time to apply for deferment.

Another way to reduce your monthly payment on federal loans is to apply for an income-based repayment plan . The government offers four repayment plans designed to make payments affordable if you’re on a limited income. These plans tie how much you pay every month to how much you make, limiting your outlays to between 10% and 20% of your discretionary income.

The specific plan you qualify for depends on the types of loans you have and when you borrowed. If you stick with the plan when you get back, your balance may be forgiven if you continue making minimum payments for 20 or 25 years, depending on the plan.

If you have private loans, there’s no guarantee that you’ll be able to pause or reduce those payments. But some private lenders do offer flexibility during periods of economic hardship, so approach yours to ask whether they can offer you any options while you’re a volunteer.

How You Can Get Your Loan Partially Cancelled

If you have a federal Perkins Loan, you may qualify for another perk thanks to your Peace Corps service: partial cancellation .

You can get 15% of your loan canceled after your first year of service and another 15% after your second year, then 20% after your third and fourth years, respectively. That adds up to having 70% of your loan canceled after four years!

This also includes the interest that accumulated during that time. All borrowers who have Perkins Loans are eligible, regardless of when you took the loan out, but only service completed after Oct. 7, 1998, qualifies. This benefit can make it easier to sign up for the Peace Corps with student loans, but keep in mind that other types of loans aren’t eligible.

The Peace Corps and Public Service Loan Forgiveness

Since the Peace Corps is clearly a way of doing good in the world, it shouldn’t be too surprising that as a volunteer you may be eligible for Public Service Loan Forgiveness.

Under the program, if you make payments for 10 years on your loans under a qualifying income-based repayment plan, you may be able to have the balance on your loans forgiven.

Because you have to make 120 monthly payments to qualify, you would only be eligible if you continue in a public service job full-time at some point after leaving the Peace Corps. Other qualifying fields include government organizations, 501(c)(3) nonprofits, public service agencies such as libraries and police departments, and more.

The payments don’t have to be consecutive, meaning you may qualify if you go back to public service after a few years doing something else. Note that this program applies only to Federal Direct Loans, but not Perkins Loans or loans under the Federal Family Education Loan (FFEL) Program. If you’re hoping to qualify for this, complete an Employment Certification form every year, starting with your time in the Peace Corps, or when you switch jobs.

When you look into options for student loan forgiveness, beware of the scams out there, some of which target young graduates like you. One prominent example is the Obama Student Loan Forgiveness Plan, which doesn’t exist but sometimes lures borrowers to pay fees for paperwork they could’ve completed themselves or for nothing at all. Stick with the forgiveness options offered directly through the Department of Education .

How Student Loan Refinancing Can Help

If you’re looking for other ways to make payments more affordable while you’re in the Peace Corps, or after you leave, consider refinancing your student loans. You can refinance federal loans, private loans, or both.

When you do so, you take out a new loan from a private lender to pay off your existing loans, which might make sense if you qualify for a better interest rate or lower monthly payments than you previously had. A loan refinancer will take a look at your personal information, income, credit history, and other factors when deciding what terms and interest rates to offer you.

Fixed rates will stay the same for the term of your loan, while variable rates will shift over time. Keep in mind that refinancing federal loans will mean you have to give up government benefits like deferment, partial cancellation, income-based repayment, and Public Service Loan Forgiveness. But for some people, refinancing can be a great way to make student debt manageable while you’re a volunteer and for the ensuing years.

Don’t Let Student Loans Stop You from Following Your Dreams

If your goal after college or grad school is to join the Peace Corps, or engage in any public service for that matter, your student debt doesn’t have to be an obstacle . With federal loans, there are options for delaying or reducing payments or getting part of your debt canceled or forgiven.

And regardless of what kinds of loans you have, refinancing can be a way to make payments more affordable. Plus, when your two years of service are complete, you’ll get $8,000 from the Peace Corps that you can put toward your loans if you want to. Coming up with a plan to pay your loans is important, but that doesn’t have to come at the expense of making a difference.

Thinking of going into the Peace Corps or another public service role? Look into refinancing your student loans with SoFi.

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 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.

SOSL19041

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Refinancing Your Student Loans

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Refinancing Your Student Loans with SoFi

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How You Can Get Your Loan Partially Cancelled

The Peace Corps and Public Service Loan Forgiveness

How Student Loan Refinancing Can Help

Don’t Let Student Loans Stop You from Following Your Dreams

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