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Exploring Student Loan Forgiveness for Firefighters

If you’re hoping to become a firefighter, or already working as one, you’ve made a noble choice. Besides putting out local blazes, firefighters also rescue victims, educate the public on fire prevention, attend to medical emergencies, and respond to disasters. There are nearly 1.2 million firefighters in the U.S., with 35% choosing the role as a career and 65% volunteering.

There’s a shortage of firefighters in many parts of the country, putting communities at risk. So this is clearly impactful work. But if you have student loans, you may wonder whether your loan payments will be affordable given the modest salaries some firefighters make. And you may be curious about whether you’re eligible for any extra relief thanks to performing a needed public service.

You usually don’t need a college or an advanced degree to become a firefighter, but many career and volunteer firefighters do bring along student loans. That’s no surprise, given that the majority of college students are graduating with debt, and total student loan debt in the U.S. has reached $1.5 trillion .

The good news is that, as a firefighter, you have options for student loan assistance and forgiveness. Here’s a guide to help you navigate them:

Firefighter Student Loan Relief

One potential way to take advantage of student debt forgiveness if you have federal loans is to sign up for an income-driven repayment (IDR) plan. The federal government offers four IDR different plans that aim to make your monthly payment affordable by tying your monthly payments to a percentage of your discretionary income, usually between 10% and 20%.

If you make your qualifying monthly payments on time under one of these programs, the remaining balance may be forgiven in 20 to 25 years. The specific plans you’re eligible for depend on the types of loans you have, your income and family size, and when you borrowed.

Considering that the median annual salary for firefighters is less than $50,000 , these types of plans can go a long way toward making your loan repayment manageable. To apply, you need to submit an IDR Plan Request online with the Department of Education, or by requesting a paper form from your loan servicer. The loan servicer can also help answer any questions you have about your eligibility or how the plans work.

Public Service Loan Forgiveness

If you have federal student loans, as a firefighter you may also qualify for Public Service Loan Forgiveness (PSLF). Under this program, you must work full-time for a qualifying employer , which includes a government agency or a non-profit that provides public safety or emergency management services. Currently, you only qualify if you’re a full-time employee, and not a volunteer.

In December 2017, several U.S. senators introduced a bill that would expand eligibility to volunteer first responders, including firefighters, to acknowledge how many communities are served by volunteers. The legislation hasn’t progressed, but student loan forgiveness for volunteer firefighters is something to keep an eye on.

To qualify for PSLF, you must submit an Employment Certification Form to the Department of Education annually or when you switch jobs. If you make your qualifying minimum payment under an income-driven repayment plan for 120 months then the federal government can forgive the remaining balance on your loan.

You can change jobs over this period—you just need to be making payments with a qualifying employer for 120 months (after October 1, 2007), and those payments don’t have to be consecutive.

Note that you’re only eligible for Public Service Loan Forgiveness if you borrowed under the William D. Ford Federal Direct Loan Program. This includes Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

If you borrowed before July 2010, you may have loans under an earlier program known as the Federal Family Education Loan Program or the Federal Perkins Loan Program. To qualify for Public Service Loan Forgiveness, you would need to consolidate these older loans by taking out a Direct Consolidation Loan, then paying this new loan off under an income-based repayment plan.

Note: if you consolidate older loans with Direct Loans, you may lose credit for any payments you already made that would’ve qualified for forgiveness under the program. Also, if your loans are currently in default, you would need to take steps to get them out of default in order to qualify for Public Service Loan Forgiveness.

If you have had a federal Perkins Loan , you may also qualify to have all or part of that debt wiped away. (Perkins Loans are discontinued, for the record, but there are still many borrowers working to repay the ones disbursed before September 30, 2017.) If you’re a full-time firefighter, you may be able to get the entire Perkins Loan canceled , including interest accrued, after five years of service (the service must have started on August 14, 2008, or later).

Further, you must work for a local, state, or federal fire department or fire district. The way cancellation works is that 15% of the principal is canceled after the first and second years, 20% is canceled after the third and fourth years, and 30% is cancelled after the fifth year. You need to apply for the cancellation directly with the school that issued the Perkins Loan or the school’s loan servicer.

When looking for debt relief opportunities, be careful not to get sucked in by student loan forgiveness scams. Plenty of ads and websites promise to help you get student loan assistance by touting questionable programs, such as the Obama Student Loan Forgiveness plan. Some of these specifically target public service professionals, including firefighters.

These organizations aim to take advantage of the fact that navigating the student loan forgiveness maze can be confusing. But in reality, they take your money only to fill out forms you could’ve submitted yourself for free, or even for performing no services at all. So tread carefully when looking for firefighter loan forgiveness, and focus on official programs you can access through the federal government or your loan servicer.

Consider Refinancing Your Student Loans

Another way to get a handle on your student debt is to look into refinancing with a private lender. For some borrowers, especially those with decent credit and employment history, refinancing can help obtain a lower interest rate and reduce the overall cost of the loan, depending on the term you select. It can also make your monthly payments lower, which makes them more affordable.

When you refinance your student loans, you take out a new loan and use it to repay all or some of your existing federal or private loans (or both). You do have to give up benefits of federal loans, such as deferment, forbearance, income-based repayment plans, and Public Service Loan Forgiveness. But depending on your income and your existing interest rates, refinancing can reduce what some borrowers owe.

With SoFi, you don’t pay any fees to refinance, and there are no penalties for paying your loans ahead of schedule. You can choose between fixed rates (which will stay the same over the life of the loan) or variable rates (which often start out lower but can change over time). It takes just a few minutes to see what rates you may qualify for.

Paving the Way to a Career in Public Service

Pursuing your dream of being a firefighter can be daunting when your finances feel like a disaster. But you have lots of options for making your student debt manageable, including federal student debt relief for firefighters and refinancing.

Educating yourself about these opportunities and taking advantage of them can help you put your mind at ease, so you can focus on saving lives.

You deal with burning buildings for a living—now you can get your financial house in order. Consider refinancing your student 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.
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.
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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Student Loan Forgiveness for Engineering Students

Student loans are mounting for college and graduate students, with engineering majors being no exception. In fact, today, 70% of undergraduates leave school with student loans—about $37,000 on average. Nationally, Americans have $1.5 trillion in student debt combined. Given that engineering is the fourth most common major , many of those shouldering student debt are engineering students.

Since careers in engineering have some of the highest salary potential around , some students might consider taking on student loans in order to follow all the way through to a master’s degree in that area. Still, getting there isn’t cheap. In a recent study from Sallie Mae Engineering major respondents reported spending an average of $25,252 a year on graduate school, and about a third of that funded with student loans. And that doesn’t include possible balances carried over from their undergrad years. The average student debt for engineering undergrad students varies, but when you factor in graduate school and undergraduate debt, that could mean a substantial amount of student debt.

If you’re studying to be an engineer, you may assume there aren’t many loan assistance programs out there for you. But you do have options to save money on your loans, whether through student loan forgiveness, income-driven repayment plans, state programs aimed at professionals in your field, or student loan refinancing. Here, you can learn about some of the opportunities that exist.

Federal Loan Repayment Options

It’s true that many engineering majors go on to lucrative careers. But that doesn’t mean you necessarily earn a high salary right away. And you may choose to apply your skills at a government agency or nonprofit, or work in a different field altogether, earning less than expected.

The federal government offers four different repayment plans that tie your monthly payment to your income in order to make your student loans affordable. Once you make the minimum number of payments required, the balance on your loans is eligible to be forgiven. Which plans you’re eligible for, will depend on the types of federal student loans you have, and when you borrowed:

•  With the Revised Pay As You Earn Repayment Plan (REPAYE Plan), your payment will typically be 10% of your discretionary income. If you make payments, the balance can be forgiven after 20 years if all the loans were for an undergraduate degree or 25 years if you also had graduate loans. Only Direct Loans are eligible, excluding Direct PLUS loans to parents.

•  The Pay As You Earn Repayment Plan (PAYE Plan) also limits payments to 10% of your discretionary income, generally. The balance can be forgiven in 20 years. Again, only Direct Loans are eligible, except Direct PLUS loans to parents.

•  Under the Income-Based Repayment Plan (IBR Plan), your payment will be 10% of your discretionary income if you borrowed starting July 1, 2014, or 15% if you borrowed before that date. In the former case, the debt can be forgiven after 20 years; in the latter, it can be wiped away after 25 years. Direct Loans are eligible (except Direct PLUS loans to parents), as well as most loans under the earlier Federal Family Education Loan Program.

•  The Income-Contingent Repayment Plan (ICR Plan) limits payments to 20% of discretionary income in most cases, and the rest can be forgiven after 25 years. Only Direct Loans are eligible, but this is the only program that also allows Direct PLUS loans to parents to qualify, as long as they are consolidated into a Direct Consolidation Loan.

If you get confused, you can ask your loan servicer to advise on which plan is right for you. You can apply by filling out an Income-Driven Repayment Plan Request online or by asking your loan servicer for a paper form.

Taking advantage of programs that base your payment on your income can potentially make your monthly payment affordable in the long term if you don’t expect your salary to go up much.

Note: the amount forgiven under an income-driven repayment plan may be considered taxable income.

Public Service Loan Forgiveness

There’s another way to take advantage of student loan forgiveness for engineers. If you work full-time for a government agency, non-profit, or certain other employers that serve the public interest, your federal loans might qualify for Public Service Loan Forgiveness. Those organizations include the military, as well as public safety, emergency management, and public health groups.

Under this program, if you make qualifying payments for 120 months (a total of 10 years), the balance on your loans can be eligible for forgiveness. Make sure to submit an Employment Certification form annually or when you switch jobs. Note that only Direct Loans qualify for the program.

If you have older loans, you may be able to make them eligible by consolidating them through a Direct Consolidation Loan. You need to be enrolled in an income based repayment plan if you want to apply for Public Service Loan Forgiveness.

State Loan Assistance Programs for Engineers

Engineering is an in-demand profession. The U.S. Bureau of Labor Statistics estimates that 140,000 new engineering jobs will be created between 2016 and 2026. The fastest growing sub-specialties are civil, mechanical, and industrial engineering.

With this in mind, a couple of states have created programs that provide student loan assistance to people in the Science, Technology, Engineering, and Math (STEM) fields as incentive for professionals to reside there and pursue jobs in these areas.

In Maine, the Harold Alfond Foundation offers up to $60,000 in student loan relief for state residents who work in a STEM field for a business based there. The program, administered by the Finance Authority of Maine, awards grants to approximately 150 people a year and will run at least through 2019.

You don’t have to already be a Maine resident—you can apply if you live anywhere in the U.S. or even abroad, as long as you become a resident after being hired by a Maine employer.

To apply, you have to submit a resume, essay, a statement saying you intend to live and work in Maine for a decade, information about your student loan debt, and an employment certification from a local employer. The program pays your debt in two $30,000 chunks, one after five years and another after 10 years of employment in a qualifying job.

In North Dakota, the STEM Occupations Student Loan Program also offers help with student loans for engineers. To qualify, you need to have studied a STEM-related field in a board-approved college and maintained a cumulative grade point average of at least 2.5. You must also have worked in a STEM-related job in North Dakota for a year after graduating and earn no more than $60,000.

The debt relief applies to federal loans, North Dakota DEAL Loans, or DEAL One Loans, as long as you are not in default. The actual amount doled out each year varies, depending on what funding the legislature approves, so it’s not guaranteed. Applications are due in May of each year.

When looking for student loan relief, steer clear of any scams promising fast, easy solutions—at a hefty cost. Many of these companies end up filling out paperwork you could’ve completed yourself for free, or providing no services. Focus on official programs administered by federal or state governments, or by legitimate foundations or employers.

Look to Your Employer

With employers looking to retain talent, some companies offer loan assistance for engineers. For example, Natixis Global Asset Management offers employees $1,000 a year toward their student loans for up to a decade.

You can receive the benefit for federal or private loans as soon as you join the firm. Almost 20% of the company’s employees are taking advantage of the program. The company often hires for roles such as network security engineer, front office engineer, data engineer, and others.

PriceWaterhouseCoopers , the professional services firm, pays $1,200 in student loans for associates and senior associates, for up to six years. Its employees include software engineers, data engineers, cloud security engineers, DevOps engineers, and more.

Abbott , a health technology company, assists with student loans in a slightly more indirect way. For full-time and part-time workers who qualify for the company’s 401(k) plan, and who are paying at least 2% of their salary toward student loans, the company will deposit its 5% match in the 401(k) plan even if the employee doesn’t contribute anything.

This way, it helps employees avoid the tradeoff between paying off loans and saving for retirement. Abbott hires for roles like engineering director, senior manufacturing process engineer, mechanical engineer, and more.

These are just a few examples of companies that offer loan repayment help to engineers. It’s worth keeping a lookout for this benefit throughout your job search.

The Benefits of Student Loan Refinancing

The above options may not be enough: Perhaps you don’t live in the right place or work for the right employer, or maybe you earn too much for an income based plan to make sense. If you don’t qualify for loan assistance, or even if you do have some benefits but not all of your loans are covered, refinancing your student loans can be a good way to potentially save money.

You can refinance federal loans or private loans with a variety of lenders and other financial institutions, often nabbing a lower interest rate or reduced monthly payment in the process. You even might be likely to get a better rate if you have a good credit score, earn a decent income, and have a solid employment history. It takes just a couple of minutes to see if you pre-qualify online.

Engineer a Better Future

Student loans represent an investment in a solid career path, but they can be a burden even for people in thriving professions. If you’re an engineer, check out what options are available to reduce your student loans, whether that’s loan forgiveness, assistance from your state or employer, or student loan refinancing.

As an engineer, you’re good at solving problems. Look into whether refinancing your student loans with SoFi can help with your student debt.


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.
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.
No Companies or private programs mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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What Happens if You Don’t Pay Your Personal Loan?

Your car breaks down. Your furnace blows cold air. Your precious pup needs surgery—pronto.

Yep, life can be challenging when unexpected expenses pop up. When that happens, you may need to assess how to spend the month’s budget, and might be wondering what happens if you don’t make payments on a personal loan.

In this post, we’ll share potential consequences of not paying your personal loan. And what can happen if you miss one payment, of course, is quite different from what can happen if you miss several of them—and we’ll take you step by step through possible consequences along the spectrum.

Before we dive in, we’ve got to level with you: This is an incredibly complex topic. We’re going to try to break it down the best we can, but please understand that this info is general in nature and does not take into account your specific objectives, financial situation, and needs; it should not be considered advice. SoFi always recommends that you speak to a professional about your unique situation.

Consequences of Late Payments

One of the earliest consequences might be that your credit score could drop, because one major factor in your score is typically your payment history. For your FICO® Score , how timely you make your payments accounts for as much as 35% of the score.

You may not feel the impact of a lower credit score immediately, but people often do when they apply for new credit—whether that’s for a credit card, car loan, or mortgage loan—or even when they need to turn on utilities in their new apartment.

How timely you make your payments accounts for as much as 35% of the score.

According to an article in US News and World Report , the first six months of missed payments could seriously impact your credit score—in fact, because of those six months, your credit score could drop as much as 100 points. And since the numerical span from an “exceptional” FICO Score (800 and up) to a poor one (579 down to 300) is only 221 points, a 100-point drop could be highly significant in your ability to obtain new loans.

Sometimes, a lender may still approve a new loan for borrowers with substandard credit scores, but at a higher interest rate. This means you’d pay back more interest over the life of the loan, which could set you even further back from the goal of financial wellness.

Then, if you become 60 days behind in your payments, that’s typically when lenders may start sending your accounts to a collection agency in an attempt to get their money. If you don’t respond to the collection agency and repay the debt, you will likely get calls from agencies.

And if the debt becomes 180 days in arrears, the lender may assume you don’t plan to repay at all, and you may get sued . If you lose the lawsuit, money owed could be taken out of your paycheck or garnished from your bank accounts or tax returns. Plus, collection agencies can keep on calling, and your credit report may continue to suffer.

What Happens Next?

Let’s say you’ve just been hit with an unanticipated expense, one large enough to cause you to scramble to figure out how to meet all of your monthly financial commitments. So, first ask yourself which of the following is true:

•  This will be a short-term problem, perhaps one to three months in length.

•  This will be challenging for me financially for a longer period of time.

If the first is true, you might find that, by creating a strategic budget to get yourself through this lean period, you might actually meet your expenses, after all. You can use a budget worksheet to list all of your:

•  monthly expenses

•  monthly income

Now, look to see what expenses you can eliminate for now. Strategies can include a short-term policy of no dining out (including fancy coffees!) and no discretionary purchases. Until you get past this bump in the road, find creative ways to entertain yourself without spending anything extra of significance.

For example, you could check out old black-and-white movies from the library, pop some popcorn, make some lemonade and invite friends over for a marathon of Abbott and Costello, or Charlie Chaplin or Douglas Fairbanks, Jr. and Mary Pickford. (And, if this makes you say, “who??” then you may discover brand new interests in these stars of yesteryear!) Consider turning expense cutting into a game and you may discover that you can weather this short-term financial challenge.

Plus, how much money do you have in savings? Could you, for example, use these funds to pay off whichever bill of yours has the lowest balance? If you do that, how much will that free up your monthly cash flow? Enough to get through the financial challenge?

If, after considering these strategies, you still can’t make ends meet, you can always talk to your lender(s). You could explain what you’ve figured out during your budgeting process—perhaps you’ve determined that your car repair is going to put you behind for two months.

Or let’s say, for example, you let your lender know how you take your financial repayment responsibilities seriously and would like to talk about any available options. Sometimes, the lender may work with you; whether this happens or not, it’s one approach to take.

Now, let’s consider what you can do if the unanticipated expense is going to have an impact on your budget for a longer amount of time. In this case, it’s especially important to get a crystal clear picture of your financial situation.

If you have good to excellent credit, it may make sense to see if you can consolidate credit cards and other qualifying debt into a personal loan. Consolidating multiple debts into one, especially if you can get a low interest rate, might give you a lower monthly payment—which might mean more breathing room in your budget. If this strategy sounds helpful, it’s important to make sure you follow through before you begin to miss payments on any outstanding loans.

Proactively Taking Out a Personal Loan

Once you’ve decided it’s time to take control of your budget and cash flow management, it can also be time to decide if you should apply for a personal loan as part of your overall financial strategy.

If you’ve got solid credit, among other financial factors, a personal loan might be the right strategy for:

•  debt consolidation

•  large purchases that serve as investments in your health

•  home improvements

•  large and/or unexpected medical bills

If you decide that a personal loan is right for your needs, the next step is to choose the right lender for you. Questions to ask of lenders include:

•  Can I borrow enough for what I need?

•  What is the best interest rate I can get? Can I get a better rate if I sign up for automatic payments?

•  Do they charge any origination fees? Prepayment penalties? Application fees?

•  What happens if I can’t pay my personal loan because I lost my job? Do they offer unemployment protection?

Personal Loans with SoFi

Applying for a personal loan at SoFi is fast and convenient. You apply online, and get access to live customer support seven days a week. You can find your rate in just two minutes—with no commitment—and without impacting your credit score.

A SoFi personal loan comes with no origination fees or prepayment penalties. You can get a fixed interest rate and a SoFi personal loan gives you access to member benefits like unemployment protections on your loan.

Learn more about how to apply for a personal loan at 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.
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.
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.
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What Is a Direct Consolidation Loan?

If you have multiple federal student loans, one way to simplify the repayment process is by consolidating. A Direct Consolidation Loan combines different federal student loans into a single loan, resulting in one monthly payment.

This can be a helpful way to stay on top of student loan payments, and also set yourself up for eventual loan forgiveness, based on some requirements for different loan types and income-driven repayment plans.

Consolidation of student loans can lower your monthly payment by extending your repayment timeline; however, you typically end up paying more overall this way due to the additional interest you pay when lengthening your loan term.

It’s important to note that the application process for a Direct Consolidation Loan is available through the U.S. Department of Education and comes with no fees . Some private companies solicit offers to help people apply for consolidation for a fee, but there’s no need to pay for application assistance. The process takes about 30 minutes total and can be done online.

Considering the pros and cons of a Direct Consolidation Loan, such as lowering your monthly payments, can help determine if it’s the right repayment strategy for you. But make sure to run the numbers and see if the lengthened payback period or new interest rate will result in paying more than you are comfortable with in the long run.

Exploring Direct Consolidation Loans?

Deciding if consolidation is right for you depends on if your desire to simplify your payments outweighs the potential loss of some benefits. The first thing to consider is if you currently have multiple federal student loans with different servicers, meaning you have to log in to two or more separate accounts to pay your student loan bills each month.

Student loan servicers are companies such as Great Lakes or FedLoan Servicing that collect payments on your loans and maintain your records. In this instance, consolidation can make life a little easier because the process will give you a single loan with a single bill each month.

Consolidation can also lower your monthly payment amount, since a Direct Consolidation Loan has a repayment period of anywhere from the standard 10 years to 30 years .

Direct Consolidation Loans are eligible for multiple repayment plans, but on a Standard or Graduated plan, you must have less than $7,500 in total debt to have the maximum repayment time set at 10 years.

If your total debt is $60,000 or more, your Graduated or Standard repayment plan will be spread over 30 years. For all debt amounts in between, the term will be between 12 to 25 years for repayment. Plus, if you have any variable-rate loans, consolidation will make it so you are able to switch to a fixed interest rate.

Also, if you consolidate loans other than Direct Loans, such as Perkins Loans (drawn before the program was discontinued), those loans may become eligible for Public Service Loan Forgiveness (PSLF) once consolidated, whereas they were not eligible before.

Before you apply for a Direct Consolidation Loan, make sure you calculate how much you could end up owing over time, based on your new repayment schedule. And if there are Direct Loans you don’t wish to consolidate, perhaps because they are nearly paid off, you’ll still want to factor those payments in when calculating how much you can afford to pay each month on your consolidated loan.

As we mentioned, unless you have less than $7,500 in total debt, your repayment period will be extended beyond the standard 10 years, meaning you will make more payments and pay more in interest, unless you switch to a different student loan repayment plan. Consolidation can also cost you some benefits that only non-consolidated loans are eligible for, including access to some loan cancellation options. It’s a good idea to check in with your loan program before opting for a Direct Consolidation Loan.

However, one of the most important things to consider before consolidation is that if you are currently paying your loans using an income-driven repayment plan, or have already made qualifying payments toward PSLF, consolidating your loans will result in the loss of credit for payments already made toward loan forgiveness.

Applying for a Federal Direct Consolidation Loan

Almost all federal student loans are eligible for consolidation. If you have private education loans, you can not consolidate them with your federal loans. You can’t consolidate your loans while in school and must graduate, leave school, or drop below half-time enrollment in order to pursue consolidation. Parent PLUS loans can’t be consolidated with loans in the student’s name.

The Direct Loan Consolidation application process is available through StudentLoans.gov . You simply fill out the online application, or if needed, you can print out a paper version and mail it. To make things easier, it may help to gather all of your loan records, accounts, and bills on hand as you work through the form.

You can also select which loans you do and do not want to consolidate on your loan application. For instance, if you have a loan that will be paid off in a short amount of time, you might consider leaving it out of the consolidation, or if you have already made qualifying payments toward forgiveness on certain loans.

There might be other reasons you don’t want to include a certain loan in your Direct Consolidation Loan—consider the features of each individual loan before deciding whether to consolidate. Of course, if you keep one or more loans out of the Direct Consolidation Loan, you’ll end up with at least two different payment plans and monthly student loan bills.

Remember to keep making payments on your loans during the application process, until you are notified that they have been paid off by your new Direct Consolidation Loan. Your first new payment will be due within two months of when your Direct Consolidation Loan is first paid out.

Repayment Plans for Consolidation Loans

A Direct Consolidation Loan will have a fixed interest rate. The fixed rate will be the weighted average of all of the interest rates for the loans you are consolidating—rounded up to the nearest one eighth of a percent. This means that the interest rate on your largest loan will have the most impact on your consolidation interest rate, whether that interest rate is high or low.

When you apply for a Direct Consolidation Loan, you must also be prepared to select a repayment plan. Many repayment plans, including income-driven repayment plans, are available for Direct Consolidation Loans.

Consolidation can also help student loans that are currently in default . Student loans will go into default after 270 days without payment, which can result in consequences and loss of benefits, such as damaging your credit score or possible wage garnishment.

Since loans in default are accelerated, and the entire unpaid balance becomes due when you enter default, consolidation is worth considering since it allows you to pay off one or more federal student loans with the new Direct Consolidation Loan.

Once your consolidated loan is out of default, you can repay the Direct Consolidation Loanunder an income-driven repayment plan or make three consecutive.. Direct Consolidation Loans are eligible for benefits such as deferment, forbearance and loan forgiveness.

Refinancing vs. Consolidation for Student Loans

For those interested in a better interest rate or more favorable loan terms you could consider refinancing your loans instead. You can apply for student loan refinancing with companies like SoFi, and the process works much in the same way. But unlike consolidation, refinancing can combine federal student loans and private loans, if you are still looking to make only one monthly payment.

Keep in mind refinancing can result in the loss of some of the benefits for federal student loans under consolidation since you’re working with a private company and not the government. However, for someone looking for lower interest rates or lower monthly payments, refinancing is another option to consider.

If the idea of consolidation appeals to you, but the weighted consolidation interest rate won’t save you much over the life of your loan, SoFi can help. You can get a quote to see what your new loan could look like in two minutes or less.


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 Debt Collection Agencies Work

It could come as a dreaded red envelope in your mailbox, or as a call from an unknown number you’re afraid to take. Whether you’re receiving calls or mail from a debt collector or are going out of your way to avoid either (or both!), you’ll probably want to know: How do debt collection agencies work?

How Do Bills End Up in Collections?

If you don’t pay a bill for a long time , it can end up “in collections,” which means that it has been sent to a debt collector whose job is to try and get you to pay up. (How long is a “long time” you ask? It varies, depending on the type of debt and where you are.) Many types of debt, from an unpaid magazine subscription to a missed credit card payment, can end up in collections if they go unpaid.

If you miss a bill payment, it is technically considered “delinquent,” which means you have a payment outstanding. However, the delinquency is only reported to the major credit bureaus after a certain period of time, which may vary based on the type of debt, among other factors.

For example, a delinquent (or late) credit card payment will only be reported to the credit bureaus after 30 days—and it can then negatively affect your credit score, Being delinquent, however, does not necessarily mean your bill is in collections.

An unpaid bill is typically not sent to a collection agency until several months have gone by and your lender no longer wants to try to personally collect the debt from you. Instead, the lender might either enlist an agency that is hired to collect third-party debts or sell the debt to a collection agency. Once the debt has been sold to a debt collection agency, you may start to get calls and/or letters from that agency.

How Do Collection Agencies Work?

At their most basic, debt collection agencies exist in order to try to get borrowers to pay their overdue debts. Debt collection companies make money by buying debt from lenders for pennies on the dollar and then trying to make the borrower pay back the original amount owed. Keep in mind that even if your debt is sold to a collection agency, the agency can still ask that you pay the entire debt.

The debt collection industry is heavily regulated, and borrowers have many rights when it comes to dealing with bill collectors. Debt collectors are allowed to try to get you to pay up, but they are restricted by the Fair Debt Collection Practices Act , which prohibits them from harassing you or lying to you in order to collect your debt. Despite this, debt collectors will try everything in their arsenal to get you to pay your old debt.

When Could a Debt Collector Sue over Unpaid Debt?

Debt collectors are bound by strict legal limits on the amount of time they have to sue over uncollected money. So when will a debt collector sue over unpaid debt?

Depending on your state’s statute of limitations for debt collection, a collection agency may only have three to six years to sue over an unpaid debt. Of course, some debt, like federal student loans, is not subject to statutes of limitations .

It is important to remember that just because the statute of limitations that governs the debt has expired doesn’t mean you don’t owe that money. Running out the statute of limitations does not erase your debt or even necessarily prevent the collection agencies from trying to make you pay up.

Avoiding Ending up in Collections

Managing your debt is one important part of staying financially healthy, but that doesn’t mean it is always easy. Luckily, there are several steps you can take to help ensure that you don’t end up on the receiving end of stressful collection calls.

One easy consideration to avoid inadvertently being hounded by debt collectors is to set your monthly bills up on an “autopay” schedule tied to your bank account. Putting your bills on autopay can help you avoid accidentally forgetting to pay a bill that could eventually end up in collections.

Of course, not having the necessary funds in your account when a bill is scheduled to come out may also eventually result in calls from collections, as well as fees from your bank, so it is important to plan in advance to cover the auto-debit costs.

If you’re worried that some of your debts could end up in collections, there are things you can do to help get back on track. A great first step can be just contacting the agency trying to collect debt payments from you.

If, for example, you’re worried about ending up in collections because of an overdue medical bill that you can’t pay, you might consider contacting the hospital that issued the bill. You may discover that the hospital has payment plans or can point you towards other payment assistance.

Using a Personal Loan to Pay Off Debt

If you’re worried about keeping a high-interest debt out of collections, one option may be to take out a lower-interest personal loan in order to consolidate high-interest debt. Here’s the deal: Credit cards in particular often have very high interest rates, which means that as long as there is an overdue balance on your credit card, you may continue to accrue significant interest charges.

That interest can mean higher payments, which could lead to more time spent in debt.. You may be able to pay less in interest if you qualify for a low-rate personal loan.

Using a personal loan to pay off high-interest debt, like credit cards, can help you consolidate your debt into one easy-to-manage monthly payment. Dealing with one lower payment may help keep your finances stable and your debt out of collections—and help keep those collection calls and red envelopes from plaguing you.

Curious about how a personal loan could help you consolidate your debt? Check out SoFi personal loans to see if you qualify.


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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
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