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Credit Card Refinancing vs. Consolidation

It’s a story that seemingly never ends. You get out of college, have some car trouble, and find yourself in credit card debt—in many cases—for the first time ever. It can happen very fast. But hopefully, you were able to pay off your credit card debt in just a few months and move on.

In a perfect world, no one would ever have to go into unmanageable credit card debt. But we know this isn’t the reality. There are many reasons people may end up in debt, such as medical bills, unplanned emergencies, or a job layoff. Others may never have learned that it is best to pay a credit card off, in full, each month rather than carry high balances.

If you have high-interest credit card debt and are ready to put together a plan to pay it back, you might be considering one of two popular methods: Credit card refinancing or credit card consolidation. Essentially, both methods involve paying back your debt with another loan or credit card, ideally at a lower interest rate. Still, the two methods are not the same and both options require careful consideration.

Below, we’ll answer the questions, “What is credit card refinancing?” and “What is credit card consolidation?” Also, we will cover some differences between debt consolidation and credit card refinancing and discuss the pros and cons of each debt payback method, so you’ll have more information that could help you make an informed decision.

What is Credit Card Refinancing?

Credit card refinancing is the process of moving your credit card balance(s) from one card or lender to another.
One such way to do this is by using a balance transfer credit card. A borrower can essentially pay off their credit card(s) with a brand-new balance transfer card that comes with a low- or non-existent interest rate.

With a 0% interest rate, this hypothetical borrower would pay nothing in interest throughout the promotional period and therefore have a better chance at making a dent in their credit card balance. For example, say a borrower has $10,000 in credit card debt on a credit card that charges 20% interest.

By switching to a 0% interest card, and making payments on time, they could save around $2,000 in the first year alone (provided there are no other fees or penalties). If the borrower switched to a card that charged 10% interest in the first year, they could save around $1,000.

Perhaps unsurprisingly, there’s a catch. Low- or no-interest promotional periods don’t last forever, and cards often charge a “balance transfer fee,” which can be 3% to 5% of the total balance.

That means with a 5% balance transfer fee, for example, our hypothetical borrower with $10,000 in credit card debt would pay a balance transfer fee of $500. The borrower would need to weigh the fee against the potential savings.

Refinancing Credit Cards with a Balance Transfer

With credit card refinancing, the borrower is typically transferring one credit card balance to another card, which means that they could potentially continue to charge more money on the new card. That’s because a credit card is “revolving credit,” which means that any time the borrower pays off some of the balance, they are able to re-spend that money up to their credit limit.

A balance transfer (refinancing your credit card debt) can be a great idea to help save on interest and pay off your debt faster. But, where people get into trouble is when they aren’t able to pay off the credit card balance by the time the 0% introductory period ends. And as soon as the 0% interest period ends, the interest rate will go back up. The average credit card interest rate as of this writing is hovering around 17% .

If you can commit to paying off your total balance by the time the introductory period ends, a balance transfer may be a good idea for you. This is because you won’t be accruing additional interest if your balance is $0 by the time the interest rate increases.

What is Credit Card or Debt Consolidation?

Credit card consolidation refers to the process of “paying off” credit card(s) with a lower-interest loan—like a personal loan. Sometimes, people use “consolidation” to describe paying off multiple credit card balances with another credit card, but for the purpose of exploring the two different options, we’ll consider it consolidation with a personal loan.

Generally, a personal loan is a loan paid out in a lump sum with a fixed rate and term. For example, you might have a $10,000 loan with a term of five years at an 8% interest rate that will not change during the duration of the loan.

With a credit card consolidation loan or personal loan, the borrower typically receives the payment in one lump sum. A personal loan is also known as an “installment loan,” because they are paid back, in equal monthly installments, over a set period of time.

Personal loans are generally unsecured, which means that they are not backed by collateral. Loans that are not backed by collateral tend to have higher interest rates than collateralized loans, but don’t put a borrower’s assets at direct risk of bank seizure like a collateralized loan would.

Still, a personal loan may have a lower interest rate than credit cards—credit cards are notorious for having the highest rates of all .

Although the landscape is changing, personal loans can be difficult to qualify for. Some lenders will still charge origination fees, but not all of them. Origination fees typically run from 1% to 8% , depending on your credit score. An applicant’s credit score and other financial data points will also determine the interest rate that the lender offers on a personal loan.

But, there are lenders that don’t charge any fees for personal loans. For example, SoFi doesn’t charge origination, prepayment, or late fees on personal loans.

The Pros and Cons of Credit Card Refinancing with a Balance-Transfer Card

Now that we’ve discussed the differences between debt consolidation and credit card refinancing, let’s explore some of the pros and cons of each option.

Credit Card Refinancing Pros

The primary benefit of using a balance transfer card is the chance to pay off your credit card debt while paying little-to-no interest in the first 12 or 18 months—or whatever the promotional term might be.
For those who have a somewhat small credit card balance—say, what could reasonably be paid off within a year—this could be an effective strategy.

Credit Card Refinancing Cons

Credit card companies often charge a balance transfer fee, which has to be disclosed but is not always advertised. For some borrowers, the interest rate savings might not be worth the transfer fee. This is especially true if the borrower doesn’t have concrete plans to pay off their debt within the introductory period.

This brings up another important consideration: Credit card refinancing does not put any structure into place for the borrower to follow in order to fully pay off the credit card debt. A borrower could just as easily continue making only the minimum payments and even add to the balance of the debt.

If a borrower fails to pay off the credit card within the introductory low-interest period, the interest rate could skyrocket—sometimes to insanely high interest rates (think: 25%).

Also, a credit card’s rate is variable. Not only could the interest rate jump up after the introductory period, but it also has the potential to change even more thereafter. Credit cards calculate their rates according to market rates.

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The Pros and Cons of Consolidating Credit Card Debt with a Personal Loan

Using a personal loan vs a balance transfer card involves consolidating your debt and paying off your debt in fixed installments. So, borrowers make equal payments towards the debt at a fixed rate for a fixed time until it is completely eliminated. And borrowers can’t add to their personal loan debt the way they could potentially add to their revolving credit card debt.

Some online lenders and FinTech companies, like SoFi, are shaking up traditional lending by offering straightforward personal loans that have no hidden fees.

A SoFi personal loan is not only free from origination fees, but has no prepayment penalty. A prepayment penalty could potentially inhibit the borrower from paying their loan down faster, by charging a fee to pay off the loan before the term ends or make extra payments.

In the event that a borrower loses their job, a borrower may qualify for SoFi’s Unemployment Protection Program, wherein loans may be eligible for a temporary forbearance. During forbearance, no payments are due (although interest still accrues), allowing the borrower to get back on track before payments resume.

With most personal loans, the borrower is able to opt for a fixed interest rate. While a variable rate is usually initially offered at a lower rate of interest, it could go up as market rates rise, whereas a fixed rate ensures payments won’t typically change over time—provided the borrower always pay on time, of course.

The terms of a personal loan will almost always be based on the borrower’s credit history and their holistic financial picture, which means that not every borrower will qualify, or qualify for a rate that’s better than the interest rate they’re currently paying on their credit card(s).

Although borrowers can get a quote to be sure, this option might be best for those that have a solid financial history.

Want to see if a personal loan from SoFi can help save you money on your credit card debt? Check to see if you qualify in as little as two minutes. It’s easy to take the first step to get back on track.


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
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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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^ $500 SoFi Personal Loan Bonus Offer: Terms and conditions apply. Offer is subject to lender approval, and not available to residents of Ohio. The offer is only open to new SoFi Personal Loan borrowers and may not be combined with other offers aside from the autopay discount, direct deposit discount, and direct pay discount. To receive the offer, you must: (1) register and apply through the promotion link for a SoFi Personal Loan by 11:59pm EST 11/30/21; (2) complete and fund a personal loan application with SoFi before 11:59pm EST 12/14/21; (3) have or open a SoFi Money account within 60 days after starting a personal loan application; and (4) meet SoFi’s underwriting criteria. Once conditions are met, your $500 welcome bonus will be deposited into your SoFi Money account within approximately 30 calendar days after earning the bonus. If you do not qualify for the SoFi Money Account, SoFi will offer payment via ACH transfer pending completion of a W9 form. Bonuses that are not redeemed within 60 calendar days of the date they were made available to the recipient may be subject to forfeit. Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received as required by applicable law. Recipient is responsible for any applicable federal, state or local taxes associated with receiving the bonus offer; consult your tax advisor to determine applicable tax consequences. SoFi reserves the right to change or terminate the offer at any time with or without notice.

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Insights on Going To College Abroad

For many, going to college abroad is a dream. The chance to live in a different country, experience a new culture and maybe even pick up a language may not only be exciting, but invaluable.

But going to college overseas can be tricky, especially if you are interested in a four-year program, rather than a study abroad opportunity for a semester. You have to navigate a different currency, education system, and potentially a new language.

The most important thing is to start planning early. Going to college abroad involves a lot more legwork than attending a domestic university. The first step is figuring out how to apply to colleges abroad.

Nearly every country will have different entrance requirements. But since it is not always a point-to-point conversion, the earlier you know the requirements the better off you’ll be.

In general, international universities offer much more specific programs than the four-year college experience in the United States. This can mean that they are targeted, three-year programs, which can be a boon to savings. But this also means that you may need to show some sort of expertise in that field of study.

Being Prepared with Your Course Selections in High School

If you know you’re interested in going to college overseas, and your high school offers international equivalency courses like the International Baccalaureate or the IB , you could consider enrolling in those programs rather than (or in addition to) taking AP classes. This can help broaden your options when applying to college abroad.

Generally, you’ll want to begin taking classes for the IB program by sophomore year, so the earlier you are thinking about going to college abroad, the earlier you can prepare. The same way that you need to think about American schools being reaches or safeties, it’s important to know what a university abroad will require of you.

Counting All Your Costs

Make sure to account for all expenses associated with getting a foreign education. You may need to apply for a student visa, as well as transportation costs. Round-trip tickets to a foreign country can also be very expensive, so if you go to school there, you’ll need to consider that you may miss out on family events like holidays or birthdays.

Financing the Cost of School Abroad

Other countries may offer less-expensive education options than those offered at American colleges. Although many countries charge international students at a higher rate, it can still be a bargain when compared with other places, and in some Scandinavian countries like Norway, it could even be free.

Even if you’re getting a great deal by attending college in a foreign country, you may still have to pay for some sort of tuition. And attending school internationally means that the rules change for financial aid.

Federal student loans are still available at many schools around the world through the William D. Ford Federal Direct Loan Program . You can download a list of international schools that participate in federal student loan programs here from the U.S. Department of Education. They recommend confirming with the school regarding their status as the list is updated every quarter.

In terms of the process, applying for federal student loans for study abroad is fairly similar to applying in the United States. You have to fill out the FAFSA® form, making sure to include the school’s Federal School Code .

The rest of the process depends on the school. It’s important to communicate with your college about next steps. See how they will get the loan money, which forms you need to fill out, and what the deadlines are. Since they are outside of the American system, how they process loan payments will be different.

If you’ve already gone to college abroad, congrats! You’ve done the hard part. If you have loans, you could consider refinancing them with SoFi. If you qualify to refinance, you may possibly secure a lower interest rate, which means you could reduce the amount of money you spend in interest over the life of the loan (depending on the loan term, of course). You can take a look at SoFi’s student loan calculator to get an idea of how your loan may be improved if you qualify to you refinance.

Thinking About the Bigger Picture

While there’s a certain globe-trotting glamour and excitement to living on foreign soil while attending college, studying abroad may not be for everyone.

For instance, if you’re typically a homebody or a creature of habit, living on a completely different continent for several months may not be for you. If you find that you’re prone to FOMO and think you’ll feel left out with family or friends during this exciting time of life, then perhaps staying put may be the best option.

But, if you long for distant shores and the idea of experiencing a brand-new culture and landscape is intriguing, then going to college abroad may fit the bill for you.

After completing your degree—in the U.S. or abroad—consider refinancing your student loans with SoFi.


SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL MAY 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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What is the Student Loan Interest Deduction?

When you claim a deduction on your taxes, it is subtracted from your total income for which your income taxes are assessed. This is different from a tax credit, which is subtracted from any taxes you may owe.

The student loan interest deduction applies to any interest payments on qualifying student loans made in the previous tax year. This includes any interest payments required by your lender and any extra payments you may have made. (For example, if you are paying back your loans faster than the repayment plan requires, and some of your additional payments went to interest.) The maximum student loan interest deduction limit is $2,500 (as of the current 2018 tax year), even if you paid more to your student loans in a given year.

Not all loans will qualify; loans must have been used for “qualifying educational expenses” according to the IRS. These include: tuition and fees, room and board (determined by the allowance for room and board according to the institution), books, supplies, equipment, and any other necessary expenditures such as transportation. Additionally, the loans must have been used at a qualifying institution.

The IRS considers qualifying institutions to be “any college, university, trade school, or other post secondary educational institution eligible to participate in a student aid program run by the U.S. Department of Education.”

You should receive a tax form 1098-E from any student loan lender to whom you paid $600 or more in interest during the tax year.

Student Loan Interest Deduction Income Limit

With over $1.5 trillion in outstanding student loans in the United States and the majority of college students taking out student loans to fund school, college graduates in the United States are familiar with student loan debt.

And if you’re like most students, you don’t want to spend one dollar more on paying back those student loans than you absolutely must. To do this, it’s important to be aware of all potential avenues available to save, one of which may be the tax deduction for student loan interest .

Unfortunately, not all student loan borrowers will qualify for the student loan interest deduction. To know whether you qualify, you can start by finding your Modified Adjusted Gross Income (MAGI) from last year.

You might be thinking that the student loan interest deduction is a small silver lining when you’re making hefty debt payments. But on the bright side, every bit counts when you’re paying back student loans, right? Below, we’ll discuss how this deduction works, the student loan interest deduction income limit, and when you might be unable to qualify for the deduction.

Before we get into it, we just want to give you a friendly reminder that this is a general overview of a pretty intense subject. You should definitely consult a tax professional before making any big decisions.

How Student Loan Interest Deduction Works

In addition to a deduction limit, there are rules regarding how much money you can earn to use the student loan interest deduction. According to IRS student loan rules, you are not eligible if your Modified Adjusted Gross Income (MAGI) is more than $80,000 per year, or $165,000 if you file a joint return.

Your ability to use the deduction begins to phase out at $65,000 (filing yourself) and $135,000 (filing jointly. This is all for the 2018 tax year. Here’s how to calculate how much you qualify for . But P.S., for the 2019 tax year, the income threshold is going up: for single peeps, the deduction will start to phase out at $70,000—and it’ll be $140,000 for married filing jointly.

If you meet the above income qualifications, you can claim the student loan interest deduction limit on any qualifying student loan made by you, your spouse (if married and filing jointly), or a dependent. You may not deduct your student loan interest if someone else claims an exemption for you on a tax return, or if you are married and not filing jointly.

Other Ideas for Lowering Student Loan Payments

If you’re currently applying to, or have enrolled in school, you may want to consider how much student loan debt you’re taking on and whether it’s an amount that you’ll reasonably be able to pay back over a standard repayment term.

Another important tip to keep in mind: avoiding taking out more in student loans than you absolutely need can make repayment easier. If this means working a few hours a week while you’re in school to cover your fun and travel money, it might be worth it. You can also apply for scholarships, even after you’ve enrolled in school.

You could also consider more affordable options, like state school and community college. While you should certainly do what’s best for your needs and your future, it’s important to weigh all the options that may be available to you.

If you’ve already graduated and are looking for ways to lower your monthly payments or shorten your loan term, consider refinancing your student loans with an online lender like SoFi.

Refinancing is the process of paying off your student loans (both federal and private) with a new loan at a lower interest rate.

A lower interest rate could significantly reduce the amount of money a borrower pays in interest over the life of the loan. However, a borrower could opt instead to extend their loan term, which might not lower the interest they pay over the life of the loan—but it could lower their monthly payments.

A lower monthly payment can feel like a better deal, but compounding interest works in such a way that even a year or two added to the duration of the loan can increase the total interest owed by quite a bit. Play around with a student loan refinance calculator to see the difference in total interest paid with lower interest rates and different loan durations.

The reverse is also true; refinancing to a shorter loan length will increase your monthly payment but lower the amount that you pay in interest, overall. If you’re able to, you might want to consider this strategy.

An alternative that may feel more comfortable is to pre-pay more than the required amount towards your loan when that money is available to you (for example, when you get a semi-annual or quarterly bonus).

If this is a path you’d like to consider, be sure that your new lender allows prepayment without penalty, and remember to tell the lender to apply the additional payment to the loan’s principal.

You shouldn’t refinance a student loan if you’re using or planning on using one of the federal repayment programs such as Public Student Loan Forgiveness or an income-driven repayment plan (you forfeit your access to those benefits if you refinance).

When you refinance, you’re taking out a new private loan, so you’ll lose federal loan repayment options. Even if you’re not able to refinance, paying more than your monthly payment is a strategy that can help you pay off your loans faster, and help you pay less in interest over time.

Want to pay less interest on your student loans? Checking your interest rate with SoFi student loan refinancing takes just a few 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
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL MAY 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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What Happens to Student Loans When You Die?

No one plans for their student loans to outlive them. We all expect to have paid off loans for college or graduate school long before middle age, let alone within our lifetimes. Most people prefer not to think about the grim topic of death at all.

But all of us should ask the question: “What happens to my student loans if I die?” Adults age 60 and over are the fastest-growing group of student loan borrowers, and 2.8 million Americans in that age group have at least one student loan. And the reality is, regardless of age, none of us can be certain about when our lives will come to an end.

Not knowing what happens to student loans when you die can cause you a lot of anxiety. Will the loan be wiped away? Will the burden fall on your parents or spouse? Will your estate be responsible? The answers can be complex and depend on what kinds of loans you have.

Knowing what happens to your student loans when you die can bring peace of mind to you and your family. It can also help you plan for that eventuality, perhaps by refinancing, saving, or taking out insurance to account for any costs your family could be left with. Regardless of the outcome, knowing the facts is a key jumping off point to taking control of your student debt. Here’s what can happen to your loans in a variety of scenarios.

(And before we dive in, we just want to say that this is an incredibly complex topic that we’re going to try our best to break down. But ultimately, 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.)

What Happens to Federal Student Loans?

If you took out student loans from the federal government, these will be discharged when you die . If a parent took out a PLUS loan for you, this will also be discharged if you die or if your parent dies. When a loan is discharged, the balance becomes zero and the government won’t try to collect on the loan. Note that at one point the Internal Revenue Service considered waived loans to be taxable in most cases.

Similarly, on a Parent PLUS Loan, if the student dies, the eliminated debt would have counted as part of the parent’s taxable income, increasing their tax obligations that year. However, that is no longer the case, as of the start of 2018. There is currently no tax burden once loans are discharged as a result of death. However, this is only true until 2025, at which point this tax code expires.

Family or friends would need to provide your loan servicer with documentation to confirm the death, usually an original or copy of your death certificate. They can call your loan servicer to ask about the specific requirements.

You’ll probably want to make sure that loved ones have the information they need now—at a minimum, the name of your loan servicer and, ideally, your loan ID numbers and your Social Security number. The bottom line is: If you have any kind of federal student loan, you don’t need to worry about your relatives being burdened with the debt if you pass away.

What Happens to Private Student Loans?

If you have private student loans, the answer is a bit murkier. Some private lenders will cancel your loans upon your death, but it typically depends on the type of loan and the laws in your state.

Make sure to read your loan agreement very carefully to see what protections your lender offers.

In the case that your lender doesn’t discharge your loans after death, the lender would first try to collect the money from your estate. If you don’t have an estate, they would turn to your student loan cosigner, if you have one.

If there isn’t one, then the lender would likely try to collect from your spouse. Whether your spouse would actually be liable depends on the state in which you live. If you live in a community property state, such as California, Texas, or Washington, and took out the student loan while you were married, your spouse could be responsible.

What Happens If You Have a Cosigner?

Federal student loans almost never involve a cosigner, but private loans often do (in order to improve a borrower’s access to credit or to qualify for better terms). According to the Consumer Finance Protection Bureau, more than 90% of private student loans were taken out with a cosigner in the 2016 to 2017 academic year, including 93% of loans to undergraduates and 60% of loans to graduate students.

A cosigner has agreed to pay the debt if you default, so they’re just as responsible for the loan as you are. If you die, a private lender will likely seek to collect payment from the cosigner. Some lenders may waive the remaining debt if the primary borrower (student) dies. (If you have a loan with a cosigner and want to take this burden off of them, you could consider trying to refinance the loan in only your name. This could be an option if your credit, income, and employment history have improved since you took out the loan, and you can now qualify on your own.)

It’s worth asking what happens if the situation is reversed: What if your cosigner dies? It used to be that, in some cases, your loan would go into “student loan auto-default,” meaning the lender would immediately require you to pay the full amount of the remaining loan, even if you’ve been making payments regularly until then.

However, following a 2018 amendment to the Truth in Lending Act, “auto-defaults” are no longer legal . This means that if your cosigner dies (or files for bankruptcy), your loan would not automatically go into default or wind up on an accelerated payoff timeline.

What Can You Do to Protect Loved Ones?

To ensure that your spouse or cosigner doesn’t end up with a large debt burden in the event of your death, one step you can take is to pay off your student loans faster.

You can do this by increasing the amount you pay every month, going above your minimum monthly payment, or shortening the payment term through refinancing, which could increase your monthly payment, but reduce the amount of interest you pay over the life of the loan and help you pay it off more quickly. Another option is to build a savings cushion that can be put toward your debt if you die.

How Student Loan Refinancing Can Help

Refinancing your student loans can be a good way to speed up repayment, leaving less of a potential obligation behind in case you die. When you refinance, your existing federal and private loans get combined into a single new loan. Particularly if you have a strong credit and employment history (among other factors), you may be able to qualify for a lower interest rate than on your current loans—or a shorter term to help pay down your loans faster.

With SoFi, you’ll have complimentary access to SoFi’s career coaches and wealth advisors. If you want to pay off your loans faster and protect your loved ones, look into whether refinancing can help.

Want to see if you can pay off your student loans faster? Consider refinancing with SoFi.


*Guaranteed Rate Match Offer: Your pre-qualified rate, and the rate match program itself, are conditional upon our verification of your application information, including verification of sufficient income to support an ability to repay. Eligible documentation of a competitor’s rate offer, issued within 30 days of your SoFi pre-qualified rate, will be determined at SoFi’s sole discretion and must be for the same loan amount and term. SoFi will only match rate offers for private student loan refinance products. The match will be on the rate, exclusive of all discounts. The $100 Rate Match Bonus is not available to residents of Ohio. To receive the $100 Rate Match Bonus, you must: (1) register and/or apply for a student loan refinance (2) provide documentation of an eligible competitive rate offer; (3) call at (855) 456-SOFI (7634) or chat on SoFi.com and follow the instructions to send in your proof of lower rate; (4) have and provide a valid US bank account to receive bonus; (5) complete Form W-9; (6) and meet SoFi’s underwriting criteria and book a student loan refinance with SoFi. Once conditions are met and the loan has been disbursed, you will receive your Rate Match bonus via automated clearing house (ACH) into your checking account within 30 calendar days. Bonuses that are not redeemed within 180 calendar days of the date they were made available to the recipient may be subject to forfeit. Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received as required by applicable law. Recipient is responsible for any applicable federal, state or local taxes associated with receiving the bonus offer; consult your tax advisor to determine applicable tax consequences. Additional terms and conditions may apply. SoFi may discontinue this program at any time.
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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL MAY 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Do Student Loans Count Toward Debt-to-Income Ratio?

Student loans can help you achieve your educational dreams, but they can also have lasting effects on your personal finances.

The short answer is yes. Borrowers with student debt eager to take out a new loan may discover that student loans can drag on their debt-to-income ratio (DTI), which is a factor lenders examine carefully before issuing new loans. Luckily your DTI isn’t set in stone, and with a little effort, you can decrease it while increasing your chances of approval for a new home loan.

What Is Debt-to-income Ratio?

Debt and income are two sides of the same coin. One side (income) represents the regular money you have coming into your accounts, and the other (debt) is the regular money you have flowing out.

Your DTI is represented by your regular monthly debts divided by your gross monthly income and expressed as a percentage.

For a W2 wage earner, our gross monthly income is the amount of money you make each month before taxes and other deductions are taken out. For self-employed individuals net income may be used.

Here’s a hypothetical situation that you can work through using a calculator and a pen. Say you have $300 each month in student loan payments, $500 in auto loan payments, and $700 in other debts. Your total debt each month is $1,500. If you’re making $4,500 a month (gross), your DTI is $1,500 divided by $4,500, or 33%. If you’d like a little extra help calculating your DTI, you can use an online calculator . Keep in mind that not all income sources are eligible to use for loan qualifying.

Lenders look at your debt-to-income ratio, among other factors, to help them figure out whether you will comfortably be able to make regular payments on new debts.

If your debt-to-income ratio is on the lower end, a lender may take that as a sign that you’ll have an easier time paying back a new loan. On the other hand, according to the Consumer Finance Protection Bureau , “Evidence from studies of mortgage loans suggest that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments.”

DTI is the ratio of your total debt to your income. So, that’s where student loans factor in—they are part of your debt when calculating that ratio. It’s also where credit card debt, car loans, and any other consumer debt would come into play. To find your DTI, you’d want to add up all of your debts (student loans, credit card, mortgage, etc.) and then divide by your qualifying gross income.

What is the Ideal Debt-to-income Ratio?

There are a few general rules of thumb surrounding ideal DTIs. A DTI of 43% is typically the highest you can have and still receive a qualified mortgage . Though 43% DTI maximum is generally the accepted range, especially for non conforming loan amounts, lenders will examine other factors such as credit score, savings and the size of your down payment when determining an acceptable DTI.

LoweringYour Debt-to-income Ratio

If you have student loans and you’re thinking about taking on other debt, such as a mortgage, take a hard look at your DTI. If it’s less than ideal, there are a number of options you can pursue to lower your ratio.

First, you can try to increase your income. You may decide to start a side hustle, get a new job with higher wages, or ask for a raise. As you increase the denominator in your DTI, your overall percentage will fall. However, there are qualifications for using a second job or part time income for decreasing your DTI.

Often it has to be stable ongoing income received for the past two years.

You may also look for ways to reduce your overall debt, which can have a more immediate effect on your DTI. If you’re grappling with large student loans debt, you could consider consolidating your loans or refinancing with a private lender. If you’re looking to consolidate your federal student loans, you could consider a Direct Consolidation Loan.

This combines all of your federal student loans into one. And your new loan still qualifies for most federal loan benefits. However, the new interest rate on your Direct Consolidation Loan is the weighted interest rate of your bundled loans, rounded up to the nearest eighth of a percent.

If you qualify to refinance your student loans with a private lender, they will pay off your old loans and can provide you with a new loan at a (hopefully) lower interest rate.

A lower interest rate means you’ll pay less in interest over the life of the loan, if you don’t extend your repayment term. Refinancing can also help you shorten your term if you’re looking to get out of debt faster.

While Direct Consolidation Loans are solely reserved for federal loans, you can refinance private and federal loans (or even refinance both into one, new loan). Refinancing federal loans with a private lender means you’ll lose access to federal loan benefits like income-driven repayment plans, deferment, and forbearance.

You may also want to take a look at the other debts you have and find ways to reduce them. If you carry a lot of high-interest credit card debt, for example, you could consider making extra payments to pay it off faster.

Also, while you’re paying off your current debts, it’s not a bad idea to avoid taking on new debt if you can. This may mean making fewer purchases with your credit card or putting off big purchases such as a new car for a few years while you lower your DTI and pursue other goals.

Patience Can Pay Off

Lending rules, such as the maximum DTI a lender will accept, can feel like a real drag sometimes, especially if you’re itching to get a new mortgage. But keep in mind that these rules are there for a reason, and part of that reason is to protect you from taking on new debt that you can’t afford.

What’s more, taking the time to make student loans debt more manageable or pay it off entirely can be worth the effort since it can lower your DTI, which may help you qualify for more favorable terms on future loans.

Making sure your debt is manageable has the added benefit of potentially improving your credit score. Making full, on-time debt payments shows that you are responsible with your finances and can give your score a boost. This too might help you qualify for more favorable loans in the future.

Looking Forward

Visit SoFi to find out more about how refinancing your student loans can help to make your student loan debt more manageable and potentially decrease your debt-to-income ratio.

Learn more about student loan refinancing with SoFi!


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL MAY 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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.

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