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As a college graduate, getting started in your career and planning for your financial future should be top priorities. For 44 million college graduates , part of this includes repaying student loans. The average college student graduates with approximately $37,172 in student loan debt.

Repaying student loans can cost a substantial amount of money when you factor interest into the equation, but if you’re planning on working for a non-profit organization or a government agency, public service loan forgiveness could save you years’ worth of payments. But federal loan forgiveness is not necessarily for everyone.

Another option is potentially refinancing your student loans at a lower interest rate—an appealing way to save money over the life of your student loan, especially if you don’t qualify for public student loan forgiveness.

After starting your new post-graduation career and creating a budget, you’ll also want to consider your student loan repayment options and have a plan for managing your student loans.

As with any loan option, there are pros and cons to the Public Service Loan Forgiveness (PSLF) program. You’ll have to decide if it’s right for you or if refinancing your loans could be a better option for your finances in the long run.

What Is Public Service Student Loan Forgiveness?

Also known as PSLF, the Public Service Student Loan Forgiveness is a federal program that may forgive or cancel the remainder of your Direct Student Loans if you work in a qualifying public service job and meet certain stringent criteria, including making 120 qualifying monthly payments. There is no cap on how much can be forgiven, so if you are able to meet the criteria, the rest of your loan goes away.

What Are Public Service Loan Forgiveness Qualifying Jobs?

The first step to qualifying for any kind of federal loan forgiveness program is filling out the employment certification form . Often people wait until after a few years of making payments before filling out the employment certification form, only to then find out those payments didn’t qualify because their job didn’t meet the requirements.

In general, PSLF qualifying jobs are more about the employer than about the specific role you’re filling at the organization. The important thing is that the employer qualifies as a public service organization.

That includes government organizations and 501(c)3 tax-exempt non-profit organizations. There are a few non-profit organizations that are not officially 501(c)3 but still qualify—but only if they provide certain types of qualifying public services. Working as an AmeriCorps or Peace Corps volunteer also counts as a qualifying job.

Employers that don’t qualify—even though working for them can include meaningful and important jobs: Labor unions, partisan political organizations, non profit organizations that are not official 501(c)3 tax-exempt organizations, and any for-profit companies.

You also must be working full-time in the qualifying job, which generally means at least 30 hours per week or whatever your employer’s definition of full-time is.

Other Requirements for the Public Service Loan Forgiveness Program

There are a number of other requirements and specifications necessary to qualify for public student loan forgiveness. For example, only Direct Loans are eligible for PSLF.

If you have other kinds of federal student loans, particularly if you borrowed before July 1, 2010, then you may be able to consolidate your federal student loans into one qualifying federal Direct Consolidation Loan.

However, none of the payments you might have made on your Direct Loan before consolidation will count toward your 120 monthly qualifying payments.

The slightly more confusing part of the requirements are the 120 monthly qualifying payments. These do not necessarily need to be consecutive—if you leave a qualifying employer, you do not lose credit for previous payments you may have made under the employer.

The payments do have to be on qualifying repayment plan, however. Generally, to qualify for federal loan forgiveness programs, you need to be on an income-driven repayment plan. There are four different kinds offered, with the most desirable being the Pay As You Earn Repayment Plan (PAYE) and the Income-Based Repayment Plan (IBR). These typically set a cap on how much your monthly student loan payment will be based on how much you’re currently earning.

For example, if you’re on the Income-Based Repayment Plan, then your monthly payments will be either 10% or 15% of your discretionary income (depending on when your loan was disbursed), but never more than your payment would have been under the standard federal 10-year repayment plan. Your discretionary income is calculated each year based on your family size, location, and salary.

If you’re making income-based payments each month, then it might take longer to pay off your loan because your repayment term will be longer (20-25 years for IBR and 20 years for PAYE), and you’ll be paying interest during that whole time—which adds to the total amount you’ll end up paying.

However, if you meet all the requirements and make the payments, then you could ultimately have your loan forgiven. But even after you’ve made all the 120 qualifying monthly payments, you do not automatically get loan forgiveness or have the rest of your loan cancelled. You still need to apply.

Is Loan Forgiveness Right for You?

While loan forgiveness seems like the ultimate dream, there are downsides, too. Income-driven repayment plans are, obviously, tied to your income.

That means if you have a large loan but a small income and are making very small payments on your student loan, then you could end up paying more over the life of the loan as the interest compounds and gets added to the remaining balance.

If for some reason you make the 120 qualifying monthly payments but then aren’t able to get the remainder of your loan forgiven, all that extra interest could end up costing you. And, unfortunately, many students find it challenging to get their loan forgiveness application officially approved.

Another downside is that your loans have to remain as federal direct loans in order to qualify for potential forgiveness. That means you cannot consolidate or refinance them as private loans, even if the lower interest rates might save you money.

For example, the federal interest rate for undergrad Direct Loans is set at 5.05% through June 30, 2019. A $37,000 federal loan, paid back over 10 years, with a monthly payment of $393, would end up costing you about $10,202 in interest payments on top of the principal. That’s a lot of money.

Student Loan Refinancing with SoFi

And, of course, there’s the fact that if you want to pursue a career that doesn’t fall under the public service definition, then you might want to consider other student loan repayment options, like refinancing. When you refinance your student loans, you take out a new loan—potentially with a new interest rate or loan term.

Depending on your earning potential and credit score, you could qualify for a lower interest rate, which might reduce the amount you pay in interest over the life of the loan.

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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Sallie Mae, the private student loan company, used to offer loan consolidation for the loans they issued. But here’s the thing: that’s not happening anymore. Student loan consolidation refers to the process of combining multiple loans into one, in order to have just one monthly payment.

When you consolidate federal loans, through a Direct Consolidation Loan, the interest rate becomes the weighted average of all your interest rates combined, rounded up to the nearest eighth of a percent.

But even without Sallie Mae offering direct student loan consolidation, there are still options available to those with private Sallie Mae loans looking to consolidate or refinance their student loans.

Sallie Mae Ends Loan Consolidation

Sallie Mae began as a government-sponsored entity, but went private in 2004. Then in 2014, the company split into two separate organizations; Sallie Mae is a private student loan lender, and now Navient Corporation helps to service government loans.

If you previously had multiple Sallie Mae student loans, you were able to consolidate them into one Sallie Mae loan. But the company no longer offers loan consolidation—and loan refinancing through Sallie Mae isn’t an option either.

Recommended: Can You Get Your Sallie Mae Loans Forgiven?

Student Loan Consolidation vs. Refinancing

These terms are sometimes used interchangeably, but they do have some important distinctions. Sallie Mae consolidation is no longer offered for their private loans. However, students can refinance their Sallie Mae and other private student loans through another private lender or bank, which would then switch over the management of the new refinanced loan to that lender.

For federal loans, a Direct Consolidation Loan allows you to combine multiple federal student loans into one loan with a fixed interest rate. You might not receive a lower interest rate by choosing to consolidate your loans (because of the weighted interest rate rounded up), but you will only have to make one monthly payment. Private student loans cannot be consolidated via a Direct Consolidation Loan.

Refinancing your student loans is another repayment option to consider. While Sallie Mae does not offer refinancing, other private lenders do, including SoFi. These companies essentially purchase your existing student loans and offer you a new loan to pay them off, with a new interest rate and new terms. Private and federal loans are both able to be refinanced into a private loan.

You can refinance just a single loan, possibly lowering the interest rate, or combine multiple loans to refinance your overall student loan debt. If you refinance federal loans, they become private loans in the sense that you will no longer be eligible for federal repayment plan benefits such as Income-Driven Repayment or Public Service Loan Forgiveness.

Student loan consolidation and refinancing with a private lender can offer the chance to restructure your loans. While consolidation can simplify debt and possibly lower monthly payments, refinancing can help you pay less over the life of a loan with a lower interest rate or different repayment terms. You can calculate what you might save if you consolidate or refinance your Sallie Mae or federal student loans.

Consolidating Student Loans

You may be able to consolidate your federal student loans with a Direct Consolidation Loan. While private Sallie Mae loans will not be eligible, federal student loans serviced by their new company, Navient, may qualify for consolidation. Stafford Loans, Direct Loans, and Direct PLUS Loans are all federal student loans eligible for Direct Loan Consolidation, too.

Consolidation may help make repayment easier to manage, since there will only be one monthly payment to make, rather than multiple payments. You can also choose new loan terms, with the possibility of extending out the repayment term to 20 or even 25 years.

While this can help you manage your monthly bill and possibly lower your payments, you must also remember you may be in debt longer and pay more interest over the life of your new consolidated loan.

Direct Consolidation Loans from the government also take the weighted average of your previous interest rates, rounded up to the nearest eighth of a percent so it’s possible that you will end up with a higher overall interest rate than you had before.

Before you make a decision on what to do with your Sallie Mae loans, could be a good idea to check that your loans are private loans from Sallie Mae, and not federal loans managed by their sister company, Navient, to avoid any confusion.

Considerations Before Consolidating or Refinancing Student Loans

Whether or not you have Sallie Mae or other private loans, or are just considering applying for a Direct Consolidation Loan for your federal loans, it’s important to review your current payment plan and rates before consolidating loans. Ask yourself this: Will you save money overall, or will you wind up paying more over the life of the loan?

Refinancing Your Private or Federal Loans

For those with private student loans, federal student loans, or a combination of the two, refinancing is another option to consider. Unlike consolidation, refinancing with a private lender such as SoFi allows you to combine private and federal loans into one, and it may lower the amount of interest you’re currently paying or lower your monthly payment.

Refinancing may be better for people whose financial situation, including employment, cash flow, or credit, has improved since graduating. And just like with consolidation, refinancing gets you one loan, and one monthly payment, so you no longer have to juggle multiple loan servicers and payments.

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.
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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
The 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.
$500 Student Loan Refinancing Bonus Offer: Terms and conditions apply. Offer is subject to lender approval, and not available to residents of Ohio. The offer is only open to new Student Loan Refinance borrowers. To receive the offer you must: (1) register and apply through the unique link provided by 11:59pm ET 11/30/2021; (2) complete and fund a student loan refinance application with SoFi before 11/14/2021; (3) have or apply for a SoFi Money account within 60 days of starting your Student Loan Refinance application to receive the bonus; and (4) meet SoFi’s underwriting criteria. Once conditions are met and the loan has been disbursed, your welcome bonus will be deposited into your SoFi Money account within 30 calendar days. If you do not qualify for the SoFi Money account, SoFi will offer other payment options. Bonuses that are not redeemed within 180 calendar days of the date they were made available to the recipient may be subject to forfeit. Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received as required by applicable law. Recipient is responsible for any applicable federal, state, or local taxes associated with receiving the bonus offer; consult your tax advisor to determine applicable tax consequences. SoFi reserves the right to change or terminate the offer at any time with or without notice.

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Before you even think about a lender to refinance your student loan with, you need to think about why you’re refinancing in the first place.

Everyone’s reasons for refinancing are different—maybe you want to refinance for a lower monthly payment, or perhaps you’re looking for a lower interest rate. Maybe it’s to pay off your loans sooner. Your motivations may mean you choose one lender over another, which is why it’s so crucial to have a debt payoff plan in place before applying for refinancing.

Before you begin scouting out refinancing options you might be eligible for, make sure you have a solid idea of what you’re looking to get out of a lender.

Option 1: Student Loan Consolidation

If you have federal student loans, you might think about a Direct Consolidation Loan with the Department of Education. This might be a good option if you only have federal loans and don’t want to deal with managing multiple loan payments. It can be easy to lose track of monthly loan payments, and missing a payment might be a hindrance to your finances.

Missing a loan payment could cause your credit score to plummet, which hurts your chances of borrowing money in the future, whether it’s opening a credit card or buying a car. Payment history makes up 35% of your FICOⓇ score , so missing a payment can be bad news t when it comes to your credit.

Consolidation combines multiple federal loans into one loan—and one monthly payment. Your interest rate becomes the weighted average of all your old interest rates, rounded up to the nearest one-eighth of a percent.

This might not lower your payment, or your interest rate, but it can potentially help make your federal student loan payments more manageable.

If you have private student loans, you can’t apply for a Direct Consolidation Loan. If you have federal and private student loans and still want to have one streamlined payment, you may want to look into refinancing with a private lender—both federal and private student loans may qualify for refinancing.

Refinancing is a lot like consolidation, but instead of combining your loans with a weighted interest rate, you get a new loan with new loan terms and a new interest rate. And depending on your financial standing, that might even mean you get a better interest rate when you refinance.

If you’re having trouble qualifying for refinancing, you can consider finding a cosigner. A friend or relative with great credit can be your cosigner to help you qualify for a loan or get a better interest rate.

But having a cosigner means that if you don’t make the minimum monthly payments, your cosigner may be on the hook for them. And if you default on your loan, both your credit and your cosigner’s credit may take a hit.

Option 2: Refinancing for a Lower Monthly Payment

Whether you’ve already consolidated your loans or you’re struggling to pay several little loans every month, missing payments can be detrimental to your credit report.

Payment history makes up 35% of your FICOⓇ score—which means on-time payments have a substantial impact. Sometimes, other bills like rent and utilities are your main financial priorities and you don’t have much left for other things—even other bills.

If you’re struggling to make student loan payments and are worried about missing payments, refinancing for lower payments might be worth looking into. And it’s especially important to think about refinancing before you miss a payment, because your financial credibility could go down once you’ve missed a student loan payment.

Refinancing your student loans can help you lower your monthly payments when you’re having trouble making them, typically by opting to extend your loan term. Even if your interest rate isn’t the lowest, you can concentrate on making on-time payments to help reestablish a good track record.

Keep in mind that a lower monthly payment doesn’t necessarily mean you’ll pay off your loan faster. The goal here is to make your monthly payments more workable for your budget.

But it might extend the life of your loan and in turn, you could end up paying more in interest over the course of the loan.

If your monthly payments start to become manageable and you can pay more into them every month, you may want to consider doing so. But check with your lender first. Some charge fees for paying off your loans early.

Option 3: Refinancing for a Lower Interest Rate

Generally, a lower interest rate might reduce the cost of your debt overall—depending on your loan term. Review all your lender options to find one that offers you the lowest possible rate. If that rate still isn’t lower than what you’re currently paying, it might not be worth it.

The lowest interest rates are typically offered to those with excellent credit (among other positive financial factors). You might want to build up your credit score if you want to eventually refinance your student loans for a lower interest rate.

Option 4: Refinancing to Pay Off Your Loans Sooner

Refinancing to pay off your student loans sooner means you might have to make larger monthly payments—that’s because a shorter loan term would increase your minimum payments. Chunking away at your loan principal means at the end of your loan’s life, you will have paid less interest overall. Shortening your loan term so you get out of debt faster might be a good reason to refinance.

If you have a solid job with steady income, you may be able to structure your budget to pay off more of your loan every month, resulting in paying it off sooner. But if you don’t have reliable income, this may not be the best option for you.

Are You Ready to Refinance Your Student Loans?

Regardless of your reason, you have plenty of options when it comes to refinancing your student loans. Get quotes from multiple lenders so you can find the refinancing offer that best suits your needs.

Don’t settle for options that don’t help you. If you aren’t getting a good deal on any of your refinancing options, it’s okay to walk away.

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.
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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or 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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