May
31
2023
students on stairs

How Many College Students Are in Debt?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | Comments Off on How Many College Students Are in Debt?

American students and their parents continue to take out student loans to pay for their undergraduate and graduate degrees.

People who are attending college are paying for tuition, room and board, books, and other necessities by taking out student loans or using credit cards.

Paying for college has become more expensive as tuition costs have continued to rise each year. For the 2022-2023 academic year, the tuition for full-time in-state students attending public colleges and universities was $10,950, according to the College Board. Tuition at private colleges and universities for the 2022-2023 academic year was $39,400.

The average federal student loan debt per person in 2023 is $37,338. Private student loan debt is almost $55,000 per borrower.

Americans now owe over $1.6 trillion in student loans. More than 43 million people, both graduates and their parents, have amassed a large amount of debt to pay for higher education.

Paying Down Student Debt Faster

Borrowers can maximize their financial resources and accelerate their repayment schedule in a few different ways.

Some options might include making extra payments by creating a budget, cutting expenses, getting a part-time gig, paying down other debt, and refinancing student loans.

Budgeting Effectively

Creating a budget can help borrowers see and understand all their expenses. A budget could make someone more aware of how much they are spending on eating out or entertainment each month.

Being able to refer to a budget can come in handy when you’re paying bills each month. There are plenty of options to choose from when it comes to budgeting and tracking spending.

After you have created a budget, examine your monthly expenses. One way to do this is to look at your expenses by different categories, such as bills, daily expenses such as parking, necessities such as groceries, and non-essential items such as entertainment.

Going through each category can help a consumer decide what is a priority. It can also help remind you of expenses you’re paying each month, but not using often such as a streaming movie or TV service.

Consider negotiating with the service provider, such as an internet or cable company, to see if there are less expensive options or if they are offering special deals currently.

Making Extra Payments

Making extra payments whenever borrowers can afford can help speed up the repayment process.

Neither federal or private student loans have prepayment penalties, which means borrowers won’t be penalized for making extra payments or paying their loan off ahead of schedule.

When making over payments, check in with the loan servicer to confirm how it will be applied to the loan or loans. For example, a borrower with multiple loans may choose to spread the extra payments evenly among each loan. Others may choose to concentrate on the loan with the highest balance or the highest interest rate.

Another note, lenders may first apply overpayments to the interest accrued on the loan. Borrowers may have to request the extra payment be applied to the principal balance of the loan. The important thing is to be sure you understand exactly where the payment is going.

Focusing on High Interest Debt

When it comes to students and debt, sometimes it’s more than just student loans. Paying down other debt, such as credit cards with higher interest rates or personal loans, can also lower your overall debt.

While some people prefer to pay off their debt with the lowest balance, other people prefer to start tackling the one with the highest interest rate.

Here are some ideas that could help someone pay off their credit cards or personal loans sooner.

•   Making more than the minimum payment. Even an extra $25 or $50 a month adds up.

•   Contacting the credit card company and asking for a lower interest rate.

•   Using automatic payments to avoid missing a payment and incurring a late fee.

•   Stopping using the credit card for additional purchases.

•   Obtaining another credit card with a lower interest rate and transferring all or a portion of the balance.

Some lenders may charge a prepayment penalty for some types of loans or credit, so double check the terms to be sure.

Getting a Second Job or Side Hustle

One way to help pay down student loans faster is to obtain a second part-time job. The additional income from the second job could go towards extra payments on the loan.

Finding a second job could be accomplished by asking your friends or co-workers for referrals. They might know of a small business or person who needs a helping hand or temporary work on a short-term project.

Depending on the gig, some of the work could be completed online or during weekends.

Checking job boards, social media, and with your current network could net you some temporary gigs such as babysitting, pet sitting dogs or cats, or running errands for a professional.

Another strategy is to sell any unused items that are sitting around in your home. Cleaning out your closet or garage could help people come up with some extra income that can be used to make an extra payment or two.

Selling musical instruments, electronics, clothing, or shoes online or at a resale shop is one way to sell the items quickly. Social media is another way to sell your unwanted guitar or electronic tablet that is just collecting dust.

Recommended: 23 Ways to Make Extra Income From Home

Making Lump Sum Payments

Sometimes, making consistent extra payments on a loan isn’t an option. In that case, consider making a lump sum payment whenever you get a larger amount of money from a tax refund, birthday gift, or bonus at work.

Apply all or a portion of the extra money to a payment. Making extra payments applied to the principal can help reduce the amount of interest paid in the long term.

Refinancing Student Loans

Making changes to your budget, slashing your expenses, and getting another gig could help you pay down your student loans faster. Focus on the improvements you have made and create both short-term and longer term financial goals. Refinancing is another option that could potentially help a borrower speed up their repayment.

Student loan refinancing could help qualified borrowers secure a lower interest rate, which also means that more of the money paid each month will go towards the amount that was originally borrowed — the principal value.

This could help students and their parents finish paying off their student loans sooner. A lower interest rate could also reduce the amount of money spent in interest over the life of the loan.

Refinancing can also help make monthly payments more affordable, which could be helpful to people with a tight budget.

However, getting a lower monthly payment when refinancing could be a result of extending the repayment term, which would ultimately mean the loan costs more in the long run.

Refinancing also allows borrowers with multiple loans to combine them into a single loan. This can help streamline the repayment process, since the borrower will be repaying a single loan with a single lender, instead of making multiple payments each month, sometimes to different lenders.

A student loan refinancing calculator can help give you an idea of the amount of your new monthly payments. Any extra money saved each month could be used to pay for other debt such as credit cards or towards your savings for an emergency, a down payment for a car or house, or other goals such as a vacation.

SoFi gives people the option to refinance both federal and private loans. Before you refinance your federal student loans, consider whether keeping the repayment benefits that they offer, such as forgiveness programs or income-driven repayment plans, could be useful to you in the future. When you refinance with a private lender like SoFi, those benefits are no longer available.

The application process at SoFi can be completed easily online and there are absolutely no hidden fees.

Find out if you prequalify to refinance with SoFi, and at what rate, in just a few minutes.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

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Apr
28
2023
Student Loan Forgiveness Scams: Watchouts for 2022

Student Loan Forgiveness Scams: What to Watch Out For

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | Comments Off on Student Loan Forgiveness Scams: What to Watch Out For

It didn’t take long after President Biden announced his student loan forgiveness program in August 2022 for the scammers to get up and running. The Better Business Bureau (BBB) and federal agencies have unearthed hundreds of ads, text messages, phone calls, and emails targeting student loan borrowers. Their purpose? To get consumers to divulge private financial information or to pay for unnecessary services. In response, the U.S. Department of Education issued warnings about the student loan forgiveness scams and advice on how to avoid them.

The ongoing student loan payment pause hasn’t slowed the scammers down. Keep reading to learn how student loan forgiveness program scams try to fool you, and how you can avoid getting duped.

Status of Biden’s Student Loan Forgiveness Plan

The student loan forgiveness plan would cancel up to $10,000 in federal student loan debt for single borrowers with an adjusted gross income of less than $125,000 a year, or less than $250,000 for married couples. Pell Grant recipients could have as much as $20,000 in student debt canceled. To refresh your memory, check out this story on the student debt relief plan.

The DOE officially began to accept applications for forgiveness on Oct. 17, 2022, but had to stop in November due to legal challenges to Biden’s program.

Meanwhile, the pause on federal student loan payments for all borrowers has been extended several times. Repayment could potentially resume as late as 60 days after June 30, 2023, when the U.S. Supreme Court is expected to release its decision on the challenges to President Biden’s student debt cancellation program.

While borrowers wait for updates, scammers are actively using phony government websites, false promises, and other criminal schemes to lure unsuspecting consumers. Here’s what you need to know to avoid student loan forgiveness scams.

Recommended: What Biden’s Student Loan Forgiveness Means for Your Taxes

Types of Student Loan Forgiveness Scams

Watchdogs have identified a variety of scams related to student loan forgiveness. Some are aimed at borrowers searching out information on the internet, and others directly target people who hold student loans. Fortunately, certain patterns are coming into focus. Here’s a rundown of what officials have seen so far.

Recommended: How Do Student Loans Work? Guide to Student Loans

False Deadline Warnings

These scams include texts, calls, and emails sent to borrowers conveying a false sense of urgency that they must take action before a certain date or miss out on forgiveness. In reality, the messages are designed to scare you into disclosing personal financial information, which criminals may then use for identity theft and other financial fraud. Be very wary of any “student loan forgiveness center” calls.

On Oct. 17, the DOE opened the official forgiveness application portal . The deadline for applications is the end of 2023, but you’ll want to apply a lot sooner if your payments will be resuming in January.

What’s more, for many borrowers who already have income information on file with the DOE, forgiveness will be automatic. No application — and no deadline — is necessary.

Fake Email Alerts

Especially while borrowers were waiting on an email from the DOE informing them that the forgiveness application was open, scammers are sending fraudulent emails that look as if they might be from the government in an effort to collect personal financial information. This and other fraudulent strategies are expected to continue.

To make sure you’re responding to a legitimate email, always check the address of the sender. The full address isn’t always obvious on a phone or other mobile device: That interface often shows only the name of the sender. Always click on the sender’s name to see the actual address.

The address is likely to be the real thing if it has a .gov ending, something not easy for fraudsters to imitate.

You can sign up for student loan forgiveness notifications and updates from this DOE webpage .

Help With the Student Loan Forgiveness Application

There are lots of offers on the internet and elsewhere to help borrowers claim their loan forgiveness — for a fee. While not all of the companies offering these services are illegitimate, the DOE has warned that it won’t be necessary to pay for help. They promise the application will be simple and quick to complete.

Predatory companies love to use webinars and videos explaining the details of the loan forgiveness program. The ending is always the same: a plea to sign up for their paid service, with the promise they’ll get you your debt relief. They may claim they can get you additional benefits, get your benefits faster, or get you to state tax breaks if you pay them upfront. In some cases, the outlaws charge hundreds of dollars for unnecessary service.

A real government agency will never ask for an advance processing fee. And legitimate student loan servicers will never charge a fee for providing information about your loans. You can check if a company works with the DOE at the Federal Student Aid site on avoiding scams .

Recommended: 9 Smart Ways to Pay Off Student Loans

What You Can Do to Avoid Scammers

To protect yourself from student loan forgiveness program scams, familiarize yourself with the following tips. They can help you avoid the threat of costly identity theft or financial fraud that can result from these schemes.

Never give out your FSA ID, student aid account information, or password. The DOE and the company that services your federal student loans will never call or email asking you for this information. Along the same lines, never give your personal or financial information — including your Social Security number and bank account information — over the phone or email. (That said, the beta version of the forgiveness application asks for your Social Security number but not your FSA ID.)

Avoid upfront fees. Think twice before paying anyone for help filling out the application. It is highly likely you won’t need help because the government is promising a free and easy-to-use application. Paying a fee before the application is even available is totally unnecessary.

Stay up-to-date. Having the most accurate and current student loan forgiveness information is the best defense against fraud. As mentioned above, sign up with the DOE for notifications and updates. And keep an eye on the Better Business Bureau and Federal Student Aid websites for the latest official information.

Update your contact information. To receive official notices related to student debt relief, make sure the government and your loan servicer have your most current contact information. If your income information is already on file at the DOE, qualifying borrowers will automatically receive loan forgiveness without having to apply. All borrowers, whether or not they have to apply, will be notified by the DOE when the application goes live.

To make sure you get these notices and other updates, sign up with StudentAid.gov to receive text alerts. If you don’t have a StudentAid.gov account, create one now .

You’ll also want to make sure your student loan servicer has your most recent contact information. You can find your federal student loan servicer’s contact information at Studentaid.gov/manage-loans/repayment/servicers

The Takeaway

Understanding how student loan forgiveness scammers work is an important step toward protecting yourself. Staying up to date on the latest official news and announcements can also help you bypass the onslaught of scams out there. Another important defense: Actively manage your student loan accounts and make sure all of your information is accurate and up to date.

SoFi can help. If you have more federal student debt than the new debt relief plan will forgive, or you don’t qualify for loan forgiveness, or you have private student loans, you may want to consider refinancing your debt before rates rise further.

If you do qualify for forgiveness and you refinance your federal student loans, you will no longer qualify for the new program. If you still wish to refinance, leave up to $10,000 unrefinanced ($20,000 for Pell Grant recipients) to receive your federal benefit. Remember: Good information is your best weapon when it comes to managing all aspects of student debt.

Save thousands of dollars thanks to flexible terms and low fixed or variable rates.

FAQ

What are common types of student loan forgiveness scams?

Look out for false email alerts claiming to be from the government and phony government websites. These schemes attempt to get you to divulge personal financial information, which can then be used for identity theft and other financial fraud. Other scammers are offering unnecessary forgiveness application help for a costly upfront fee.

How can I avoid falling victim to a student loan forgiveness scam?

Information is your best defense. Sign up for government alerts and notifications, and keep an eye on advice from official outlets. Also, make sure your contact information is current with both the government and your loan servicer.

Does everyone eligible to receive student loan forgiveness need to fill out an application?

No. If your income information is already on file with the Department of Education, you will not need to apply for student loan forgiveness. You’ll receive it automatically.

Photo credit: iStock/Pekic

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

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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Apr
24
2023
How to Pay Off Dental School Debt and Thrive as a New Dentist

How to Pay Off Dental School Debt

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

In dental school you’re taught the skills you need to become a successful dentist. What they don’t tell you is how to effectively handle your dental school debt. A typical dental school graduate enters the profession with a student loan burden topping $293,900, according to the Education Data Initiative.

That’s $90,000 more than the average medical school debt. Right when dentists are ready to hit the accelerator on their careers, the reality of repayment presents a sizable speed bump.

The good news is, you’ve picked the right profession when it comes to ROEd, or the “return on education” you should reap down the road. The average base salary for general dentists is $217,620, and more than $355,570 for specialists who provide implant services, per a 2021 survey by DentalPost and Endeavor Media.

Ways to Pay Off Dental School

At this stage of the game, it’s important to have a plan for paying down your debt as efficiently as possible. Getting your finances in order early is especially critical if you anticipate borrowing more money down the road to open your own practice or buy a home.

Below, we explain the various student loan payment options available and how to know which one makes the most sense for you.

Choose a Repayment Plan

Federal student loan borrowers have four repayment plans to consider. They all set your monthly loan payment at an amount deemed affordable based on your income and family size. You can change your plan anytime without incurring fees.

•   Standard Repayment Plan. Spreads payments evenly over 10 years. Under this plan, if you have a loan balance of $250,000 at 7.54%, your monthly payment will be about $2,900. This is the default plan if no other plan is chosen.

•   Graduated Repayment Plan. With this plan, payments start lower and then gradually increase over time, usually every two years. Repayment takes place over 10 years.

•   Extended Repayment Plan. Choose either fixed or graduated payments. Repayment takes place over 25 years.

•   Income-Driven Repayment Plans. There are four types of income-driven repayment plans that tie a borrower’s income to their loan payments. Repayment takes place over 20 or 25 years. At the end of the repayment period, the remaining balance is forgiven (though this amount may be taxable).

Thanks to their higher income, dental professionals often pay off their loans before the end of the repayment period, making the forgiveness benefit irrelevant. Also, you may not be eligible for forgiveness programs if your income is over a certain threshold. (Still, we’ll get into forgiveness programs a bit more in the next section.)

Keep in mind that the longer your repayment term, the more interest you pay over the life of that loan. The shorter your term, the less you’ll pay in interest, but the higher your monthly payment will be.

A student loan payoff calculator will give you an idea of your monthly payment for different repayment terms.

Recommended: How To Get Out of Student Loan Debt

Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) program is an option if you start your career at an eligible nonprofit or public service agency. Work for a local, state, tribal, or federal government organization or for a nonprofit organization, and you may be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan. Serving as a full-time AmeriCorps or Peace Corps volunteer also counts.

Examples of qualifying government employers are the U.S. military, public colleges, and public child and family service agencies, but not government contractors.

There are also a number of federal and state loan-repayment assistance programs that reward dentists for providing service to certain segments of the population. The Indian Health Service Loan Repayment Program, for example, offers dentists who serve American Indian communities up to $20,000 per year toward the repayment of school loans.

Student loans from private lenders do not qualify for PSLF.

Student Loan Consolidation

Federal student loan consolidation lets you combine multiple federal student loans into a single new loan with a fixed rate. Your new rate is the weighted average of the old student loans’ interest rates rounded up to the nearest eighth of a percentage point. That means the rate might actually be slightly higher than the prior rate on some of the loans.

If your monthly payment decreases, it’s likely the result of lengthening the term (up to 30 years), which can mean paying more interest over time.

By the way, you can’t include private student loans in this type of a consolidation loan.

Student Loan Refinancing

For many dental school grads, consolidating multiple student loans into a single loan with a private lender, and then refinancing the balance at a lower interest rate, makes sense. Student loan refinancing makes it easier to manage your finances: You’ll get one bill each month from a single lender, instead of several bills for varying amounts that are based on different rates.

Depending on how you structure your loan, a lower interest rate might allow you to pay back your debt faster. That can save you a substantial amount of money over the life of the loan.

You can also choose a term that lowers your monthly payments, leaving more money in your pocket to be used for other things: building an emergency fund, starting a family, and investing for retirement.

Tips for Thriving as a New Dentist

Here are some ways you can set yourself up for success from the very start of your career.

•   Create a budget you can stick to. Leave room for annual and quarterly expenses as well as incidentals.

•   Start a savings plan. The sooner you start saving and investing, the sooner you can enjoy compound growth, which is when your money grows faster over time.

•   Set up automatic payments for student loans. This helps you make payments on time, plus many loan service providers offer a discount if you arrange to autopay.

•   Look into different ways to invest. In addition to maxing out your 401(k) or 403(b), you may also want to consider vehicles such as a health savings account or individual retirement account.

•   Get familiar with your employee benefits package. Find out what perks your employer offers, such as help with student loan repayment.

Recommended: Budgeting as a New Dentist

The Takeaway

Though a typical dental school student owes nearly $294,000 by the time they graduate, there are several student loan payment options that can help borrowers pay down debt more efficiently. All four federal student repayment options, for example, set your monthly payments based on your income and family size. And depending on your employer, you may also qualify for a forgiveness program.

Have multiple loans? Federal student loan consolidation lets you combine them into one new loan with new terms and a new interest rate. Student loan refinancing, which lets you consolidate multiple student loans into a single loan with a private lender, is another option to consider.

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

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


†Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE THAT THE WHITE HOUSE HAS ANNOUNCED UP TO $20,000 OF STUDENT LOAN FORGIVENESS FOR PELL GRANT RECIPIENTS AND $10,000 FOR QUALIFYING BORROWERS WHOSE STUDENT LOANS ARE FEDERALLY HELD. ADDITIONALLY, THE FEDERAL STUDENT LOAN PAYMENT PAUSE AND INTEREST HOLIDAY HAS BEEN EXTENDED TO DEC. 31, 2022. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE THE AMOUNT OR PORTION OF YOUR FEDERAL STUDENT DEBT THAT YOU REFINANCE 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.
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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Jan
25
2023

5 Myths About Student Loans That Can Cost You Money

By | Fresh Out of School, Student Loans, student_loan | Comments Off on 5 Myths About Student Loans That Can Cost You Money

Don’t believe everything you hear about student loans. With tuition costs outpacing income, the fact is that 70% of college graduates need student loans to help pay for college. But bad information can make borrowers feel like they might have made the wrong decision.

Relax. Here are 5 myths about student loans that are pure fiction.

5 Myths About Student Loans

Have you been taken in by any of these student loan fictions and fallacies? A lot of students and parents are, which is why they’re still floating around.

Myth #1: Interest Rates Are Super High

It’s true that federal student loan interest rates can be higher than auto loan rates. But that doesn’t make student loans a bad deal. Here’s why.

Auto loans and mortgages are “secured” loans. The borrower’s car or home serves as collateral and can be repossessed by the bank if they default on the loan. Secured loans have lower interest rates because they’re less risky for the lender.

Student loans, meanwhile, are “unsecured.” If a borrower defaults on student loans, the bank doesn’t have anything to repossess. And so the interest rate is set a bit higher. But the interest rates on federal student loans are still much lower than what you’d qualify for at a bank.

Myth #2: Saving Money Is Impossible With Student Loans

For most people, student loan payments aren’t sky high. The key is choosing the right repayment plan. Take income-based repayment plans, which set monthly payments at just 10% of “disposable income” — or what’s left after your other bills are paid.

Let’s run some numbers. The average new graduate from a 4-year public college has $32K in student loan debt. And the average salary for 20- to 24-year-olds is $37K.

With income-based repayment, a single grad might pay about $138 per month. If they start a family, they pay much less: just $20 a month until their income grows. Which still leaves room for saving.

See how different terms and rates affect your monthly payment with our student loan refinance calculator.

Myth #3: Student Loans Kill Your Credit

Like any loan, student loans could help or hurt your credit depending on how you manage them. As long as you make your payments on time, student loans may build your credit history and boost your score over the long run.

If you’re struggling financially, consider switching your payment plan, or applying for student loan deferment or forbearance. Neither of these options will hurt your credit.

Myth #4: Student Loans Are All the Same

Nope. In fact, federal student loans are typically a better deal for borrowers than private loans. With subsidized loans, the government pays your interest while you’re in school and for 6 months after. And all federal loans offer special protections to borrowers in case of financial hardship.

In short, subsidized federal loans are pretty much the gold standard.

Myth #5: You Can Get Student Loans Forgiven, for a Fee

It sure seems plausible that a law firm or financial advisor might be able to cut through the red tape and reduce your payments or get them forgiven entirely. For a fee, of course.

Alas, this is a scam. If anyone reaches out to you by phone, text, email, or social media promising to help you with your student loans, it’s utter bull. You may catch on when the caller asks for your financial info, but your parent or grandparent may not, so you might want to warn them.

To make sure you hear about the latest student loan forgiveness news straight from the source, sign up for alerts from the DOE .

ReFi With SoFi

SoFi refinances student loans — both federal and private. (Just be aware that refinancing federal loans makes them ineligible for federal forgiveness and protections.) You can choose to lower your monthly payment by extending your term or pay off your debt faster and save money on interest. SoFi offers flexible terms and low fixed or variable interest rates. And there are no fees: no origination fees or late fees.

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

Photo credit: iStock/Khosrork
SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.


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.

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.

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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
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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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