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How to Start Paying off Your Loans on an Entry-Level Salary

Congratulations! Not only have you graduated college, but you’re also starting your first job. It’s an exciting time, and a great opportunity to use what you learned in college and apply it to life on your own: how to manage your time, how to meet and engage with different types of people, and, of course, all the knowledge you picked up in class. However, something else many students pick up in college is student loan debt.

According to Forbes , student loan debt is quickly catching up with mortgage debt.

In fact, student debt now ranks as the second-highest consumer debt category in the United States. CNBC reported that in 2018, the average student loan debt upon graduation was $37,172, which marks a $20,000 increase from 2005.

And it’s not just a few people graduating with debt—an estimated 70% of all college students will graduate owing money to somebody else.

In fact, Americans collectively hold $1.5 trillion in student debt. That’s a lot of money, especially when you take into account how little entry-level salaries can pay these days, even for college graduates.

According to the National Center for Education Statistics , the most popular undergraduate degree in America is a business-related degree. It’s undoubtedly a versatile academic path and business majors have the ability to work in a number of fields, but it’s a degree that comes with an average entry-level job salary of just $62,000 a year, according to PayScale .

Trying to balance an entry-level paycheck with rent, food, bills, and massive student loans can be overwhelming, but it’s not impossible. Delaying loan payments isn’t necessary; here’s how you can start paying off your student loans on just an entry-level salary.

Creating a Budget That Includes Paying off Debt

Upon graduation and starting your new job, it’s key to create a budget that’s comfortable for you. This can include setting aside money to grow both an emergency fund and a retirement fund.

To create a budget, gather all of your financial documents, including your post-tax income statements. You’ll also need to compile all your monthly bills, such as rent, utilities, food, entertainment expenses, insurance, the minimum requirement on your student loan repayments, and anything else you spend money on each month.

Tally up your expenses, and see how much you have left over after putting your after-tax income toward your bills. If you have money left over, consider stashing some away in an emergency fund and some in a retirement account—any amount can help. (Note: Retirement may seem far away, but if you start early you could see serious returns in your golden years.

As NerdWallet calculated, assuming a 7% interest rate, if you start saving $200 a month when you turn 25, you could have about $528,000 by the time you turn 65.)

Consider a Job Eligible for Public Service Loan Forgiveness

If you’re willing to work in the public sector and are open to relocating, several states have programs that may forgive part or all of your student loans. These programs are often geared toward students who recently completed grad school.

So a forgiveness program like this might be a fit for post-grads earning an entry-level salary. For example, if qualified health care professionals agree to work in areas of Alaska experiencing a provider shortage, the state may pay off up to $35,000 of those graduates’ loans.

California offers a similar deal for health care workers, offering repayment assistance up to $50,000 for a two-year commitment to working full time in high-need areas.

In North Dakota , qualified veterinarians can see up to $80,000 of their student loans repaid by the state if they are willing to live and work there for four years.

On the federal level, teachers may be able to take advantage of the Teacher Loan Forgiveness Program in all states. To qualify, the teacher must teach full time for five consecutive academic years in a low-income school or educational service agency.

Consider an Income-Based Repayment (IBR) Plan

The government is willing to help those who cannot afford their current federal student loan payments with programs including IBR, Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).

What all of these essentially do is rejigger your repayments to an amount you can afford each and every month. NerdWallet explains that the right IBR plan could reduce your payments to as little as 10% of your discretionary income each month. So, if you took out a loan after 2014 and are currently paying more than 10% of your discretionary income on a student loan, the IBR plan may be an excellent option for you.

Think about a Side Hustle

Sometimes, an entry-level salary isn’t enough to make a dent on your student loan balance. For those feeling particularly underwater with student loan repayments, getting a side hustle may be the answer, but not all side gigs are created equal. To help subsidize your entry-level job salary, look for a gig you’ll actually find fulfilling. This could involve using pre-existing skills, such as freelance photography, copy editing, or consulting.

It could also just be something you enjoy doing and is easy to get involved in, such as driving for a ride-sharing company or completing tasks for people via a site like TaskRabbit. Whatever it is, try to make it fun or useful for your future career goals so it feels less like work.

Look into Refinancing Your Student Loans

If you’re unhappy with your current student loan rates, you may find relief through student loan refinancing.

By refinancing, you could make your student loan debt more manageable and potentially become debt-free sooner. (Don’t forget that refinancing with a private lender means you’re no longer eligible for the federal programs we mentioned above—like PAYE, REPAYE, loan forgiveness, and income-based repayment plans.)

You can start by checking out SoFi’s student loan refinancing options and see if there’s a better interest rate out there for you. You might be able to lower your payments or shorten your term.

Ready to take control of your student loan debt? It only takes two minutes to find out what your new interest rate would be if you refinanced your student loans with SoFi.


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.
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 savings and experiences mentioned herein may not be representative of the experiences of all members. Savings are not guaranteed and will vary based on your unique situation and other factors.
SoFi does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.
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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4 Top Student Loan Repayment Options for Medical Residents

As a medical resident, your schedule is incredibly busy. (And even that’s an understatement.) On top of that, you’re saddled with student loan debt—and your residency salary isn’t exactly going to make a huge dent in it just yet. So what should you do about it?

There are options that can help reduce the stress of student loans—and even save you money in the long run. Here’s a quick guide to the four top student loan repayment options, so you can choose the best one for you:

1. Deferment

What it is: A temporary suspension of federal loan payments, where interest DOES NOT accrue on certain types of loans.

Pros: If you’re struggling to repay loans due to challenging short-term circumstances, it can be beneficial. Big caveat, though—residents tend not to qualify for deferment.

Cons: Not all loans are eligible for deferment, and only subsidized federal loans do not accrue interest. So if you have unsubsidized loans (typically used for medical school), your balance will still increase during deferment.

Best for: Residents who qualify. Those who have other debts to pay off first that make it a challenge to pay back loans, such as higher interest credit card debt, could be in this category.

Not great for: Residents who need a more long-term or permanent option, as interest will still accrue on unsubsidized loans, growing your balance.

2. Forbearance

What it is: A temporary suspension of loan payments, where interest DOES accrue on all loan types.

Pros: Medical residency and internship programs are usually qualifying circumstances for forbearance. As long as you meet basic requirements1, mandatory forbearance is an option that can be granted for residents up to 12 months, and be extended for up to three years, upon request.

Cons: As mentioned, interest will continue to accrue on all loans in forbearance. That means your balance will grow.

Best for: Residents with lower loan balances, or who are experiencing financial hardship where the burden of student loan payments would be significantly challenging.

Not great for: Residents with normal to high balances who have the ability to make payments and start making progress on their debt.

3. Income-Driven Repayment (IDR)

What it is: A repayment program where your monthly loan payment is a percentage of your discretionary income, typically between 10-20%. Options include PAYE, REPAYE, IBR and ICR, which vary by the percentage of income you owe and the amount of time they add to your loans.

Pros: IDR allows borrowers to keep monthly payments low without defaulting on their loans. For residents who eventually pursue Public Service Loan Forgiveness (PSLF)2, this option can lead to the greatest amount forgiven.

Cons: IDR will often extend the term of your loan to 20-25 years. Plus, your payments may not cover the full interest owed. If that is the case, interest will compound monthly, and you will be paying interest on interest.

Best for: Residents who plan to pursue federal student loan forgiveness.

Not great for: Residents who don’t plan to pursue loan forgiveness and would like the avoid compounding interest that creates a higher loan balance.

4. Medical Resident Refinancing

What it is: Refinancing is consolidating your student loans (federal and/or private) with one private lender, usually for a lower interest rate. During residency, refinancing reduces student loan payments to just $100/month. Check out SoFi’s medical resident loan refinancing rates & terms.

Pros: Refinancing simplifies your student debt by reducing your student loan payments to one low monthly payment. This option also makes it possible to avoid compounding interest during residency.

Cons: Refinancing makes you ineligible for PSLF or other federal repayment benefits. Interest will still accrue during residency, but it will not compound during that time, so you won’t pay interest on interest.

Best for: Residents who plan to work in the private sector (like a private hospital or for a private practice), and would like to reduce their interest rate on their student loans, keep payments low during residency, and save money on compounding interest.

Not great for: Residents who plan to pursue loan forgiveness or other federal repayment options by working in a public sector hospital.

It’s worth considering all your medical school loan repayment options before you dive back into the throes of residency—after all, you have patients to see and work/life balance to manage and lives to save.

Interested in seeing how much you could save by refinancing your student loans? Check your rate in just two minutes.


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.
1 https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance
2 https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

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Grace Period Ending? Create a Student Loan Repayment Strategy to Be Thankful For

During this time, many Americans are taking time to reflect on the things they’re grateful for. But for some people, the season of giving thanks actually represents something that they aren’t all that thankful for—student debt. November and December mark the end of many student loan grace periods, which means this is the time of year when recent grads have to start paying back student loans.

If you fall into this category, here’s something you can be thankful for: a smart student loan repayment strategy.

Because make no mistake—paying back student loans does require a strategy, particularly for the average graduate, law or medical school grad shouldering six figures of student loan debt .

You might think it’s as simple as choosing a student loan repayment plan and writing that first check. But variables like your monthly payment amount, the interest rates on your loans, and how long you take to pay everything off can all have a big impact on your bottom line. A smart strategy optimizes these factors for your specific situation, so that you don’t spend a penny more than you have to when paying back student loans.

You can’t do anything about your grace period ending, but you can take steps to help put your repayment strategy on the right track. Here are a few tips on how you might do just that:

Know What you Owe

Chances are you haven’t looked at your loans since you signed on the dotted line, so the first thing you’ll want to do is survey the damage. You can find your federal loans on the National Student Loan Data System (NSLDS). For private loans, try gathering up your statements or checking in with your school’s financial aid administrator. If you’re really at a loss, you can pull your credit report and all of your loans should be listed there.

Once you’ve tracked everything down, make a list of your loans and their important details: the type (e.g., subsidized, unsubsidized, Grad PLUS, private), the amount and the interest rate on each one. This information will be key to determining your strategy.

Read the Fine Print

Now it’s time to familiarize yourself with the features of each loan type. A general rule of thumb is that federal loans tend to offer more hardship-based benefits than private loans—things like forbearance, potential student loan forgiveness, and income-based repayment plans. It’s important to understand whether any of these benefits apply to you before determining your repayment strategy—you’ll learn why in a moment.

Private loans don’t typically offer these same types of programs, but some of them do provide forbearance and other valuable benefits—you’ll simply have to call your lender to find out.

Do the Math

Remember when we said that various factors (such as interest rate, monthly payment amount and loan term) make a difference in your loan’s bottom line? This is the part where you discover just how much. Federal loans offer different student loan repayment options, potentially allowing some flexibility around monthly payment amount and length of repayment term (e.g., 10 years vs. 20 years).

While it may be tempting to just choose the option with the lowest monthly payments, the long-term repercussions can potentially be costly. (Meaning, lower payments typically mean longer terms, which can increase the total amount you pay overall.) You can use tools like our student loan payoff calculator to discover how long it can take to pay off your loans using different interest rates and monthly payment combinations.

Consider your Options

You may also be wondering whether to consolidate or refinance student loans. Broadly, consolidating means combining two or more loans into one loan, while refinancing student loans entails applying for a new loan at a (hopefully) lower interest rate and a new term, then using that new loan to pay off your old loans.

If you consolidate student loans through the Direct Loan Consolidation program, only federal loans are
eligible, and a primary benefit is that you can reduce the number of different loans you have to pay each month and you may get a lower monthly payment.

Direct Loan Consolidation typically won’t save you money, since the resulting interest rate is a weighted average of the original loans’ rates, rounded up to the nearest one-eighth of one percent.

So you can lower monthly payments by extending the payment term at this new fixed interest rate, but be aware that this usually means you’ll spend more on total interest over time.

You may also be able to consolidate student loans through the refinance process, and some lenders will refinance both private and federal student loans. More importantly, refinancing may potentially save you money.

In order to qualify for a lower rate, you typically need a solid income and positive history of dealing with debt. Before refinancing federal loans, you’ll probably want to determine whether any of the federal benefits mentioned above apply to you—they won’t transfer to a private lender through the refinance process. But if saving money is your top priority, refinancing may be a great option for you.

Clearly, there’s no “one-size-fits-all” approach to determining a student loan repayment strategy. But if you take the time to understand all of your repayment options, you can create a strategy that works best for your situation and potentially saves you money over the long term. And that allows you to focus on being thankful for your education rather than resenting your debt.

If your grace period is ending, consider refinancing your student loans with SoFi. Check your rate in two minutes!


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.

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How to Help Pay Off Student Loans Faster Using Momentum

Paying off student loans fast is all about momentum and resourcefulness. Staying up-to-date on your payments—or ideally getting ahead of them a bit—can give you the motivation you need to tackle and clear your student loan debt as quickly as possible.
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When it comes to student loan repayment, there are two great ways to build momentum: prepaying (or paying more than the monthly minimum) and reducing interest rates (through student loan refinancing).

Here are five tips to help you build momentum, so you can pay back student loans faster and make your debt a distant memory.

#1 Learning the Benefits of Prepaying

When considering how to pay off loans fast, you may want to think about saving money on student loan interest by prepaying. That means to make payments in addition to your regular monthly payment.

Generally, there is no penalty for making extra student loan payments (check with your lender or loan servicer to verify this), and it can help you spend less on interest over the life of the loan.

If you haven’t started paying off your loans yet, you can use our student loan calculator to estimate your monthly payments. Then, you can determine how much you want to pay on top of that each month, to help pay off your student loans faster.

As a bonus, it’s amazing how motivating it can be to see your outstanding balance shrink more quickly than you planned by making more than your minimum payment each month.

An important note: Some lenders may apply the additional money to next month’s payment instead of deducting it from your student loan balance if you don’t specify where you want to apply your prepayments. If your goal is to save money on interest and be done with your loans sooner, ask your loan servicer if they can apply any extra payments to your loan’s principal instead.

#2 Taking Control of Your Spending

Prepaying sounds great, but where are you going to come up with that extra cash? You can start by taking stock of where your money currently goes.

Many of us have “leaks” in our spending that we barely notice—whether we’re springing for frequent takeout dinners or have auto-payments on magazine subscriptions that we keep meaning to cancel.

Try recording your daily spending in the notes app on your smartphone or using an app like Toshl , which can help give you better insights into where your money is going. Sites like Mint offer tools that can help you create a livable budget with room for the occasional splurge.

#3 Using Unexpected Windfalls to Grow your Proverbial Garden

Instead of treating a windfall like “fun money,” use it to get ahead on your debt. Whether you come into money through inheritance, you get a pay out from a stock you’d forgotten you owned, or your boss hands out a surprise bonus, try to put a portion of your surprise cash straight toward your debt.

And don’t just think small—see if you can apply at least 50% of any financial gifts, dividends, bonuses, and raises toward paying down your loans.

#4 Creating Another Income Stream

If your main job isn’t extremely demanding, you might consider adding a side hustle to help pad your debt payments. Sites such as Upwork can connect you with freelance work. If you don’t have the time or inclination to take on another job, you can consider becoming an Airbnb host .

According to recent analysis from SmartAsset , the average host can expect to cover 81% of their rent by listing one room in a two-bedroom apartment on Airbnb.

They also found that, in many cities, it may be possible to pay the entire rent on a two-bedroom apartment with around 20 days of bookings per month. That translates to sizable savings you can put toward your student loans.

#5 Lowering your Interest Rate

If you are a working graduate paying down high-interest student loans, student loan refinancing could be a powerful way to make a dent, if you qualify. For example, securing a lower interest rate can make a big difference in what you have to pay over time.

Bear in mind that if you have federal student loans such as Direct Loans and Graduate PLUS loans, refinancing them with a private lender like SoFi means you will lose certain benefits that come with them, such as access to the Public Service Loan Forgiveness program and income-based repayment plans.

However, some graduates may find they don’t need these benefits and that the cost-saving benefits—and faster payoffs—that can come with refinancing provide more value.

If you’re ready to make a bigger dent in your student loans, and potentially qualify for a lower interest rate, look into refinancing your loans with SoFi.


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.
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.
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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How Student Loans Work: The ABCs Of Student Loan Options & Terms

There are so many upsides to investing in your education—the personal enrichment and possibility of a bright and fruitful future being the most obvious. But, there are also some potential downsides that are hard to ignore, one of the main ones—if you’re like so many others—being the debt you may accrue.

Before you start losing sleep over your looming financial obligations, read on to gain a better understanding of how student loans work, starting with “the language of loans.”

Getting a grasp on certain student loan terms and concepts can benefit you in a few ways. For one thing, you’ll be able to better understand your student loan options, which means you can more easily compare features and fine print. That allows you to make confident decisions about your loans and, perhaps most importantly, save some money along the way.

So, what are the student loan terms every borrower should know? Here are a few of the big ones:

The Basics of Student Loans

Borrowing a loan can have long-term financial consequences so it’s important to fully understand the fees and interest rates that will affect the amount of money you owe. Here are a few of the most important terms to understand before you take out a student loan:

Principal

This is the original amount of money borrowed, plus any capitalized interest and fees. Capitalized interest is accrued interest that is added to the principal balance.

Term

The loan term is the amount of time the student loan will be in repayment. Loan terms vary by lender, and if you have a federal loan, you are usually able to select your repayment plan.

Annual Percentage Rate

Commonly referred to as APR—this is the cost of borrowing, expressed as an annual percentage. APR includes any fees associated with the loan, providing a more comprehensive view of what you are being charged. Depending on the fees associated with your loan, the APR could be a bit higher than the interest rate.

Accrued Interest

The amount of interest that has accumulated on a loan since your last payment.

The Potential Student Loan Pitfalls

Once you understand loan basics and have secured your student loans, there are a few more terms to know. Making sure you understand your repayment terms and options like deferment or forbearance will allow you to find the best strategy to pay off your student loans quickly.

Forbearance

The temporary postponement of student loan repayment during which time interest typically continues to accrue. If your student loan is in forbearance you can either pay off the interest as it accrues, or you can allow the interest to accrue and it will be capitalized at the end of your forbearance.

You will usually have to apply for forbearance with your loan holder and will sometimes be required to provide documentation proving you meet the criteria for forbearance. For a loan to be eligible for forbearance, there must be some unexpected temporary financial difficulty.

Deferment

Similar to forbearance, deferment is the temporary postponement of student loan repayment. During deferment, interest may or may not continue to accrue, depending on the type of student loan you have. In
the case of federal loans , the government may pay the interest on your Perkins, Direct Subsidized and/or Subsidized Stafford loans.

Capitalized Interest

This is when accrued interest is added to your loan’s principal balance. Most student loans begin accruing interest as soon as you borrow them. While you are often not responsible for repaying your student loans while you are in school or during a grace period or forbearance, interest will still accrue during these periods. At the end of said period, the interest is then capitalized, or added to the principal of the loan.

If you make your payments on time each month, you’ll keep accrued interest in check. However, after a period of missed or reduced payments (such as forbearance), accrued interest may be capitalized, which can cost you more money in the long run.

When interest is capitalized, it increases your loan’s principal. Since interest is charged as a percent of principal, the more often interest is capitalized, the more total interest you’ll pay. This is a good reason to use forbearance only in emergency situations, and end the forbearance period as quickly as possible.

Consolidation

The act of combining two or more loans into one single loan with a single interest rate and term. The resulting interest rate is a weighted average of the original loan rates.

Consolidating can make your life simpler with one monthly bill and payment, but it’s important to understand that it doesn’t actually save you any money. In fact, if you opt for lower payments when consolidating, this is typically accomplished by lengthening your loan term, which means you’ll pay more interest over the life of the loan.

The Potential Money-Savers

Building a repayment plan and sticking to it is one of the best ways to repay your student loans quickly, while spending the least amount of money on interest. Now that you understand what could cause your interest to skyrocket, here are a few terms that could help you reduce the money you spend over the life of your loans.

Automated Clearing House (ACH)

This is an automatic loan payment that transfers directly out of your bank account to your lender or loan servicer each month. The benefits of ACH are two-fold—not only can automatic payments keep you from forgetting to pay your bill, but many lenders also offer interest rate discounts for enrolling in an ACH program.

Refinancing Your Student Loans

Refinancing is the act of taking out a new loan at a lower interest rate and using it to pay off your original loan(s). Often times, refinancing your student loans allows you to lower your interest rate on your loans.

This is one of the fastest ways to slash your student loan burden. Not only does refinancing reduce the total amount of interest you’ll spend over time, but it can also decrease your monthly payments or allow you to pay off your loan sooner.

To see how refinancing your student loans could help alleviate some financial burden, take a look at SoFi’s student loan calculator. When you refinance with SoFi, there are no origination fees, application fees or prepayment penalties.

With good earning potential and credit history, you could qualify for a lower interest rate than the one you currently have. Refinancing your loans could help you manage your student loan payments.

Prepayment

Paying off a loan early or making more than the minimum payment. Both federal and private loans allow for penalty-free prepayment, which means you can pay more than the monthly minimum or make extra payments without incurring a fee.

The more you do it, the sooner you’re done with your loans—and the less interest you’ll spend over the life of your loan.

Whether you need help paying for school or help paying off the loans you already have, SoFi offers competitive interest rates and great member benefits as well.

See what you’re pre-qualified for in just a few minutes.


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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.

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