Jan
02
2023
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How to Keep Track of Your Student Loans

By | Fresh Out of School, Student Loans, student_loan | No Comments

Nearly two-thirds of students graduate college with some debt. The average student loan debt, including federal and private loans, is $37,338. The key to paying down that debt quickly is to stay organized. If you have a mix of federal and private loans (with different payment plans, interest rates, and due dates), however, that’s easier said than done.

Unfortunately, lenders are not very forgiving. One late payment can tarnish your credit history. Before you get into any trouble, it is a good idea to put together a system and a plan for making payments and keeping track of your loans. The following tips and strategies can help.

Understanding Your Student Loans

If you’re like many borrowers, you may have a combination of different types of student loans. Each type has different benefits and features, so it’s important to differentiate between federal and private student loans, and to take note of each loan’s amount, interest rate, and payment requirements.

If you’re not sure what type of federal student loans you have, you can log on to StudentAid.gov and select “My Aid” in the dropdown menu under your name. There you can find:

•   Your student loan amounts and balances

•   Your loan servicer(s) and their contact information

•   Your interest rates

•   Your current loan status (e.g., repayment, in default, etc.)

The government’s database won’t tell you about private loans, though. For that, you can get details from the bank or lender where you obtained the loan. If you completely lost track of what private loans you have, you can check your credit report. You can get a free credit report at AnnualCreditReport.com.


💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

Understand Loan Repayment Options

Federal student loans offer multiple payment options. If you don’t choose a specific plan, you’ll automatically be placed on the 10-year standard repayment plan, which can be a good choice if you’re looking to save on interest. Other options include the Extended Payment Plan and Graduated Repayment Plan.

If you want low monthly payments and student loan forgiveness, you might want to apply for an income-driven repayment plan. With these plans, your payment amount is a percentage of your discretionary income (typically 10% to 20%). After making payments for 20 or 25 years, any remaining loan balance is forgiven.

Private student loans generally offer less flexibility, but you likely had a choice of a few different repayment plans when you initially borrowed the loan. Typically, lenders will let you choose a loan term between five and 20 years when you first sign for a student loan.

Organizing Your Loan Information

If you’re feeling overwhelmed by your student loans, these tips can help you get organized and make the repayment process simpler and less stressful.

Gather Your Documents

An important first step toward keeping track of your student loans is to gather all of your documents and keep them in one place (such as a three-ring binder or file folders). These documents may include:

•   Financial aid award letters

•   Promissory notes (legal contracts detailing the terms that you received when you originally signed for your student loans)

•   Disclosure documents (which include information about rates, fees, disbursement dates, and amounts)

•   Monthly billing statements and emails from your loan servicers
As any mail comes in regarding your loans, be sure to add it to your binder or file system.

Create a Spreadsheet

A spreadsheet allows you to have all of the details of your student loans summarized in one place. You could use something like Microsoft Excel or Google Sheets, or just a regular computer document. Details you may want to include in your master spreadsheet:

•   Name of the federal loan and whether it is subsidized or unsubsidized

•   Name of the private lender (if applicable)

•   Name and contact details of the lender or loan servicer

•   Total amount borrowed

•   Term of the loan

•   Interest rate (this can help you decide which loans you should pay off first)

•   Payment due date

•   Current loan balance (this will go down as you update your spreadsheet)

With all your loan details in one place, you’ll likely find it easier to stay on top of your student loans. It’s also a good idea to take a few minutes every month to update the columns to reflect the latest status of every loan.

Recommended: Tips to Lower Your Student Loan Payments

Sign Up for Autopay

If you have a job with a steady income, you may want to set up autopay for all of your loan payments. Since your payments will be automatically taken from your bank account, you won’t have to worry about missing a payment or getting hit with a late fee. Plus, you’ll receive a 0.25% interest rate deduction on your federal loans. Many private lenders will also lower your interest rate by .25% to .50% when you enroll in autopay. This can add up to substantial savings over the life of your loan.

You’ll want to be careful, however, that you have sufficient funds in your bank account. If you don’t, you will have to manually adjust your payment amount accordingly.

Organize Your Login Details

Organizing your login details for each student loan website can save you a lot of time and frustration in the coming years. It also makes it quick and easy to check in on your loans and track your repayment progress.

You can go old school and simply write down all of your usernames and passwords on a piece of paper and store the document in a secure place. Or, you might choose to go more high-tech and use a password manager app or website (such as Dashlane or 1Password) or a built-in manager like Apple’s Keychain. This can save you the headache of repeatedly trying — and failing — to access your accounts.

Utilize Online Tools and Apps

There are free websites and online student loan trackers that can help you stay on top of your student loans. There are also apps that specialize in managing and paying off loans easily. Some you might want to check out:

•   Undebt.it This free app can help you eliminate all debt, not just student loans. Once you enter your loan information, you can see how quickly you can pay them off using the debt snowball strategy, as well as the amount that you’ll save on interest over the life of each loan.

•   Debt Payoff Assistant This free iPhone app lets you view all of your debts in one place. Simply enter your loan information and the dashboard will break down your different types of debts and your total amount of debt. You can then use the app to see how much you’ll save using the debt snowball payoff method.

•   Changed You link your credit or debit card to the app and every time you make a purchase, the app rounds it up to the nearest dollar and puts the change into your Changed account. Once you reach a certain threshold, that money gets deposited to your student loan provider. The app also offers a dashboard that lets you see all your loans in one place. (There is a $3/month fee.)

Recommended: 6 Strategies to Pay off Student Loans Quickly

Simplify Your Loans by Refinancing

When you refinance your student loans, you combine your federal and/or private loans into one private loan with a single monthly payment. This can simplify repayment and might be a smart move if your credit score and income can qualify you for lower interest rates.

With a refinance, you can also change your repayment terms. You might choose a shorter term to pay off your student loans faster. Or, you might go with a longer repayment term to lower your monthly payments (note: you may pay more interest over the life of the loan if you refinance with an extended term).

If you’re considering a refinance, keep in mind that refinancing federal loans with a private lender disqualifies you from government benefits and protections, such as income-driven repayment plans and generous forbearance and deferment programs.


💡 Quick Tip: It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to financial advisors, networking events, and more — at no extra cost.

The Takeaway

When it comes to paying off your student loans, knowledge is power. So a great first step is to take inventory of all the loans you have, noting the loan amounts, interest rates, payment amounts, and due dates. Other ways to stay organized include: storing all of your loan paperwork and mail in one place, creating a master student loan spreadsheet, and using technology (like apps and loan platforms) to help you track your progress and pay off your loans faster.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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.

Third-Party Brand Mentions: No brands, products, or companies 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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Dec
28
2022
Prepaid College Plans: What Does Each State Offer?

Prepaid College Plans by State: What Does Each State Offer?

By | Going to College, Student Loans, student_loan | Comments Off on Prepaid College Plans by State: What Does Each State Offer?

College is a major expense. Even with years of thoughtful saving and planning, the costs can add up quickly. Prepaid college plans are one option families are choosing to work out a smoother financial process for students and parents alike. These plans used to be more readily available in the past. Still, it’s worth looking at prepaid college plans, where you can get one, and whether they’re a smart financial decision.

What Are Prepaid College Tuition Plans?

If you have a student who definitely plans on going to college someday, a prepaid college tuition plan can help set them up for success. You, as a parent, guardian, or relative, can start paying for college now, long before the student actually attends. This locks in the current tuition rate. Even as tuition costs go up in subsequent years, these plans allow you to keep paying the tuition rate you initially locked in.

You can think of it as a loan of sorts. You pay up front, and the state earns money off of those payments. When it comes time for your student to attend college, the state pays the tuition out of the funds you provided.

Of course, you need to be confident in your student’s plans for this to work. You will probably need to live in the same state as the college the student will attend since these plans tend to apply only to in-state tuition.

Pros and Cons of College Prepaid Plans

Obviously, locking in a lower tuition rate can be a tremendous financial benefit. With college costs constantly on the rise, a prepaid tuition plan offers the potential of a steep discount. And you might even enjoy some tax breaks if you choose this approach, such as a deduction based on your contribution to a prepaid plan, depending on where you live.

However, this sort of plan can be somewhat inflexible. You may be limited in the choices you have in terms of schools. While you can get a refund if your student chooses a different school than you all expected, you may end up feeling some pressure to stay the course when investing in a plan like this.

And you can’t use the money freely. There are restrictions to how you can use the funds in a prepaid college plan. For example, room and board probably aren’t covered. These plans generally focus specifically on tuition and fees.

Despite this, many choose prepaid college plans to lock in a rate. They also enjoy the high contribution limits and tax benefits. Here are the major pros and cons of these plans.

Pros Cons
Steady tuition rate Lack of flexibility
Tax breaks Eligibility limitations
High limits Lack of control

Prepaid College Plans vs 529 Program

College prepaid plans and 529 college savings plans are similar. They serve the same basic function. However, when you look closer, they can be quite different. Prepaid tuition plans are a type of 529 plan, in fact, but 529 savings plans have distinct features that might sway your decision about investing in one or the other. Here are three of the biggest differences.

Prepaid College Plan 529 Savings Plan
Timeframe You must start investing within a certain time period. Different states will have different rules about this. You can generally invest whenever you like.
Flexibility These plans are less flexible. You generally have to spend the money on tuition and fees specifically. You have more flexibility in how you spend your money here. You can use funds for books, room and board, and other expenses, as well as tuition.
Risk These plans are stable. However, they won’t earn much over time. If your student changes their mind and you withdraw the money, expect to break even. These plans aren’t risky, but they aren’t going to earn much either. This is an investment. It could earn far more than a prepaid plan, but it does involve stock investments.

The National Prepaid College Plan

While many prepaid college plan options are state-run, there is also a national program called the Private College 529 Plan. Unlike other prepaid college plans, there’s no state residency requirement to join this plan. It applies to nearly 300 colleges and universities. However, they are all private institutions, not public. They span 30 states plus the District of Columbia.

The national plan offers a bit more flexibility than state plans, and you don’t need to choose a school to start saving. That decision can wait until your student is actually enrolling, in fact. As long as it’s one of the private institutions that are part of the plan, you can use your funds there.

Recommended: How to Start Saving for Your Child’s College Tuition

States With Prepaid College Plans

Only nine states still have prepaid college plan options, and each state will offer something a little bit different. You can compare all of the options below to see if any of these state plans work for you.

State Plan Features
Florida Florida 529 Prepaid Plan The child must be a Florida resident. This plan covers tuition and fees and you can opt into a one-year dorm plan as well. Florida lets you use this plan nationwide and it’s guaranteed by the state so you won’t lose money.
Maryland Maryland Prepaid College Trust You can start by prepaying for just a single semester. This plan also works for out-of-state tuition. And it offers an income tax deduction for Maryland residents.
Massachusetts Mefa U.Plan You can contribute the full cost of tuition and fees to this plan, which is invested in bonds. You can transfer the funds or cash out and receive your investment plus interest if your plans change.
Michigan Michigan Education Trust Michigan offers a discounted, age-based pricing structure. Plus, you can transfer the funds to other family members. The funds work at in-state, out-of-state, and even trade schools.
Mississippi MPACT You pay a lower monthly rate for younger children when you enroll in this plan. You have to use the funds on tuition and fees, but anyone can contribute to the plan.
Nevada Nevada Prepaid Tuition Program There are some eligible out of state and private institutions that qualify under this plan. The student must use the funds within six years of graduating high school.
Pennsylvania PA 529 Guaranteed Savings Plan This plan only applies to state universities. However, you can also use it for up to $10,000 at elementary and secondary public, private or religious schools. You can alter your contribution levels at any time by changing your tuition level.
Texas Texas Tuition Promise Fund Save for public colleges and universities in Texas with this plan, excluding medical and dental institutions. You must enroll between September and March.
Washington Guaranteed Education Tuition You can use your funds on schools nation-wide. You can even use the funds for room and board, books, computers, and other expenses. As long as you use the funds for higher education, they won’t be subject to tax.

Are Prepaid College Plans Tax Deductible?

It depends on the state and plan, but in many cases, yes! There may be stipulations, though. For example, you’ll probably have to use the funds for higher education only. However, withdrawals for educational purposes may be tax-free. Moreover, your contributions to the plan could earn you deductions.

Are Prepaid College Plans Worth It?

That depends on where you live and what your student’s goals are. If the future is pretty certain, or you live in a state with a very flexible plan, a prepaid college plan can be a safe, stable way to save up money for college.

Because of the limitations and lack of flexibility, though, it may not be right for everyone. If, for example, you want to be more aggressive about your college planning, a 529 savings plan might suit your goals better. Plus, you can spend that money on things beyond just tuition and fees.

Recommended: Parent PLUS Loans vs Private Parent Student Loans for College

Alternative Methods for Prepaid College Plans

Beyond a prepaid tuition plan, you can also try a college savings plan to build up cash for college. This allows you to save up money and spend it on qualified education expenses. It doesn’t lock in a tuition rate, but because it’s a more aggressive type of savings plan, you could end up saving up more money in the long run.

There is also a national option. This plan applies even in many states that don’t have their own prepaid tuition plans. It also locks in rates, but you will have to choose one of the schools covered by the plan. Luckily, there are almost 300 to choose from.

Of course, if your child is headed to college in the next few years, you may not have time to save much money. Parent PLUS loans can help. When an undergraduate’s financial aid doesn’t meet the cost of attendance at a college or career school, parents may take out a Direct PLUS Loan in their name to bridge the gap.

The Takeaway

The thought of large student debt scares off many who would otherwise attend a college or university. But with some strategic and long-term planning, college can fit in the budget. You can mix and match approaches to find what works for you. For example, you could combine a prepaid tuition plan with a no-fee student loan to pay for college. No matter what you ultimately choose, it will help to start planning well in advance.

Photo credit: iStock/dangrytsku

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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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Dec
09
2022
Using a Credit Union to Refinance Student Loans

Credit Union Student Loan Refinancing: All You Need To Know

By | Fresh Out of School, Student Loans, student_loan | Comments Off on Credit Union Student Loan Refinancing: All You Need To Know

In addition to typical banking and lending services, some credit unions also offer student loan refinancing opportunities. Refinancing student loans means that you pool all or some of your existing federal or private student loans into a new loan with a new, private lender. The goal is to achieve some sort of advantage when you refinance: for example, a lower interest rate or a lower monthly payment by extending your loan term.

It’s important to note that if you refinance federal student loans, you will forfeit access to federal repayment plans, such as the Standard, Graduated, and Extended Repayment plans.

Keep reading to learn more about how credit unions differ from traditional banks and why you may want to consider a credit union for student loan refinance.

How Credit Unions Differ from Traditional Banks

A credit union is a financial services cooperative that exists to serve its members. Products and services of a credit union typically include member education, financial planning help, mobile and online banking, checking and savings accounts, and the usual menu of loans.

Banks deliver many of the same types of services as credit unions. Their main goals are to benefit stakeholders and customers. But credit unions differ from traditional banks in one main way — they are nonprofit, whereas traditional banks are for-profit. Take a look at the comparison table below to learn more about the differences between credit unions vs. banks.

Credit Unions

 Banks
Nonprofit organizations For-profit institutions
Must be a member; they are member-owned Anyone can be a customer; they are owned by shareholders
Dividends issued to members and also to benefit capital development for the overall benefit of members Stockholders receive dividends
More-limited product offerings Wide variety of product offerings
Deposit insurance, which helps provide insurance in case of institution failure, is provided by the National Credit Union Administration (NCUA) Deposit insurance in case of bank failure is provided by the FDIC
May offer lower rates and better fees Rates and fees may be higher due to for-profit status
Fewer locations and ATMs More branches and ATMs

Pros and Cons of Refinancing Student Loans With a Credit Union

Credit unions can offer benefits that other lenders might not give you, but there are some downsides to watch out for as well. It’s a good idea to take a look at both the pros and cons before refinancing student loans with a credit union.

Pros of Credit Union Refinancing

 Cons of Credit Union Refinancing
May charge lower interest rates and fees May encounter limits on how much you can refinance
Credit unions have a greater understanding of member needs (such as alumni, military, or community credit unions) May offer less flexible repayment options
May earn discounts if you’re already a member or if you make your loan payments on time Interest rates and fees may cost more than with other types of financial institutions
Potentially better customer service due to dedication to members compared to large banks or online lenders Must apply to become a credit union member

If you’re looking for more in-depth information, SoFi offers a comprehensive student loan refinancing guide.

Finding a Credit Union That Refinances Student Loans

Which credit unions refinance student loans? It’s a good idea to consider a wide variety of lenders before you land on a credit union, including national credit unions, local credit unions, alumni credit unions, and even church credit unions. Not every credit union offers student loan refinancing, so you’ll have to do a little homework based on where you’re likely to be able to tap into membership opportunities.

By the time you finish comparing and contrasting all of your options (including interest rates), you’ll have a better idea of what type of lender you should choose. In addition to searching around for the right lender, you can do a few other things to strengthen your overall profile.

Review your FICO® credit score, the three-digit number that tells lenders how well you handle debt. Your credit score can reveal the rate and terms you will likely receive. It’s a good idea to try for the highest credit score you can get. The higher your credit score, the more favorable your terms will be, which can help you save a significant amount of money over time.

Consider paying down other debts you have, such as personal loans or credit card debt. Lenders take a look at your debt-to-income (DTI) ratio, which compares your monthly debt to the income you bring in. The lower your DTI, the better your opportunities may be.

You can also assemble the types of documents that you know your lender may need, including government-issued identification (such as your driver’s license), pay stubs from your employer, and recent tax returns. It may speed up the process of loan approval once you apply for a student loan refinance with the credit union.

Recommended: What Is a Bad Credit Score?

Comparing Credit Union Loan Terms

Loan terms refer to all the conditions and options available to you when borrowing money. The key elements you should look for in a refinance lender are:

•   Interest rate: What interest rate will you receive from the lender? You want to be able to get a lower interest rate than what you have on your current loan(s). The lower the interest rate, the more money you’ll be able to save on your loan over time.

•   Payoff amount: Know the total “payoff amount” for each loan offer. Getting a round figure from each lender will let you determine the interest amount you’ll pay over your entire loan period. A student loan refinancing calculator can also help you calculate your final costs. You can also find out whether a 20-year student loan refinance or 30-year student loan refinance makes sense for your needs.

•   Fees. Some lenders charge fees to help cover the cost of servicing a loan. These may include origination fees, prepayment penalties, and late fees.

Besides loan terms, consider asking about flexible repayment options and customer service:

•   Flexible repayment options: What happens if you have trouble making your payments? Will your lender work with you? It’s a good idea to ask questions about the types of repayment options they offer in the case of a job loss or a demotion, for example.

•   Customer service: Will you get good customer service from the credit union you’re considering? Ask for references from current customers. You may also know of student loan refinance customers in your community who already use a particular credit union and who can talk to you about their experiences.

Recommended: When Should I Refinance My Student Loans?

Alternatives to Credit Unions for Student Loan Refinancing

What alternatives to credit unions do you have, and should you refinance student loans in the first place? You can refinance with banks, online lenders, and other financial institutions.

Some online banks and lenders differ in that they cannot accept cash deposits (to savings or checking accounts) from customers. Or they may only offer loans, lines of credit, and credit cards. Because they don’t accept cash deposits, online lenders face less stringent government requirements than traditional banks and credit unions.

Before you make a final decision about a credit union student loan refinance or alternative banking solution, take a look at the interest rates, overall payoff amounts, repayment options, and customer service reviews.

The Takeaway

You can refinance private student loans with a credit union (as well as federal student loans), but it isn’t your only option. Credit unions differ from traditional banks due to their nonprofit status, membership requirements, dividends offered to members, limited product offerings, and backing by the NCUA rather than the FDIC. Shop around to find the best loan terms (interest rate, repayment period, and fees) before you settle on a lender.

If you think refinancing might make sense for your situation, consider refinancing your student loans with SoFi. You can refinance online and pay zero fees.

Check out student loan refinance rates offered by SoFi.


Student Loan Refinancing Tips

1.   Refinancing student loans is a way to lower your monthly payments by either getting a lower interest rate and/or extending the loan term. Please note: If you refinance a federal loan, you will no longer have access to federal protections and benefits.

2.   When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

3.   It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.

Photo credit: iStock/SDI Productions

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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 .

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.

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Dec
08
2022

Should I Sell My House to Pay Off Student Loans?

By | Family Finances, Student Loans, student_loan | Comments Off on Should I Sell My House to Pay Off Student Loans?

Selling a house to pay off student loans may not make the most sense for most borrowers. If you’re thinking about selling your home to pay off your mortgage debt and then buying another home after you pay off your student loans, it’s important to remember that no matter what, you’ll still have to pay back debt. Due to certain characteristics of both student loans and mortgages, it might not be advantageous to you as a borrower.

Read on to learn about mortgage debt vs. student loan debt, the challenges of selling your house to pay off student loans, and alternative options to selling your house to pay off student loans.

Paying Off Student Loans

It’s understandable that some borrowers may want to leverage the sale of a house to sweep away student loan debt. After all, student loan borrowers in the United States collectively owe about $1.6 trillion, up from $250 billion in 2004, according to Brookings and the U.S. Department of Education. Student loans take up the second largest portion of household debt after mortgages.

However, there are specific repayment plans that could help you put a plan in place to tackle the process of paying off your student loans. Here are several repayment plans available to federal student loan borrowers:

•   Standard Repayment Plan: The most common repayment option for federal student loans is the Standard Repayment Plan, which means you pay a fixed amount each month. You must make payments of at least $50 per month over a 10-year period in order to repay the loan in full.

•   Extended Repayment Plan: The federal fixed or graduated Extended Repayment Plan allows you to take up to 25 years to pay off your student loans in full. You must owe more than $30,000 to qualify under the Direct Loan or a Federal Family Education Loan (FFEL) program.

•   Graduated Repayment Plan: You can start out with a lower monthly payment and increase your payment amount every two years with the federal Graduated Repayment Plan. You’ll still pay your loans off in 10 years but the graduated repayment plan theoretically allows for your student loan payments to grow along with your salary.

•   Income-Driven Repayment Plan: The Income-Driven Repayment Plans set your monthly payments based on your income and family size. It can take up to 25 years to pay off your loan using four different options: the Revised Pay As You Earn Repayment Plan (REPAYE Plan), Pay As You Earn Repayment Plan (PAYE Plan), Income-Based Repayment Plan (IBR Plan), and Income-Contingent Repayment Plan (ICR Plan). You may even be able to cancel your remaining balance after you meet certain requirements.

These plans give you opportunities to pay off your student loan debt with a goal in mind as an alternative to selling your home.

The repayment plans available for private student loans will vary based on the lender’s policy.

Mortgage vs. Student Loan Debt

Whether you choose mortgage and student loan debt, the fact of the matter is that you’ll still have debt.

One of the first things you may look into when you’re trying to decide whether to sell your house and pay off your student loan debt may be your interest rate. The interest rate is the amount you pay per month as a portion of the loan you receive from your lender. The higher your interest rate, the more you’ll pay over the life of the loan.

Mortgage lenders set interest rates based on the action on secondary markets, where bundles of loans are bought and sold as well as the amount of risk you present to a lender. Rates fluctuate depending on the 10-year Treasury yield. Mortgage lenders will also evaluate factors like your personal credit score, the type of mortgage, and loan terms, your down payment, and more when determining your mortgage interest rate.

The U.S. Department of Education also sets interest rates for federal student loans based on the 10-year Treasury note. Private student loan lenders use market factors and information they gather about you, the borrower, and your cosigner (if applicable). Private lenders also use a benchmark index rate to determine interest rates called the Secured Overnight Financing Rate (SOFR).

Student loan interest rates may be higher or lower than mortgage rates, depending on the type of mortgage loan you choose. If your student loan interest rate is higher than your mortgage, you may want to consider keeping your mortgage and refinancing your student loans to a lower interest rate.

However, the interest rate isn’t the only thing you’ll want to consider before you make your decisions about how to pay off student loans. In the next section, we’ll discuss several other important considerations before you make the big decision about whether to sell your house to pay off debt.

Challenges of Selling Your House to Pay Off Student Loans

Why may you want to avoid selling your house to pay off student loans? Let’s walk through a few reasons why you might want to consider other options.

Your Home Serves as Collateral

A mortgage is a home loan secured by the property you finance. In other words, when you get a mortgage, you put your home up as collateral. This means that when you borrow money, you agree to put an asset up to back the loan or as backing for that loan. If you fail to make your payments, your lender could take away your home through foreclosure.

Student loans are not backed by any collateral. You can’t lose your home if you’re having trouble making your student loan payments — there are benefits to having student loans!

You Lose Out on Certain Tax Benefits

If you’re not paying interest on student loans, you can’t claim the student loan interest deduction, which allows you to deduct up to $2,500 of the interest paid for student loans on Form 1040. You may deduct $2,500 or the amount of interest you actually paid during the year, whichever is less.

It’s true that you can also take advantage of the mortgage interest deduction, which is a tax deduction on the mortgage interest paid on your mortgage debt. You can deduct interest on the first $750,000 of your mortgage as long as you itemize your tax return.

However, if you’re asking, “Should I sell my house to pay off student loans?” — it may be a better idea to keep your student loan and your mortgage and get the tax benefits of both the student loan and mortgage interest deductions.

Alternatives to Selling Your House to Pay Off Student Loans

What alternatives are available if you’re thinking, “I don’t know if I want to sell my house to pay off student debt?” Let’s go over a few options.

Consolidating Student Loans

If you have multiple federal student loans from different loan servicers, you may be able to combine them into one loan with a fixed interest rate by choosing student loan consolidation. You can also change your loan term when you consolidate and also adjust the repayment terms on your loans without paying extra fees. Though it’s worth noting that it’s possible to change your repayment plan for federal student loans at any time.

You must complete the Federal Direct Consolidation Loan Application to consolidate your loans but you can only use this option for federal student loans, not private student loans. You may consider refinancing your private student loans if you are interested in changing the rates or terms on them — continue reading for additional details on student loan refinancing.

Student Loan Forgiveness

It’s important to note that most student loan forgiveness programs don’t offer complete loan cancellation right away. As mentioned earlier in the article, with an income-driven repayment plan it could take 25 years to qualify for complete forgiveness.

One of the most common types of forgiveness, Public Service Loan Forgiveness (PSLF), means you no longer have to pay your remaining federal student loan debt after you make a specified number of monthly payments. You must satisfy all of the requirements before you get your loans forgiven or canceled. Note that the program only applies to federal direct student loans, including:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Parent PLUS Loans

•   Graduate PLUS Loans

•   Direct Consolidation Loans

Pursuing loan forgiveness through a program like PSLF requires a series of on-time, qualifying payments. The program requirements can be strict so be sure to read the details closely to be sure you are fulfilling them. If you have any questions about whether you qualify for loan forgiveness, contact your loan servicer.

Refinancing Student Loans

Refinancing your student loans essentially means you trade in your current loans to a private lender and exchange them for a new loan with a better interest rate and payment plan. The goal with refinancing is to save more money over time with a lower interest rate over a fewer number of years.

The Takeaway

Ultimately, you’ll have to consider a wide variety of factors before you decide whether it makes sense to sell your house to pay off student loans, including:

•   Interest rates

•   Loan term

•   Repayment options

•   Student loan consolidation options

•   Forgiveness options

•   Refinancing opportunities

•   Tax deductions

In some situations, it doesn’t make sense to sell your house to pay off your student loans. Selling your home may mean eliminating a mortgage, but it also requires you to find a new place to live. Before you decide to sell your house to pay off student loans or buy a house again after doing so, it’s also important to remember that your home is a great investment — a nest egg that you can build on throughout your loan term.

Check out SoFi’s student loan calculator to see how you can refinance student loans and potentially secure a lower interest rate. You’ll quickly learn your estimated savings over the life of your loan. SoFi might have the answer to handling your student loans — no need to sell your home.

FAQ

Should I move to pay off student debt?

Moving to pay off your student loans is a personal choice. However, if you can find a lower-cost home, it may be beneficial for you to be able to make lower mortgage payments because you may be able to devote more money per month toward your student loan payments. Weigh the pros and cons and also find out if you’ll owe money for paying off student loans early. Most lenders don’t charge a prepayment penalty, but it’s possible that your lender could charge one.

Is it wise to sell a house to pay off debt?

Selling your home to pay off debt can be one option for eliminating some of your debt, especially if you feel that you’re paying too much for your mortgage. Downsizing can be an effective way to expedite the repayment of other debts because you can use the excess money to make extra payments. The general rule of thumb is to spend 28% or less of your monthly gross income on your mortgage payment, which includes your principal, interest, taxes, and insurance. Before you sell your home to pay off debt, consider all the angles before you take the leap.

Is it better to pay off a house before selling?

You may think it’s a good idea to pay off a house before you sell it to make a clean, fresh start before buying a new home. However, you might end up owing more at closing because you might be subject to a prepayment penalty through your lender. Check your loan terms before you decide.

Photo credit: iStock/Quils

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.

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.

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Dec
08
2022
Refinancing Student Loans Without a Cosigner: Is It Possible?

Refinancing Student Loans Without a Cosigner: Is It Possible?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | Comments Off on Refinancing Student Loans Without a Cosigner: Is It Possible?

As long as you meet lender requirements, it’s possible to refinance student loans without a cosigner. Refinancing means that a private lender bundles some or all of your loans, pays them off, and structures them into one new loan. A private lender can be a bank, school, credit union, or state agency. Federal student loans are funded by the federal government.

A cosigner is an individual with a good credit record who agrees to repay the loan if the primary borrower cannot. If you prefer to apply for a student loan without a cosigner, you may pay more for your loan over the long term through higher interest rates.

Keep reading for more information about student loan refinancing without a cosigner and what it involves.

What Is Student Loan Refinancing?

Student loan refinancing means that a private lender pays off your existing loans (which can be a mixture of private and federal student loans) and puts all of your loans under one roof. This means you don’t have to keep track of various loan payments.

Refinancing student loans allows you to lower your interest rates or extend your loan payoff. Your interest rate, which is a percentage of your principal amount borrowed, is the amount you pay to your lender in exchange for borrowing money. Extending your loan payoff means that you will increase the number of years you take to pay off your loan. It’s important to note that in this case, you will pay more over the life of your loan because you increase the number of years that you will pay for your loan.

You can refinance both federal and private student loans, but note that you must do so with a private lender. You cannot refinance any type of loan into a federal student loan. However, refinancing federal student loans means that you’ll lose access to federal protections such as federal loan forgiveness and income-driven repayment plans. Some lenders only refinance private student loans. Clearly, knowing if and when to refinance student loans is not a simple decision.

Benefits of Refinancing Student Loans Without a Cosigner

Take a look at the benefits of a student loan refinance with a cosigner and the drawbacks of refinancing student loans without a cosigner.

Pros of Refinancing With a Cosigner

 Cons of Refinancing Without a Cosigner
Students may gain access to lower rates and terms. Students may not get approved for a loan without a cosigner.
Students may have a better chance of getting approved for refinancing student loan debt with a cosigner. Students may have to pay a higher interest rate without a cosigner on the loan.
Students may be able to build their credit in order to qualify for future loans and get a lower interest rate on other loans in the future.

Keep in mind that if the student stops making loan payments, cosigners may end up paying back the student loan. Not making payments can damage both the student’s and the cosigner’s credit score. Your credit score is a three-digit number that shows a lender how well you pay down debt.

If this happens, it can result in a strained relationship. A student loan refinance without a cosigner may be the best option for all parties involved.

Recommended: Guide to Student Loan Refinancing

How To Refinance Student Loans in 4 Steps

Refinancing student loans without a cosigner typically follows these four steps:

1. Prequalify

By submitting some personal information, you can compare the rates among lenders. Lenders will run a soft credit check which won’t hurt your credit. Lenders will ask for your name, address, school you attended, degree achieved, total student loan debt, income, credit score estimate, and more. The information you need to provide varies from lender to lender.

Recommended: What’s the Difference Between a Hard and Soft Credit Check?

2. Get Multiple Rate Estimates

Each lender will likely give you several offers with various term lengths as well as fixed interest rates (those that don’t change) and variable interest rates (those that change depending on market fluctuations).

3. Complete the Application

Once you’ve chosen a lender and a loan, you can submit documentation that supports the soft credit check and any other information the lender needs, such as personal identification, pay stubs, or other income verification. You’ll undergo a hard credit check at this point.

4. Sign the Final Documents

Learn your final costs, or take a look at a student loan refinance calculator, to get a sense of your all-in costs so you know what you’ll have to pay every month.

What Refinancing Without a Cosigner Involves

Refinancing student loans without a cosigner involves special considerations:

Qualifying With Your Own Credit

Qualifying for a refinance with your own credit means that you aim to get a refinance using your own credit score. The credit score you need to qualify for a refinance will depend on a wide variety of factors, including your income and other information.

It’s important to put forth as high a credit score as you possibly can. The FICO® score range from 300 to 850 — 300 is the lowest and 850 is the highest credit score possible.

In addition to your credit check, you may also need to meet some basic eligibility requirements:

•   The legal age, or “age of majority,” in your state (typically 18)

•   A U.S. citizen, permanent resident, or non-permanent resident alien

•   Employed or have sufficient income from other sources

•   Graduated with an associate’s degree or higher from a qualified institution

Recommended: What is a bad credit score?

Debt-to-Income Ratio

When you get a refinance, a lender will also look at your debt-to-income (DTI) ratio. This is a percentage that tells lenders how much of your money per month goes toward monthly debts versus how much money you have coming into your household.

You can figure out your DTI by adding up your monthly debts and dividing that figure by your gross monthly income (your income before taxes). The result is a percentage, and the lower the percentage, the less risk you present to lenders. Learn more about why debt-to-income ratio matters in student loan refinancing with cosigner and without a cosigner.

Employment Status

In many cases, you must be currently employed, earn income from other sources, or have an offer of employment to start within the next 90 days in order to get a refinance. However, various lenders may have different employment stipulations. Check with your lender to learn more.

Credit History

In order to qualify for a refinance, a lender will look at your credit history, which includes your current and past credit accounts, the amount you owe, and your payment history. Your credit history reveals how responsibly you repay your debts. Credit scores come from information on your credit reports.

What If You Can’t Get Approved Without a Cosigner?

If you can’t get approved without a cosigner, you may want to look for a lender with an alternative credit check. Lenders may offer an alternative process, including simply taking a look at your grade point average, field of study, graduation prospects, and estimated future earnings to determine your eligibility for a refinance or loan. Keep in mind that these alternative requirements may require you to pay a higher interest rate for your refinance.

You may also consider going ahead with a cosigner and then later applying for a student loan cosigner release. A cosigner release means that cosigner is released from a loan as long as you meet certain requirements, such as a minimum payment requirement. Once released, the cosigner is no longer obligated to take care of your debt if you cannot repay your loan.

Alternatives to Refinancing Without a Cosigner

One of the best ways to circumvent the need for a cosigner is to work on improving your credit score. You can do that by paying off debt — paying down credit cards, paying off loans that have gone into arrears — and not taking out too many other types of loans. Your credit score will increase over time as you make positive moves.

SoFi Student Loan Refinancing

It’s possible to refinance student loans without a cosigner, but you may end up with less desirable rates than if you did opt for a cosigner. However, consider the pros and cons of applying with and without a cosigner, including the potential for a strained relationship if you fail to make timely loan repayments. Another important factor to weigh is how likely you are to benefit from the current federal student loan forgiveness plan, as well as the protections that come with federal student loans.

If you think refinancing might make sense for your situation, consider refinancing your student loans with SoFi. You can refinance online and pay zero fees, whether you choose to refinance student loans with a cosigner or not.

Check out student loan refinance rates offered by SoFi.

Photo credit: iStock/paulaphoto

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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 .

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.

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