top down hands on laptop

Finding Grants to Help Pay Off Student Loans

College students are graduating with tens of thousands of dollars in student loan debt, which can make it difficult to make monthly student loan payments, let alone get by financially each month.

For those looking to get some help, the federal government offers some potential options, including income-driven repayment plans and the Public Service Loan Forgiveness program. Or refinancing your student loans can also help you potentially lower your interest rate or your monthly payment.

One option you may not be aware of is to apply for repayment program “grants.” These grants function similarly to scholarships in that you don’t have to pay them back, at least not monetarily. Instead, post-graduation, you’ll typically agree to work in a certain field for a set period in exchange for the help.

There are several student loan repayment programs that act like grants but don’t technically refer to themselves as such. You might consider them grants to pay off student loans, however, because they don’t require you to pay back the money plus interest.

Here are a few repayment programs to look into:

National Health Service Corps Loan Repayment Program

Qualifying health care providers can receive up to $50,000 if they agree to a two-year commitment to work in a Health Professional Shortage Area (HPSA).

You can apply if you’re a licensed primary care physician, nurse practitioner, certified nurse-midwife, physician assistant, dentist, dental hygienist, or a qualifying behavioral and mental health provider.

In addition, to be eligible for this grant you must have qualifying student loan debt and also be:

•  A U.S. citizen or national

•  As applicable, a provider or be eligible to be a provider in Medicare, Medicaid, or the State Children’s Health Insurance Program

•  Fully trained and licensed to practice

National Institute of Mental Health Loan Repayment Program

If you work or plan to work in biomedical, behavior, social, or clinical research, you may qualify for a grant to pay off student loans up to $35,000. You can apply the award to qualifying undergraduate, graduate, or medical school loans.

In return, you’d “agree to engage in at least two years of qualified research funded by a domestic nonprofit organization,” according to the National Institute of Mental Health .

NURSE Corps Loan Repayment Program

The Health Resources and Services Administration provides this program to registered nurses (RN), advanced practice registered nurses (APRN), and nurse faculty with nursing debt that meets the program’s qualifications. To qualify, you must also:

•  Commit to working at least two years in an eligible Critical Shortage Facility (CSF) in a high-need area or an accredited school for nursing

•  Have received your nursing education in an accredited school of nursing in the U.S.

If you qualify, you may receive up to 85% of unpaid nursing debt over three years—that’s 60% over the first two years with an option to extend to a third year for an additional 25%.

Indian Health Service Loan Repayment Program

This grant is for health professionals who agree to work in an American Indian or Alaska Native community for at least two years. In exchange, you can receive up to $40,000 in grants to help pay off student loans.

Recipients also have the option to extend their contract each year until their debt is completely paid.

Veterinary Medicine Loan Repayment Program

If you’re a veterinarian working in an area designated by the National Institute of Food and Agriculture as a “shortage area,” you may be eligible to receive up to $25,000 each year for a (minimum) three-year service commitment. The grant is reserved only for veterinary school student loan debt, however.

John R. Justice Student Loan Repayment Program

This program provides assistance to local, state and federal public defenders, and state prosecutors. To qualify, you would agree to work as a prosecutor or public defender for at least three years.

In return, you may be eligible to receive up to $10,000 in assistance per year up to a total of $60,000.

Department of Justice Attorney Student Loan Repayment Program

If you agree to a three-year service obligation with the Department of Justice as an attorney, you may be able to qualify for loan repayment assistance of up to $6,000 per year in matches based on your payments.

To be eligible, you must have at least $10,000 in qualifying federal student loan debt. The maximum amount you can possibly qualify for is $60,000 in total.

Armed Forces Repayment Programs

Each major branch of the military offers free grants to help enlisted service members pay off student loans. Here’s a high-level overview of some of the notable programs:

•  Army Student Loan Repayment Program (College Loan Repayment Program): If you meet specific qualifications and are active duty, Army Reserve, or Army National Guard Soldiers, you can get up to $65,000 of your student loans repaid by the Army.

•  National Guard Student Loan Repayment Program: If you enlist for a minimum of six years and satisfy other requirements , you can receive up to $50,000 in assistance.

•  Navy Student Loan Repayment Program: With a three-year commitment, you may be eligible to receive up to $65,000 in repayment assistance over that time.

•  Air Force JAG Student Loan Repayment Program: Once you’ve completed one year of service as a JAG officer , you may be eligible to receive up to $65,000 in grants to pay student loans over a three-year period.

State-Based Grants

Several states offer free grants to help pay student loans for borrowers who agree to live and work in the state, usually in a specific field. Here are some examples:

•  New York State Young Farmers Loan Forgiveness Incentive Program: Eligible college graduates pursuing a career in farming who agree to operate a farm in New York state for at least five years can receive up to $10,000 per year to help pay their student loans.

•  North Dakota Science, Technology, Engineering, and Mathematics (STEM) Student Loan Program: Qualifying college graduates who work in STEM-related fields in North Dakota may be eligible to receive up to $1,500 per year and up to $6,000 total student loan forgiveness.

•  Pennsylvania Primary Health Care Loan Repayment Program: If you’re a physician, dentist, or another practitioner who commits to two-years in an underserved area in Pennsylvania , you may be eligible to receive between $30,000 and $100,000 in student loan repayment assistance.

•  California Bachelor of Science in Nursing Loan Repayment Program: RNs living in California who agree to a one-year service commitment may receive up to $10,000 to help repay their student loans. They can also renew that commitment for up to two more years and receive up to $10,000 each year they qualify.

•  Maine Alfond Leaders Program: If you live in Maine and work in a STEM-designated job, you may qualify for repayment of up to half of your outstanding student loan debt, with a $60,000 maximum.

What to Do While You’re Waiting for Your Grant Money

If you qualify for a grant or student loan repayment based on your career or where you choose to work and live, the assistance can make a world of difference for your student loan repayment strategy.

But in the meantime, you’ll still have to make regular payments on your loans. One way to potentially get a lower payment or interest rate is student loan refinancing.

Depending on the terms you qualify for, you could significantly reduce the amount of money you pay in interest over the life of the loan. Or you could extend your loan term and potentially reduce your monthly payments, but that would mean you’d pay more in interest overall (longer term=more payments).

One thing to keep in mind, though: If you’re applying for grants that only apply to federal loans, you may want to hold off on refinancing, because you’ll lose your federal loan benefits when you refinance.

If you qualify to refinance with SoFi, there are no origination fees or prepayment penalties. You can even use our convenient student loan refinancing calculator to compare your current loan with a SoFi loan to get an idea of how refinancing could help you accelerate your student loan repayment.

Ready to see how refinancing your loans with SoFi could help you take control of your student loan repayment plan? You can get a quote in less than two minutes.

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
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

Read more
coin stacks on turquoise background

5 Money Rules You Don’t Have to Follow

Navigating your financial life can sometimes feel like you’re traversing rocky terrain. How much of my paycheck should I put toward my savings? What’s a 401(k) and how much should I be contributing to it?

Do I need an IRA, too? Should I save for retirement or my child’s college education? The questions are endless. But figuring out how you’re going to save for the future and still enjoy your life is important to ensure your security and happiness—both now and in the years ahead.

The internet offers a wealth of information on how to plan out your finances and deal with common money issues, but sometimes all that information can be too much. Trying to follow the rules of money and the vast amount of financial advice can be mind-boggling.

Part of what makes navigating personal finance so difficult is that it’s just that—personal. What applies to one person might not apply to you. Here we’ve compiled a list of five money rules you don’t necessarily need to follow to meet your financial goals.

1. Save Every Penny of Your Money

There’s no question—saving is an integral part of creating a successful financial plan. But setting strict or unrealistic spending limits in the hopes of saving more could potentially be a detriment to your long-term financial plan.

If you eliminate all frivolous spending you’re more likely to slip up and veer off course from your savings goals. If you set a realistic budget, including room for discretionary spending, you’re more likely to follow it.

Life, especially when it comes to your finances, can’t always be about restriction—it’s should be about moderation. So when you review your finances, set a realistic budget that you’ll be able to follow. That way you can save for retirement, pay your bills, and still live your life.

Having a place where you can save and track your spending could be the first step to getting your finances on track and saving goals in order. SoFi Money is a cash management account that let’s you save, spend, and earn all in one place.

With SoFi Money, you’ll have instant access to your funds. Plus, there are no account fees. Our goal is to eliminate as many fees as possible. That being said, our fee structure is subject to change at any time. With clear visibility, you can keep your savings on track while also indulging in life’s little pleasures.

2. Check Your Investment Accounts Every Day

Investing can be an important part of your financial goals. But, should you be checking your investments every day? Probably not! The goal of investing is to grow your money over time. And while regular rebalancing is an important part of ensuring your investing goals, there’s really no need to check in on the markets and your investments every single day.

Reviewing stock prices too often can cause an emotional response to sell or buy, instead of a more mediated approach, which can pay off in the long run. While there is some inherent risk and no guarantees when it comes to investing in the stock market, historically, it’s been proven to have some of the best returns—approximately 10% annually .

There are plenty of investment options that take the guesswork out of investing for you. Consider SoFi Invest®, which combines cutting-edge auto investing technology with advice from human financial advisors.

When you open a SoFi Invest account, we’ll work with you to determine your goals and risk tolerance. Your account will be automatically rebalanced to maintain your desired level of risk as the markets fluctuate.

3. Expensive Education Means a Better Job

Paying for an expensive private college or university doesn’t always lead to a better education. And while the prestige of attending an Ivy League school may earn you a higher salary post-graduation, that may not always be the case. So, as you or your children are picking a college consider weighing all the factors before committing to a school.

You might look to see if the schools you are interested in publish employment rates for recent graduates. If their rates are high, you can expect that you will likely be able to find a job after graduation.

Another factor to consider is the alumni networks at the school you want to attend. As you think about starting your career, having a built-in network of professionals you can tap into after graduation is a huge asset.

It can be helpful to compare and contrast the different schools you are considering. You can weigh the cost benefits of each school based on your personal finances and your educational and career goals. Certain college majors may have more lucrative income potential than others, so be sure to factor that in as you weigh the cost of the school and how much money you plan to take out in student loans.

An additional consideration—do you plan on attending grad school? If so, be sure to factor the cost of that degree into your financial plan. You may find it worthwhile to save a little money on your undergraduate education so you have more wiggle room to invest in your graduate degree.

4. Work Hard to Give Your Kids Financial Support

As a parent, you want to give your kids the world. But giving them endless financial support may not be necessary. It’s important to teach your kids how to handle money, and part of that process will require them to support themselves financially.

Today, we are surrounded by instant gratification, but it could be good to teach our children that getting what they want may require some patience, saving, and perseverance.

Explaining concepts like saving and spending to your kids at an early age will pay off in the long run. Studies suggest that most kids’ spending habits are formed by the time they turn seven.

One proven way to instill the value of a dollar is to experience scarcity. Legendary American investor Jack Bogle, who grew up during the Great Depression, attributes much of his success to having to work for what he got.

One easy way to teach your kids the value of a dollar is an allowance. While allowances are a personal choice for each family, having your children earn money for the chores they perform around the house can help them develop important money-management skills.

And don’t feel like you can’t help your kids at all—the goal is to support them while also allowing them to earn their financial independence.

5. Paying Rent Is Throwing Money Away

So many young people compare renting to just tossing money away. Well, sometimes that just isn’t the case. Renting can give you freedom and flexibility.

Buying a house is a long-term commitment, while renting offers you mobility. if you plan on living somewhere for less than five years , renting is often a good idea. Due to the large upfront costs of buying a home, it usually takes more than five years to see any return.

Plus as a renter, you’re not responsible for any upkeep, maintenance, or landscaping. If the sink springs a leak, the ceiling fan no longer works, or the air conditioning is on the fritz, you can simply call the landlord.

When you own your home, you are responsible for all costs associated with maintaining the property—and those can add up quickly. Renting gives you the opportunity to save or invest what would be a down payment in a diversified portfolio until you plan to stay put for a while.

Save for Your Financial Goals Using SoFi Money

Whether your next financial goal is taking a luxurious vacation, buying a house, renovating your basement, or buying a car, SoFi Money is here to help.

SoFi Money makes it easy to track your money by showing you your weekly spend in a dashboard in the app. With SoFi Money, you can access your money in seconds with mobile transfers, photo check deposits, and great customer service.

Ready to get started with SoFi Money? Learn more today!

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.


Read more
man on phone with bicycle

7 Tips to Lower Your Student Loan Payments

Getting a handle on your student loan repayments is an important step in staying financially healthy. There are a number of simple ways to help you lower your student loan payments.

Whether you are struggling to make your monthly payments or just want to evaluate your overall repayment plan, here are seven tips to help you potentially reduce your student loan payments.

1. Finding out how much you owe and what kind of loans you have

The first step towards potentially lowering your student loan payments is to actually assess how much debt you have in total. By calculating what you owe exactly, you can get a better understanding of how your monthly payment has been calculated.

The type of loans you have will also determine some of the repayment options that are available to you. If you have private student loans from a bank or other company, there are not as many options available to help with repayment.

However, if you have federal student loans from the U.S. Department of Education, you might be able to apply for different kinds of federal plans that could help lower your student loan payments.

You could start by gathering up your paperwork and online logins—typically during your initial grace period, your student loan servicer will contact you about when your first bill will be due and how to pay.

A loan servicer can be a private company, as mentioned before, but for federal loans, there are also multiple other servicers, so make sure you account for all of your student debt. It might be hard to understand how to best lower your payments if you don’t have a good grasp on what you owe, and a handle on which companies you will need to contact.

2. Calculating your interest rates and payoff dates

Once you have all of your loan information, you can use a student loan payoff calculator or contact your servicer to find your current payoff date(s) for your student loans. For federal loans, if you have not selected another plan, you’ll be placed by default on the Standard Repayment Plan.

This plan sets your monthly payments at a static amount so you will have your loans paid off in 10 years, if not less. Lowering your payments means that you would need to take more time to pay off your loans, and you may end up paying more, since interest will continue to accumulate. Some private loans also follow the 10-year repayment timeline, but it varies depending on your lender.

You can find all of your federal student loans, and the individual loan servicer, by logging into My Federal Student Aid . Once logged in, you can also check which repayment plans you personally qualify for by using the Federal Student Aid Repayment Calculator .

3. Signing up for automatic payments to stay on time

Some student loan servicers may reduce your interest by 0.25% if you elect to make automatic payments. Plus, making auto-payments on your loans can help you incorporate your student loan payments into your budget better as a fixed expense which must be accounted for every month. On-time payments could also help your overall credit score.

With most federal student loans, if you don’t make a payment in more than 270 days, you’ll default on the loan. Defaulting can impact your credit score, but it can also result in other problems including losing your eligibility for deferment, forbearance, and other valuable repayment options. Furthermore, one of the consequences of default is loan acceleration, which is when the unpaid balance on your loan immediately comes due.

Let’s be real, it’s probably something you’d rather avoid at all costs. While setting up automatic payments can help you stay on track, if you’re worried about default because you’re struggling with your monthly payments, there are other solutions. You could, for example, look into ways to make your federal loan payments more manageable, like using an income-driven repayment plan .

4. Contacting your loan servicer re: your repayment plan

If you call your federal loan servicer—the company in charge of managing your loan repayments—they may be able to put you on a plan to help lower your payments. One such plan is the Graduated Repayment Plan , which can keep your payment timeline to 10 years (depending on how much you owe), but starts out with lower payments at first and then increases the payment amount over time (usually every two years).

If you have more than $30,000 in eligible outstanding student debt on most loans, you can also ask about the Extended Repayment Plan, which extends your loan repayment timeline to 25 years.

5. Applying for income-driven repayment for federal loans

Most federal student loans are eligible for at least one income-driven repayment plan:

•  Income-Based
Payments are generally 10% or 15% of your discretionary income , depending on when you first received your student loans. Any outstanding balance is forgiven after 20 or 25 years, but you may have to pay income tax on that amount. You must have a high federal student loan debt relative to your income to qualify.

•  Income-Contingent
Payments will be either 20% of your discretionary income, or the amount you would pay on a fixed 12-year repayment plan adjusted to your income, whichever is less. Many borrowers can qualify for this plan, including parents, who can access this option by consolidating their Parent PLUS loans into a Direct Consolidation Loan . Outstanding balances may be forgiven after 25 years.

•  Revised Pay As You Earn
Payments are generally 10% of your discretionary income, and outstanding balances will be forgiven after 20 years for undergraduate loans.

•  Pay As You Earn
Also generally sets payments at 10% of your discretionary income and caps at 20 years for forgiveness, but never more than what you’d pay on the Standard 10-year plan. You must be a new borrower on or after Oct. 1, 2007 to qualify.

•  Income-Sensitive
Monthly payments will be based on your income, but based on a 10-year repayment timeline.

These plans require borrowers to reapply every year. If you are employed by certain government agencies or a qualifying not-for-profit and are seeking Public Service Loan Forgiveness , you must repay your student loans under one of these income-driven repayment plans (there are other qualifying factors , too). Remember, it is always free to apply for these federal student loan assistance programs.

6. Learning about the Loan Repayment Assistance Program

This program, known as LRAP , offers you funds to help you make the monthly payments on your loans. Since private loans are not available for the federal income-based repayment plans mentioned above, LRAP could be helpful for those with private student loans.

You may want to investigate limitations such as which of your loans are eligible and income caps.

LRAPs also often include a requirement that you work in your eligible job for a certain number of years, typically in public service—and the assistance may or may not count as taxable income. If your income after graduation is modest, LRAP can help to repay loans, whether federal, private, or parent PLUS.

You can also research private grants that can help cover the cost of your student loan repayments after graduation.

7. Refinancing your student loans with a private lender

Refinancing is another student loan relief option that may be most helpful if you have student loans with high interest rates, or private student loans.

Student loan refinancing would get you a new loan entirely, at a new interest rate and new term, so you can use that money to pay off your existing student loans. And then you just have one private, refinanced loan to pay back. So, refinancing could potentially save you money in the long run if you get a lower interest rate, or you could even get more time to pay off your loan.

SoFi offers student loan refinancing which can help you lower your monthly payments, shorten your loan term, or save money on total interest. With a variety of options available, getting a handle on your student loans doesn’t have to be so overwhelming.

Use this SoFi student loan refinancing calculator to see if refinancing could offer you greater student debt relief.

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
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.


Read more
pastel pencils on yellow background

Is Your Student Loan Interest Rate Too High?

A lot of things keep us up at night. Finances. Dealing with family during the holidays. Finances. An awkward interaction with a coworker. Finances. An argument with a partner. Finances.

You get it.

Specifically, student loan interest rates could be causing your finance-related insomnia. But what is a high student loan interest rate, and how can you tell if yours is too high? To learn this, it’s important to understand the factors that influence interest rates in the first place.

What Are Interest Rates?

Without interest, lenders have no way of making a profit off of what you borrow. In their minds, everyone wins: you get the money you need, they eventually get their money back. And the interest yields earnings for the lender.

Interest rates can vary drastically depending on the type of loan, the lender, the amount you borrow, and often your credit history or financial profile.

Are Your Interest Rates Fixed or Variable?

Fixed interest rates are interest rates that don’t change over the life of the loan. Variable interest rates fluctuate based on market indexes . This means that the interest payment you pay one month might not be what you pay the next month. Sometimes, variable interest rates start out lower than their fixed interest rate counterparts.

The choice you make for your loan might depend on a number of factors. If you’re the type to feel more comfortable knowing you’re paying the same rate no matter what, a fixed interest rate might be the better option for you. If you’re willing to take a risk, a variable interest rate could be the way to go. But again, it’s a risk: your rate could increase based on how the market is doing.

You may want to check your loan terms to see which type of rate you have. If you have more than one student loan, make sure to review them all.

Federal vs Private Student Loan Interest Rates

Federal student loans come with fixed interest rates. And those interest rates are set by Congress. If you take out a federal student loan, the fixed interest rates will not change for the life of the loan. Interest rates for federal student loans are based on the 10-year treasury note and are set annually, and go into effect each July for the coming school year. (You can learn more about federal student loan interest rates here .)

While federal student loan interest rates are set by Congress, private student loan rates are set by each individual lender. Additionally, the rate you get is often determined by your creditworthiness. If you’re new to borrowing money, lenders might not see you as responsible with credit—because you haven’t proved you are yet. And if you’ve proven to be “bad” with credit in the past (aka having a lower credit score, for example), lenders may be less confident about loaning money to you.

For private student loans, there are a few things that determine your interest rate, like your credit score and credit history. Each lender has different credit standards to determine what is best for each borrower.

Student Loan Consolidation

If you’ve got federal student loans, you may be eligible to consolidate your student loans through the federal government with a Direct Consolidation Loan. Consolidating your student loans this way is essentially combining all of your loans into one with a new interest rate and term.

Your new interest rate under a Direct Consolidation Loan is the weighted average of your old loan rates, rounded up to the nearest one-eighth of 1%. Only federal student loans can be consolidated under a Direct Consolidation Loan.

Student Loan Refinancing

Student loan refinancing is similar to consolidation, but is handled differently. Refinancing is offered via private lenders, not the federal government. And instead of combining all your loans and averaging out the interest rate, you can get one new loan to replace all of your old ones, along with a new interest rate.

Your interest rate isn’t based on the interest rates of your former loans. Instead, it’s based on your current creditworthiness and other factors that vary by lender. For example, you may qualify for a lower interest rate when you refinance if you have a solid credit score and history, and can demonstrate you’re responsible enough to pay back your loan.

With SoFi, you can even refinance both federal and private student loans. If you have both, you might want to consider refinancing to see if you can lower your interest rate.

Income-Based Repayment

Income-Driven Repayment (IDR) plans are available to federal student loan borrowers who are looking to manage their payments. For an income-driven repayment plan, monthly payments are based off your discretionary income and the size of your family.

This can be helpful because if you’re not making as much as you’d expect while also financially supporting others, IDR plans help make payments more manageable, allowing you to continue making payments you might otherwise be missing.

Missing payments can cause you to become delinquent or eventually default on your student loans, which could crush your credit score.

There are different IDR plans to choose from. But if you’re still making payments after 20 or 25 years—depending on the plan —the remainder of your loan may be eligible for forgiveness. (Note: if you refinance your federal loans with a private lender, you will no longer be eligible for IDR plans and other federal student loan benefits.)

Getting a Cosigner

When you’re looking to refinance your loan, you may not have top-notch credit to land you an awesome interest rate. If that’s the case, you might want to explore cosigner options.

A cosigner can be anyone that agrees to pay your loan in your place if you fail to do so. Does this sound like a major responsibility and an even more significant ask? It is. Making a cosigner liable for you is a big deal. Failing to pay back your loan will still hurt your credit score. But with a cosigner, it will also hurt their credit score.

Whoever your cosigner is—a partner, a friend, a family member—having a plan in place to repay your new loan, including contingencies for potentially coming up short and needing immediate assistance, can provide reassurance to them.

Interested in refinancing your student loans

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Student Loan Refinance
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.


Read more
green and white toy houses

How Much House Can You Afford When Paying Off Student Loans?

While getting a college education and buying a home are both parts of the American Dream, they can come with a hefty price tag. And for many of us, that most likely means taking on substantial debt.

If you hold student loans when you start thinking about buying a house, you’re in good company. Americans collectively now hold almost $1.5 trillion in student loan debt , a number that has grown steadily in recent years.

On average, 70% of undergraduates leave school with an average of around $37,000 in student loans. When interest kicks in, that amount can balloon quickly.

When you’re ready to start house shopping, you may wonder, “Do student loans affect getting a mortgage?” Could they hold you back from getting approved for a house loan or obtaining acceptable terms, or do lenders look at student loans kindly because it’s “good” debt, as opposed to something like a credit card balance?

It’s true that college graduates who have student debt are less likely to own a home than their counterparts who left school debt-free. And those with higher student loan balances are also less likely to be homeowners than peers with lower amounts of debt.

But the good news is that student debt doesn’t have to hold you back from your dreams of becoming a homeowner. Here’s what you need to know about buying a house when you have student loans.

Getting a Mortgage When You Have Student Loans

When a lender is considering offering you a mortgage, they want to feel confident that you will pay them back on time. A key factor is whether they think you can afford the payment with everything else on your plate. To assess this, a lender will consider your debt-to-income ratio, or how high your total monthly debt payments are, relative to your income.

For the debt component, the institution will look at all your liabilities, from car loans, to credit card payments, to, of course, student loans. In the case of student loans, banks know that you’re likely to be responsible for that debt forever, since it usually can’t be discharged in a bankruptcy and it’s not secured to an asset that a lender can recover. Many industry professionals say that your debt-to-income ratio should ideally be below 36%, with 43% the maximum . If you have a high student loan payment or a relatively low income, that can affect your debt-to-income ratio and your chances of qualifying for a mortgage.

For example, here’s a hypothetical situation: Let’s say you earn an annual salary of $30,000, making your gross monthly income $2,500. Let’s assume you owe $275 per month on a car loan and have a credit card balance with a $100 monthly minimum payment.

And let’s say you have student loans with a minimum payment of $550 a month. All your debt payments add up to $925 a month. So your debt-to-income ratio is $925/$2,500 = 0.37, or 37%. That’s at the limit that some conventional lenders allow. So you can see how having a high student loan payment can affect your ability to qualify for a mortgage.

Another way that student loans can affect your chances of buying a home is if you have a history of missed payments. If you don’t make your minimum student loan payments each month, that gets recorded in your credit history.

When you fail to make payments consistently, your loans can become delinquent or go into default . Skipping payments is a red flag to your potential mortgage lender: Since you haven’t met your obligations on other loans in the past, they may fear you’re at risk of failing to pay a new one as well.

Improving Your Chances of Qualifying for a Mortgage

Your student loan debt is just one part of the picture. Lenders look at many other aspects of your financial situation to assess your trustworthiness as a borrower. By focusing on improving these factors, you may be able to increase your chances of getting a mortgage.

One of the most important things to address is your credit score, since this is a key measure lenders use to evaluate how risky it would be to lend to you. Your credit score is determined by many factors, including whether you’ve missed payments on bills in the past, how much debt you have relative to your credit limits, the length of your credit history, and whether you’ve declared bankruptcy.

If your credit score is below 650 or 700, you may want to work on improving it. Starting by consistently making your minimum payments, paying off debt, or responsibly opening a new credit line may help.

If keeping up with payments has been challenging in the past, setting up automatic payments through the lender or your bank can help you stay on track without having to memorize due dates. In the case of a bankruptcy, you’ll typically have to wait 10 years for it to disappear from your record.

Another opportunity to improve your mortgage application is to strengthen your work history. Your employment matters to a lender because, if you’re at risk of losing your job, your ability to pay back the loan could change as well.

Gaps in employment, frequent job changes, or lack of work experience can all be red flags for a financial institution. If employment history is a weakness in your application, perhaps you can focus on finding a more stable role than you’ve had in the past. This could also be a matter of waiting until you’ve been in a new job for a couple of years before applying for a mortgage.

A third way to improve your prospects is to save more money for your down payment. If you have enough to put at least 20% down on a home, your student loans may become less of a factor for the lender.

You can save for a down payment by putting funds in an interest-bearing savings account or CD, asking for wedding guests to contribute to a “house fund,” earning more income, or even asking a family member for a gift or loan.

Another key area you could focus on is your debt-to-income ratio. Tackling some of your debts—whether student loans, credit card balances, or a car loan—could help lower that ratio. Another strategy is to increase your income, perhaps by asking for a raise, getting a new job, or taking on a side hustle.

Improving your debt-to-income ratio can make you more attractive to mortgage lenders because they will feel more confident that you can afford your new loan.

How Student Loan Refinancing May Help

Another way to potentially improve your debt-to-income ratio is to look into student loan refinancing. When you refinance your student loans with a private lender, you replace your existing loans—whether federal, private, or a mix of the two—with a new one that comes with fresh terms.

Refinancing can help borrowers obtain a lower interest rate than they previously had, which may translate to meaningful savings over the life of the loan. You may also be able to lower your monthly payments through refinancing, which can reduce your debt-to-income ratio.

Refinancing isn’t for everyone, since you can lose benefits associated with federal loans, such as access to deferment, forbearance, loan forgiveness, and income-based repayment plans.

But for many borrowers, especially those with a solid credit and employment history, it can be an effective way to reduce debt more quickly and improve the chances of getting a mortgage.

Don’t Let Student Loans Hold You Back

With Americans holding more student loan debt than ever before, it makes sense that this financial burden could pose a hurdle for some would-be homeowners. But student loans and mortgage applications aren’t mutually exclusive, and paying for your education doesn’t have to cost you your dream.

If you’ve been making payments on time and your debt is manageable relative to your income, your loans might not be an issue at all. If your loans do become a factor, you can take steps to get them under control, potentially improving your chances of qualifying for a mortgage.

Looking to get a handle on your student loans before applying for a mortgage? Refinancing your loans with SoFi may help you toward achieving your dream of homeownership.

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.
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 on credit.
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.

Read more
TLS 1.2 Encrypted
Equal Housing Lender