SoFi

It’s a new year—and the perfect time to take a fresh look at your student loans. With recent changes in the financial landscape, now is a great time to consider a change if you are one of the 40MM+ individuals with student debt. Refinancing and consolidating student loans can be a financial game changer: You can pay your debt in a single monthly payment and potentially lower your rates—meaning less interest and more peace of mind.

Here are our top five tips to help you navigate and understand student loan refinancing.

1. Know Your Loans

Make sure to take inventory of the current loans you have. Which lenders are they with? Are they private or federal loans? What’s the balance owed and the interest rate for each loan? It’s important to know where you are today to better evaluate your best options for student loan refinancing.

For example, the Federal Direct Loan consolidation program won’t let you combine your private and federal student loans to a single payment or interest rate. You should also understand what deferment and forgiveness benefits are, and if they’re applicable to your loan and circumstances.

2. Do the Math

In order to better understand how much you’ll benefit from refinancing, it’s best to know your numbers: Specifically, the overall balance owed and average interest rates across both your federal and private loans. Once you have that info, you can use an online Student Loan Calculator to see how refinancing will impact your current situation and the monthly and lifetime savings you can expect (if applicable).

3. Understand Fixed vs. Variable Rates

This is important, as most lenders will offer both fixed and variable interest rate options when refinancing student loans. Which one should you choose?It depends: Do you want your rate to stay constant long-term or start out low and adjust incrementally? Head over to our fixed vs. variable rates page for a helpful overview of fixed and variable rates to see what best suits your needs.

4. Choose a Lender

When it comes to choosing a lender for student loan refinancing, you’ve got options. There are many helpful articles and online resources to find the right lender for you, but ultimately you’ll want to find a refinancing partner that offers a competitive rate. Additional benefits can also be helpful—like payment deferral (in case of job loss) or discounts on other financial products that can save you money.

Here are a few sites that may be helpful in finding the best match for your student loan refinancing: Student Loan Hero , Magnify Money , and Lendedu .

5. Lock In Your Rate

The sooner you refinance your student loans, the quicker you can start meeting your financial goals with a simpler monthly bill or a lower interest rate. So don’t wait—make 2022 the year for action. Check your rate in 2 minutes.

Want event more tips on student loan refinancing? Explore SoFi’s student loan help center for guides, resources, and advice on all thins student loans!

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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It’s been more than a decade since the Great Recession. Remember how it brought multibillion-dollar financial corporations to their knees and nearly chased the big American automakers right out of Detroit?

Instead, both industries got a bailout, to the tune of $634 billion, according to ProPublica’s Bailout Tracker.

So if the giants of capitalism got a pass, will the students paying loans to get a bailout as well? Will there be a student debt cancellation plan for you and your former classmates?

A Rising Tide of Student Loan Debt

When you earned your degree, you also most likely earned your way into a not-so-exclusive club. Forty-five million people owe $1.73 trillion in student loans in America. For comparison, that’s $740 billion higher than the outstanding credit card debt in the country.

Student loan borrowers owed about $845 billion in late 2010. This means that in the past decade, student debt has grown by over 100%.

How Many Would Benefit From a Bailout?

Forgiving just $10,000 per person would wipe away the federal student loan debt of 15.3 million borrowers, Insider reported.

Proponents of student loan cancellation say a bailout would:

•  Minimize the wealth gap

•  Inspire the creation of small businesses

•  Encourage homeownership

•  Help people feel more confident starting families

Here are two more things backers argue that student loan forgiveness would do.

Spark an Economic Upswing

Bharat Ramamurti, a member of the COVID-19 Congressional Oversight Commission, tweeted what he sees as benefits of student loan forgiveness: “Broad student loan debt cancellation via executive order is good economics and politics.”

He added, “One study has found that canceling all debt would have a big stimulative effect. Of course, the impact would be less if less debt were canceled, but debt cancellation is one of the relatively few ways to stimulate the economy without Congress.”

Benefit All Federal Student Loan Borrowers

Upper-income households owe almost 60% of the outstanding education debt and make almost three-quarters of the payments, the Brookings Institution noted. Lowell Ricketts, a lead analyst for the Center for Household Financial Stability at the St. Louis Fed, agreed that loan forgiveness would disproportionately benefit affluent graduates .

But he pointed out that forgiving $10,000 of student debt would help many low-balance borrowers as well and resolve the problem of overdue payments that 19% of that group has.

The Price of Student Loan Debt Cancellation

While it might sound like a good idea in the face of high debt balances and delayed dreams, one reason it might not come to fruition is the price tag.

Erasure of $10,000 for all 43 million borrowers would cost $377 billion . Canceling $50,000 for all 43 million would cost over $1 trillion, according to The Conversation, which publishes pieces by academics well-versed in these areas.

Additionally, the optics of a student loan cancellation aren’t necessarily good. For example, law and dental school grads may have high debt balances but also might start lucrative careers immediately.

The issue of wiping out student loan debt may have another fairness factor. Former students who successfully paid off their loans may not appreciate seeing millions of current borrowers let off the hook.

And while you can default on a mortgage or get rid of most credit card debt by filing for bankruptcy, most student loans are owned by the federal government, and are extremely difficult to get discharged except for all but the most extreme circumstances.

Student Loan Cancellation FAQ

Q: Did the Stimulus Bill Forgive Student Loans?

A: No. The $1.9 trillion coronavirus relief bill passed in March 2021 doesn’t forgive student loans, but the legislation does mention them: Any federal or private student loan balance that’s forgiven will be tax-free through 2025.

Before the bill, participants of the Public Service Loan Forgiveness (PSLF) Program and income-driven repayment plans were required to pay taxes on any remaining loan balance that was forgiven.

With this change, borrowers who receive any loan forgiveness before Jan. 1, 2026, won’t have to pay taxes on the forgiven loan amount.

It’s unclear if private student loan borrowers will see any gain. Since the only options for repayment aid are refinancing and deferment or forbearance (if offered by the lender), they may not benefit from this bill. However, there has been some buzz about the Biden administration helping private student loan borrowers more.

Q: Are Student Loans Being Forgiven?

A: President Joe Biden had vocalized his support of $10,000 in student loan forgiveness but has not acted on it. The future of student loan forgiveness is still up in the air, as of this writing.

Q: Will They Take Away Stimulus Money for Student Loan Borrowers?

A: Collection agencies can seize stimulus payments for defaulted student loans in some cases.

Paying Down Your Student Loans

Even without a student loan bailout plan, options exist for dealing with your debt.

Federal and Other Programs

If you work in a qualifying public service field or as a teacher and you have federal student loans, you may be able to qualify for the Public Service Loan Forgiveness (PSLF) Program, which is supposed to forgive any remaining loan balance after 120 qualifying monthly payments. Unfortunately, the pool of people qualifying for loan forgiveness has been small.

Specific state and federal loan forgiveness options exist for health care professionals, veterinarians, lawyers, and teachers who work in underserved areas of the country.

In addition to the forgiveness options, qualified federal student loan borrowers may be able to take advantage of delayed payments .

Another way some borrowers seek to ease student loan debt is through income-driven repayment plans. The amount you pay is based on your family size and income, usually 10% of your discretionary income. It’s intended to make the monthly payments more affordable by stretching out the repayment term, which usually results in more interest accumulating over the now-longer life of the loan.

Refinancing

If you refinance your student loans with a private lender, you may qualify for a lower interest rate, which could shave off a significant sum over the life of your loans.

Some lenders refinance both private and federal student loans.

If you decide to refinance, you’ll typically have a choice between a fixed or variable rate, both of which carry their own risks and rewards. A fixed-rate stays the same for the life of the loan, so you always know what your monthly payment will be.

Variable-rate loans can fluctuate as the economy roars or slumps. They’re usually tied to a well-known index, so your payment amount may fluctuate over time. The potential benefit, however, is that initially, the variable rate is sometimes lower than the fixed rate.

You may also have term options if you refinance your student loans. You can shorten your loan term, which can help get you out of debt faster or extend your term, which could ideally lower your monthly payment but, again, means more interest accrues over the life of your loan.

Just know that if you’re refinancing your federal loans into private loans, you’ll be giving up federal benefits and protections such as federal deferral, forgiveness options, and income-driven repayment plans.

Recommended: Student Loan Refinancing Calculator

The Takeaway

Question marks swirl around student debt cancellation. Amid all the noise about the topic, it may be a good idea to take measures of your student loan rates and terms and plot a smart course.

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.