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Getting into a top tier MBA program can be competitive. The top 10 programs have an average acceptance rate of less than 18%. But the elite of the elite accept even fewer applicants. The acceptance rate at Stanford Graduate School of Business, one of the most challenging schools to get into, is just 6.9%.

With such low acceptance rates, any boost to an application can be advantageous to an MBA (or “B School”) candidate. To elevate an MBA application, some candidates choose to seek the assistance of an MBA Application Consultant.

MBA Application Consultants help candidates fine-tune their application with the hopes of improving their chances of acceptance. If you’re considering applying for a top MBA school, here’s helpful information about the value an MBA Application Consultant could bring to the admission process.

What Is an MBA Application Consultant?

Since getting into an elite school can be a monumental task, some candidates may need additional support. An MBA Admissions Consultant, also known as a B School Consultant, can offer candidates an advantage in the demanding world of the MBA admissions process. These consultants tend to be highly skilled communicators and have extensive knowledge about the MBA admissions process.

MBA Application Consultants provide services including program selection, essay brainstorming, essay review, resume review, interview preparation, and more.

Candidates can choose to work with MBA Application Consultants on an hourly basis or select a package approach to navigate the entire application process.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

Benefits of Working with a MBA Consultants

There are certain circumstances where an MBA applicant may benefit from working with an application consultant. Most of the benefits surround highlighting the work that schools want to see and bringing the applicant’s personality to life.

A good MBA Admissions Consultant will go above and beyond suggesting and reviewing an application — they will help the applicant understand what they bring to the table.

In addition to helping an applicant brainstorm essay content, here are a few other ways they can add value to the application process.

Expressing Authenticity and Vulnerability in Application

When writing a strong essay, general recommendations suggest expressing authenticity through humor or vulnerability to let your personality shine through. Colleges, even business schools, often look to an applicant’s essay to get a deeper sense of who they are, what they value most, and any actions they’ve taken towards their beliefs.

While it’s unlikely you can get into an MBA program based on a stand-out essay alone, a strong piece of writing will be another valuable piece of your total application.

If writing is not your strong suit, an MBA Admission Advisor could help you overcome this hurdle and help schools see your personality.

Editing Short-Answer Essays

Currently, the MBA application trend is gearing toward more of a short essay format with restrictive word limits. For example, Columbia Business School has a 500 word limit on essays.

To help applicants meet these essay requirements, MBA Admissions Consultants can effectively edit down their writings. Many MBA candidates do not have college experience or training in advanced expository writing or editing. With this in mind, they may need the help of an admission consultant with advanced editing skills to meet the restrictive word count.

Addressing Communication Challenges

Those who haven’t taken a lot of coursework in writing, such as STEM (science, technical, engineering, or mathematics) students, may benefit from essay assistance. While STEM professionals may have higher GMAT scores, they may struggle to write a strong essay.

These challenges might be intensified for international applicants who have low English competency. Working with a consultant can help this group of candidates steer clear of any essay defects that could potentially disqualify them.

Recommended: Tips on How to Pay for MBA School

How Much Do MBA Admission Consultants Cost?

Cost is a significant consideration when deciding whether or not to hire an MBA Admission Advisor. One-on-one MBA application coaching can run around $195 per hour. For a three-school full package deal, you might pay as much as $16,000.

Although these costs can seem astronomical, you may want to consider the potential pay-off: The average starting salary for MBA graduates was $115,000 in 2022 (that’s 53% higher than the average starting salary for people who only have a bachelor’s degree).

Recommended: Finding & Applying to Scholarships for Grad School

Should You Consider Hiring an MBA Admission Consultant?

Here are several examples of groups of applicants that might benefit the most from an application consultants guidance.

•   For applicants who want to apply at one of the most popular business schools, like the University of Pennsylvania’s Wharton School or the Harvard Business School, a consultant’s help may be valuable. Even if an applicant has a 3.9 GPA, a 750 GMAT score, and five years of experience working at one of the schools’ prestigious employers, such as McKinsey, competition can still be intense.

•   Candidates who want to enroll at one of the top MBA programs such as Carnegie Mellon University’s Tepper School of Business or the Kelley School of Business at Indiana University, the aid of a consultant is useful.

•   Candidates that have communication challenges but want to apply to a top 25 school, may need the assistance of a consultant. A consultant can help with their essay and interview performance.

For MBA candidates who only need useful resources and information to put together a concrete application for a top 50 school, a consultant might not be worth the cost. Some candidates might do just as well on their own or using an online application consulting platform (such as ApplicantLab ), which can cost considerably less.

On the other hand, candidates who want guidance, support, and help with their skills set may get value working with an MBA Admissions consultant.

Selecting the Right MBA Admissions Consultant

Before comparing different MBA Application Consultants, it’s a good idea to first develop an idea of your needs and likelihood of acceptance. Maybe you need to focus on strategy and essay writing. In this case, you might want to make those areas the top priority when searching for a consultant.

When considering consultants, it’s important to have a clear understanding of the services they offer. For example, if a professional offers to write an essay for you, you may want to steer clear, since this isn’t an offering a consultant should provide. If the consultant is a member of an association, such as the Association of International Graduate Admissions Consultants (AIGAC), it shows that the consultant must uphold a professional standard.

It can also be wise to ask friends, family, and colleagues for referrals when beginning a search. They may have some experience working with an MBA Admissions Advisor or relevant firms.


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Financing Your MBA Program

Regardless of whether you decide to work with an MBA Application Consultant or not, you may need some help paying for your business education expenses. Some business schools offer generous fellowship awards, which are similar to scholarships, since this is money that doesn’t need to be repaid. Other MBA funding options include: federal and state grants, private scholarships, federal loans, and private MBA student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).


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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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ROTC, short for Reserve Officers’ Training Corps, offers college scholarships to students who commit to serving in the U.S. Armed Forces after graduation. ROTC college scholarships can cover significant college costs, including tuition and other fees. While in college, you get to experience campus life just like any other student; however, once you graduate, you step into a role in the U.S. Armed Forces.

Keep reading to learn about ROTC eligibility requirements, service commitments, and how to apply.

What Are ROTC College Scholarships?

Back in 1916, Congress passed the National Defense Act to strengthen the military reserve and National Guard. This led to the creation of ROTC scholarships, encouraging more students to join and introducing many young people to military opportunities.

Today, the ROTC program stands as a unique educational path, blending military science courses with your regular college classes and preparing students to become officers of the U.S. military post-graduation: Army, Navy, or Air Force. Scholarships through ROTC can cover college costs like room and board, fees, and tuition, but they aren’t guaranteed upon joining. Like other scholarships, they’re competitive and require students to earn them.

If you get an ROTC college scholarship, you’re committing to serve in the military after college — for at least three to 10 years, depending on the program. Some candidates might even have the chance to serve part-time in the U.S. Army Reserve or Army National Guard while kick-starting their civilian careers.

Recommended: What Types of Scholarships Are There?

How Much Does ROTC Pay for College?

ROTC offers scholarships lasting two to four years, depending on your remaining time until graduation. Eligible students can receive up to full coverage for tuition, room and board, and fees.

Types of ROTC Scholarships

Here’s a breakdown of the scholarship options and the qualifications you need to meet.

Army ROTC Scholarships

The Army ROTC Scholarship program offers financial support for students who want to become US Army, Army Reserve, or Army National Guard officers after earning their bachelor’s degree. Scholarships are available for two, three, or four years, depending on how much time you have left in school.

These scholarships cover full tuition and provide additional financial support. You’ll receive up to $420 monthly during the school year to help with living expenses and $1,200 annually for books.

You’re not required to commit to serving as an Army Officer until your junior year. When you sign a contract, you can serve part-time in the Reserves for eight years or full-time in active duty for three or four years, depending on whether you had an ROTC scholarship.

Army ROTC also offers a nursing program for candidates considering a nursing degree.

Navy and Marine Corps Scholarships

The Navy ROTC college scholarship program is designed to help you become a strong leader and successful Navy or Marine Corps officer. With this program, you’ll have the chance to participate in three summer training cruises with Navy surface ships, aviation squadrons, and submarines. You can use your scholarship money to cover tuition and fees or room and board, and you’ll receive a monthly stipend starting at $250, which increases each year.

The program also lets you explore a variety of career paths, including nursing, aviation, surface warfare, submarine warfare, and special warfare, all while enjoying a traditional college experience.

For those on a Navy ROTC scholarship, the service obligations are pretty straightforward. Navy midshipmen must serve at least five years of active duty, with additional requirements for certain roles. The Marine Corps and Navy Nurse Corps must serve at least four years on active duty.

Air Force ROTC Scholarships

The Air Force ROTC program can cover full college tuition and authorized fees at any qualifying institution, setting you up to become a U.S. Air Force or Space Force leader. Depending on your scholarship, you may also receive a monthly stipend for living expenses and a $900 annual book stipend. The monthly stipend increases yearly: $300 for first-year students, $350 for sophomores, $450 for juniors, and $500 for seniors.

If you’re a high school scholarship recipient, your travel expenses from home to college are covered, with reimbursement typically arriving about 30 days after school starts. However, the scholarship doesn’t cover room and board.

After completing the Air Force ROTC program and earning your degree, you’ll be commissioned as a second lieutenant in the Air Force or Space Force. Service commitments vary by career — most officers serve four years, pilots serve 10, and Combat System Officers and Air Battle Managers serve six years.

JROTC Scholarships

If you’re interested in starting a military career early, consider joining the Junior Reserve Officers’ Training Corps (JROTC) while still in high school. Eligible cadets can begin earning school-specific scholarships as early as 9th grade.

Some schools offer up to $6,000 per year for JROTC participants, with additional funds of up to $3,375 annually for cadets in leadership roles. It’s a great way to kick-start your path toward a military education and leadership experience.

Many cadets may use the JROTC program as a springboard to qualifying for the ROTC scholarship. However, it’s not a requirement.

Eligibility Requirements and Service Commitment

To qualify for an ROTC college scholarship, you need to:

•   Be a U.S. citizen

•   Be at least 17 years old

•   Have a high school diploma or equivalent

Each ROTC program has specific qualifications, requirements, and service commitments. Here’s an overview of what each scholarship program requires.

ROTC Program	Army ROTC	Navy and Marine Corps ROTC	Air Force ROTC
Eligibility Requirements	Pass the Army Combat Fitness Test (ACFT) Complete one Army ROTC elective and lab each semester	Pass Navy ROTC Applicant Fitness Assessment (AFA)	Pass the Physical Fitness Assessment Complete Physical Fitness Test within your first semester of college
Service Commitment	Complete 3-8 years depending on program	Complete 4-5 years depending on program	Complete 4-10 years depending on the program
Academic requirements	GPA of at least 2.50 Must take the SAT or ACT	GPA of at least 2.75 and a GPA of at least 2.0 in Algebra II SAT scores of 550 for Critical Reading, 540 for Math (1100 combined), and the minimum ACT scores of 21 Math, 22 English (44 combined)	GPA of at least 3.0 SAT score of 1240 or ACT score of 26 or higher

How to Apply for ROTC

Once you confirm your eligibility, you can begin the application process with a few straightforward steps:

•   Create an account to get started with your application.

•   Complete the online application.

•   Submit required materials and documentation such as your work history, extracurricular activities or achievements, planned college major, and a few scholarship application essays.

If you receive a scholarship, you might have to undergo a medical exam and meet ROTC physical standards.

For all the details and to ensure you’ve got everything you need, it’s best to visit the official websites of the Army ROTC , Air Force ROTC , and Navy ROTC programs . That’s also where you’ll find the online application process.

Pros of ROTC

Here are some of the benefits of qualifying for an ROTC scholarship and completing the program.

•   Leadership Development: As an ROTC cadet, you’ll learn essential leadership skills, such as setting examples, counseling, strategizing, and motivating others. These leadership skills are valuable in many career paths, including corporate management roles.

•   Military Training: ROTC gives you hands-on training in leadership, military skills, and exciting activities. You’ll learn in classrooms and out in the field while managing your college life.

•   Financial Aid: Whether you’re getting ready for college or already there, ROTC scholarships provide financial help. This support lets you pursue your education and career goals without taking on a lot of student debt.

Cons of ROTC

Here are some drawbacks worth considering before you apply for an ROTC program.

•   Scholarship Commitment: When you accept an ROTC scholarship, you’re committing to serve in the Armed Forces for several years after graduation. If you can’t fulfill this commitment, you might have to repay the scholarship funds you received, which could put a strain on your finances.

•   Service Obligation: ROTC prepares you to become an officer in the Armed Forces, so you’ll have a service commitment of four to 10 years, depending on your scholarship. This could affect your plans after college and limit your flexibility in choosing career paths.

•   Extra Academic Requirements: In addition to regular classes, ROTC programs often include extra coursework, labs, and leadership training. These can be demanding and require good time management to balance your studies and personal life.

Alternative Options

If you don’t qualify for an ROTC scholarship, there are other options available.

GI Bill

The GI Bill provides educational perks for military members, veterans, and their families. Eligible individuals can receive financial support covering college tuition, fees, housing, books, supplies, and relocation costs for rural residents.

To find out the benefits you may qualify for, you can use the GI Bill Comparison Tool from the U.S. Department of Veterans Affairs. It helps you estimate what you qualify for based on your military background, the type of school you plan to attend, and whether you’ll be studying in-person or online. It’s a helpful resource for understanding the range of support available to you.

Student Loans

The U.S. Department of Education administers the Federal Direct Loan Program, offering various student loan options. For undergraduates, subsidized loans are based on financial need, with the Department covering interest during school and certain periods afterward. Unsubsidized loans are also available, where interest accrues from the beginning.

If federal loans don’t cover your needs, look into private student loans from banks, credit unions, or online lenders. These loans aren’t need-based and may require a credit check or cosigner. Compare rates and terms carefully before deciding.

Recommended: Guide to Military Student Loan Forgiveness

Out-of Pocket

If you’ve been saving for college, now’s the time to make those savings count. You might have a 529 savings plan in your name, which is a special account designed for college expenses and comes with tax benefits. When you contribute money to this plan, it gets invested, and you can withdraw it later without paying taxes as long as it’s used for education-related costs. It’s a smart way to make your college savings work for you.

The Takeaway

Qualifying for an ROTC Scholarship can help with college costs, tuition, and more. Just keep in mind that it also means you’re signing up for military service after college, which could be three to 10 years, depending on which program you choose. It’s a significant commitment, but it comes with valuable leadership training and sets you up for a career as a military officer.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Can I join ROTC after starting college?

Yes, undergraduate students with at least three years remaining in their studies can typically join the ROTC program. This includes second-semester freshmen, sophomores, and other eligible students.

What GPA is required for an ROTC college scholarship?

High school students need at least a 2.5 GPA for Army ROTC, 2.75 for Navy ROTC, and 3.0 for Air Force ROTC scholarships.

How many years of service are required after ROTC?

The service requirements depend on the ROTC program you join, usually ranging from three to 10 years.

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private 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.

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.


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.


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

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The Internal Revenue Service (IRS) generally requires that you report a forgiven or canceled debt as income for tax purposes. But tax on student loan forgiveness is a different matter.

The American Rescue Plan (ARP) Act specifies that student loan debt forgiven between 2021 and 2025, and incurred for postsecondary education expenses, will not be counted as income, and therefore does not incur a federal tax liability.

This includes federal Direct Loans, Family Federal Education Loans (FFEL), Perkins Loans, and federal consolidation loans. Additionally, nonfederal loans such as state education loans, institutional loans direct from colleges and universities, and even private student loans may also qualify.

However, some states have indicated that they still count canceled student loans as taxable income. Read on for more information about taxes on student loans, including which forgiven student debt is taxable and by whom.

Types of Student Loan Forgiveness Programs

Federal student debt can typically be canceled through an income-driven repayment plan (IDR) or forgiveness programs. However, as of March 2025, applications for income-driven repayment plans are on hold while the Trump administration reevaluates them. You can find out more about this situation on the Federal Student Aid (FSA) website.

Here are some common federal forgiveness programs and how typically they work.

Public Service Loan Forgiveness (PSLF)

If you are employed full-time for the government or a nonprofit organization, you may be eligible for Public Service Loan Forgiveness for federal student loans like federal Direct Loans.

After you make 120 qualifying payments under an income-driven repayment plan for an eligible employer, the PSLF program forgives the remaining balance on your federal student loans.

However, because IDR plans are currently not accepting applications, and you must achieve forgiveness by repaying your loans under one of these plans, you will likely need to wait before you can start working toward PSLF. You can get more details about PSLF on the FSA website.

Income-Driven Repayment (IDR) Forgiveness

IDR options generally offer loan forgiveness after borrowers make consistent payments for a certain number of years. However, forgiveness on all but one of the IDR plans is paused as of March 2025.

On an IDR plan, how much you owe each month is based on your monthly discretionary income and family size. These are the types of IDR plans.

•   Income-Based Repayment: With IBR, payments are generally about 10% of a borrower’s discretionary income, and any remaining balance is forgiven after 20 or 25 years. On the IBR plan, forgiveness (after the repayment term has been met) is still proceeding as of March 2025, since this plan was separately enacted by Congress.

•   Saving on a Valuable Education (SAVE): As of March 2025, the SAVE plan is no longer available after being blocked by a federal court. Forgiveness has been paused for borrowers who were already enrolled in the SAVE plan, and they have been placed in interest-free forbearance.

•   Pay As You Earn (PAYE): The monthly payment on PAYE is about 10% of a borrower’s discretionary income, and after 20 years of qualifying payments, the outstanding loan balance is forgiven. As of March 2025, forgiveness has been paused for borrowers who were already enrolled in this plan, and they have been placed in interest-free forbearance.

•   Income-Contingent Repayment (ICR): The monthly payment amount on ICR is either 20% of a borrower’s discretionary income divided by 12, or the amount they would pay on a repayment plan with a fixed payment over 12 years, whichever is less. After 25 years of repayment, the remaining loan balance is forgiven. As of March 2025, forgiveness has been paused for borrowers who were already enrolled in the plan, and they have been placed in interest-free forbearance.

Teacher Loan Forgiveness

With Teacher Loan Forgiveness (TLF), teachers who have been employed full-time for five consecutive years at an eligible school and meet certain other qualifications may be eligible to have up to $17,500 of their federal Direct Subsidized and Unsubsidized Loans and federal Stafford Loans forgiven.

Recommended: Do Student Loans Count as Income?

Which Student Loan Cancellations Are Not Federally Taxed?

When it comes to student loan forgiveness and taxes, under the provisions of the ARP Act, private or federal student debt for postsecondary education that was or is forgiven in the years of 2021 through 2025 will not be federally taxed. This means that these borrowers are not required to report their discharged loan amount as earned income, and the forgiven amount is not taxable.

Beyond the special five-year window of tax exemption provided by the ARP Act, participants in the Public Service Federal Loan program who receive forgiveness don’t have to pay taxes on their canceled loan amount. The PSLF program explicitly states that earned forgiveness through PSLF is not considered taxable income.

Which Student Loan Cancellations Are Federally Taxed?

Borrowers who receive loan cancellation after successfully completing an income-driven loan repayment plan can generally expect to pay taxes. However, those whose debt was or will be discharged in the years 2021 through 2025, will not need to pay federal taxes on their forgiven loans due to the ARP Act.

Forgiven amounts that are taxable are treated as earned income during the fiscal year it was received. Your lender might issue tax Form 1099-C to denote your debt cancellation.

💡Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

Which States Tax Forgiven Student Loans?

Typically, states follow the tax policy of the federal government. But some states have announced that their residents must include their forgiven or canceled student loan amount on their state tax returns.

As of March 2025, the five states that say certain forgiven loans are taxable are:

•   Arkansas (except for loans forgiven through PSLF)

•   Indiana (except for loans forgiven through PSLF, TLF, and certain other programs)

•   Mississippi

•   North Carolina

•   Wisconsin (except for loans forgiven through PSLF and TLF).

It’s important to consult a qualified tax professional who is knowledgeable about forgiveness of student loans in your state to confirm the latest information of how much you owe.

How to Prepare for Taxes on Forgiven Student Loans

If you’re anticipating a tax liability after receiving loan forgiveness, there are a few steps you can take to get ready.

Step 1: Calculate Your Potential Tax Bill

The first step when preparing for a student loan forgiveness tax bill is calculating how much you might owe come tax season. This can be influenced by factors including the type of forgiveness you are receiving and the forgiven amount.

To avoid sticker shock, you can use a student loan forgiveness tax calculator, like the Loan Simulator on StudentAid.gov. It lets you see how much of your student loan debt might be forgiven, based on your projected earnings.

Step 2: Choose the Right Plan

Although IDR plans are not currently accepting applications, they are designed to help keep borrowers’ monthly payments to a manageable amount while they’re awaiting loan forgiveness. All of these repayment plans calculate a borrower’s monthly payment based on their discretionary income and family size.

Step 3: Prioritize Saving

If you’re expecting loan forgiveness after 2025, it might be beneficial to start allocating extra cash flow to a dedicated tax savings fund now. Incrementally setting money aside over multiple years can ease the burden of a sudden lump-sum tax bill down the line.

Another way to potentially save some money is to take the student loan interest deduction on your taxes each year, if you qualify. The deduction, which is up to $2,500 annually, can reduce your taxable income.

You’ll need your student loan tax form to make sure you are eligible for the deduction. The form should be sent to you by your loan servicer or lender. You’ll file the form with your taxes.

Recommended: Guide to Student Loan Tax Deductions

What If I Can’t Afford to Pay the Taxes?

If you can’t afford to cover an increased tax bill, contact the IRS to discuss your options. Inquire about payment plans that can help you pay smaller tax payments over a longer period of time. However, be aware that fees and interest may accrue on such plans.

The Takeaway

Thanks to a special law passed by Congress in 2021, post-secondary education loans forgiven from 2021 through 2025 will not count as earned income and will not be federally taxed. That said, state taxes may be due on forgiven loans, depending on where the borrower lives.

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.

FAQ

Is loan repayment considered taxable income?

If your employer offers loan repayment assistance benefits, they would typically be considered taxable income. However under the CARES Act, which was signed into law in 2020, employer assistance loan payments up to $5,250 made each year from 2021 through 2025 are tax-free.

Will refinancing my student loans help me avoid taxes?

Refinancing student loans does not involve taxes. However, the interest you pay on a refinanced student loan may qualify for the student loan interest deduction. If you’re eligible, you may be able to deduct up to $2,500, which could lower your taxable income.

Will student loan forgiveness be taxed after 2025?

The American Rescue Plan Act stipulates that forgiven student loans will not be taxed from 2021 through 2025. Currently, there are no plans to extend that tax relief beyond 2025.

Are state taxes different for forgiven student loans?

While states typically follow the federal tax policy, five states say that certain forgiven loans are taxable. Those five states are: Arkansas (except for loans forgiven through Public Service Loan Forgiveness), Indiana (except for loans forgiven through PSLF, Teacher Loan Forgivenesss, and certain other programs), Mississippi, North Carolina, and Wisconsin (except for loans forgiven through PSLF and TLF).

What steps should I take if I owe taxes on forgiven student loans?

If you owe taxes on forgiven student loans, calculate how much you’ll owe in taxes with the forgiven loan amount factored into your taxable income. Then, once you have the estimate of what you owe, you can start saving up to pay it. One way to do this is to put away the monthly amount you previously paid on your student loans to help offset the amount you owe. So if your student loan payment was $100 a month, deposit that amount monthly into a savings account, and use it to help pay what you owe in taxes.

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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 FOREFEIT YOUR EILIGIBILITY 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.

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SOSLR-Q125-020

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