Oct
24
2023
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How Is Income-Driven Repayment Calculated?

By | Building Your Career, Fresh Out of School, Student Loans | No Comments
Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

After graduation and your six-month federal student loan grace period, it’ll be time to start paying your dues. If you are on the Standard Repayment Plan, you’ll pay at least $50 a month for 10 years. But there are other ways to pay back your student loans: through income-driven repayment plans.

Not all of these plans have the same repayment strategy, and not all federal loans qualify for income-driven repayment. We’ll help you find the one that aligns with your financial situation before you commit.

How Does Income-Driven Repayment Work?

The U.S. Department of Education offers four income-driven repayment (IDR) plans for holders of federal student loans:

•   Income-Based Repayment (IBR)

•   Income-Contingent Repayment (ICR)

•   Pay As You Earn (PAYE) Plan

•   Saving on a Valuable Education (SAVE) Plan

For most IDR plans, your monthly payment is calculated as a portion of your discretionary income. The Department of Education defines discretionary income as your adjusted gross income in excess of a protected amount.

Discretionary income under the SAVE Plan, for example, is any adjusted gross income you have above 225% of the federal poverty guideline appropriate to your family size. You’ll have a $0 monthly payment under the SAVE Plan if your annual income doesn’t exceed the protected amount of $32,805 for a single borrower and $67,500 for a family of four in 2023.

If you don’t qualify for a $0 monthly payment on the SAVE Plan, your monthly payment beginning in July 2024 will be set at 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average if you have both.

On the IBR plan, your monthly payment is typically set at 10% to 15% of your discretionary income above 150% of the federal poverty guideline appropriate to your family size. But unlike the SAVE Plan, a borrower’s monthly payment on the IBR plan will never be more than what you would have paid through the Standard Repayment Plan.

IDR Loan Forgiveness

All federal IDR plans can end with your remaining loan balance being forgiven after 20 or 25 years, but some borrowers may receive forgiveness sooner under the SAVE Plan. Beginning in July 2024, federal student loan borrowers with original principal balances of less than $12,000 can have their remaining loan balance forgiven after 10 years of monthly qualifying payments on the SAVE Plan.

For more details on federal IDR debt relief benefits, check out our Guide to Student Loan Forgiveness.

Your personal circumstances and goals may dictate which student loan repayment plan is right for you. You can estimate how much your monthly payments will be through the federal Loan Simulator calculator.

Take control of your student loans.
Ditch student loan debt for good.

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

The Difference Between Income-Driven Repayment Plans

Deciding which IDR plan is right for you (and that you may qualify for) depends on your financial situation and your loan type(s). Here’s what they all mean:

•   IBR (Income-Based Repayment). This plan is based on your income and family size. The potential IBR payment must be less than what you would pay under the Standard Repayment Plan to qualify. Any remaining balance is forgiven after 20 or 25 years.

•   ICR (Income-Contingent Repayment). Under this plan, your monthly payment is adjusted based on your income (sometimes set at 20% of your discretionary income above 100% of the federal poverty guideline appropriate to your family size). It might not lower your payments as much as other plans, but it’s the only IDR plan that allows Parent PLUS Loans. Any remaining balance is forgiven after 25 years.

•   PAYE (Pay As You Earn). With this plan, you’ll never pay more than the fixed Standard Repayment Plan amount. Payments are typically set at 10% of your discretionary income above 150% of the federal poverty guideline appropriate to your family size. Any remaining balance after 20 years of payments is forgiven.

•   SAVE (Saving on a Valuable Education). This IDR plan replaced the former REPAYE Plan. Anyone with qualifying student loans can enroll into the SAVE Plan. However, you could end up paying more per month under this plan than the Standard Repayment Plan. You’ll have a $0 monthly payment under the SAVE Plan if your annual income falls below 225% of the federal poverty guideline appropriate to your family size.

Alternatives to Income-Driven Repayment Plans

The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1, 2023, and payments to resume in October 2023.

Aside from the Standard Repayment Plan, there are a few options to consider instead of IDR:

Consolidation

If you have federal student loans, you can get a Direct Consolidation Loan. This will move all your eligible federal student loans into one monthly payment. Your new interest rate is the weighted average of all your loans, rounded up to the nearest eighth of a percent.

This can be helpful if you have many smaller loans that each have a minimum monthly payment. It typically won’t lower your monthly payment, however, but it can make it manageable and easier to keep track of. Only federal loans are eligible for a Direct Consolidation Loan.

Refinancing

Refinancing is similar to consolidation. You get one loan to replace all of your other loans, but it’s a new loan with a new interest rate from a private lender or bank. Your credit report and other personal financial factors are considered to see if you’re a responsible borrower. If you previously had a co-borrower, such as a parent, you can look into refinancing without a cosigner.

Many lenders allow you to refinance all of your student loans, not just federal student loans. So if you have a mix of private student loans and federal student loans, refinancing will create one new loan with one payment to replace them.

If you qualify for a lower interest rate and a shorter term, it could reduce the amount of money paid in interest over the life of the loan. You may pay more interest over the life of the loan if you refinance with an extended term. You can explore different scenarios with our Student Loan Refinance Calculator.

You may ask, “Should I refinance my federal student loans?” Refinancing federal student loans with a private lender forfeits your access to Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and federal IDR plans. You can weigh the pros and cons when determining whether student loan refinancing is right for you.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

How Do You Calculate Income for an Income-Driven Plan?

The Department of Education considers three different components when calculating a borrower’s income. While this may seem needlessly complicated, it actually benefits borrowers:

Annual Income

Any income that’s taxable counts toward the Education Department’s calculation. That means regular wages, plus interest and dividends from savings and investments, unemployment benefits, etc. On the flip side, any income that isn’t taxed doesn’t count: gifts and inheritances, cash rebates from retailers, child support payments, and so on.

Spouse’s Income

If you and your spouse file a joint tax return, then their income must also be factored in. If you file separately, only your income counts.

Family Size

Your family size is the number of people who live with you and receive more than half their support from you. This includes children but also dependent adults, such as an older parent.

The Takeaway

There are four income-driven repayment plans for federal student loan holders, including IBR, ICR, PAYE, and SAVE. No new PAYE enrollments will occur after July 1, 2024, although current PAYE enrollees can remain on the plan after that date.

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


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

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


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

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

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.

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

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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Oct
24
2023
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Examining the Different Types of Student Loans

By | Student Loans, student_loan | No Comments

It’s not uncommon for students to use loans to help pay for their education. The average annual cost of tuition and fees at four-year institutions reached $10,940 for public in-state schools, $28,240 for out-of-state public schools, and $39,400 for private schools in 2022–23, College Board data shows.

The average undergraduate or graduate student typically needs education loans to help pay for the cost of college. The two major umbrellas to consider are federal student loans and private student loans. Federal student loans are backed by the U.S. Department of Education, while private student loans are offered through financial institutions, including banks, online lenders, and credit unions.

Knowing what types of student loans are available to you and understanding your student loan statement can help you figure out the best way to save money in the long run.

What Are The Different Types of Student Loans?

One of the first things to understand is the difference between federal and private student loans.

The U.S. Department of Education offers federal student loans at a fixed interest rate and with certain restrictions. Depending on borrower needs, students can qualify for either subsidized or unsubsidized federal loans (more on those, later). Federal student loans come with protections like income-driven repayment (IDR) options, deferment, forbearance, and access to the Public Service Loan Forgiveness (PSLF) program.

The Saving on a Valuable Education (SAVE) Plan is one of the IDR options available to most federal student loan borrowers. The SAVE Plan can give you a $0 monthly payment if your income is within 225% of the federal poverty guideline (or less than $32,805 for a single borrower and $67,500 for a family of four in 2023).

For some students, federal student loans aren’t enough to cover the cost of a college education. Some turn to scholarships, grants, or a part-time job to fill in the gaps. Other students rely on private student loans, offered by lenders and financial institutions, to cover the cost of college. Private student loans are not eligible for IDR plans or PSLF.

💡 Quick Tip: When shopping for a private student loan lender, look for benefits that help lower your monthly payment.

Repay your way. Find the monthly
payment & rate that fits your budget.

Applying for Federal Student Loans

The first step in the federal student loan process is to fill out the Free Application for Federal Student Aid (FAFSA®). That may involve compiling your family financial history. Even students who don’t think they’ll qualify for financial aid should still fill out the FAFSA.

All federal student loans require the FAFSA first. And some schools use information from the FAFSA to determine eligibility for other types of aid like scholarships or grants.

After filling out the FAFSA, students may receive a financial aid package of grants, work study, and loans. Depending on your financial circumstances, the loans will either be subsidized or unsubsidized.

The Different Types of Federal Student Loans

Think of federal student loans as an overarching category. There are different types of federal student loans, each of which have different eligibility requirements, borrower maximums (or not), and interest rates. Understanding all of your options means you’ll be better prepared to determine the best way to finance your education.

The interest rates on newly issued federal student loans are fixed and set annually by a formula specified in the Higher Education Act of 1965.

For the 2023–24 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 5.50%. The rate on Direct Unsubsidized loans for graduate and professional students is 7.05%, while the rate on Direct PLUS loans for graduate students, professional students, and parents is 8.05%.

Federal student loan borrowers are typically expected to make loan payments when due. The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1 and payments to resume in October 2023.

Recommended: Private Student Loans vs. Federal Student Loans

Direct Subsidized vs Unsubsidized Loans

Federal Direct loans, also known as Stafford Loans, can be either subsidized or unsubsidized. With a subsidized student loan, the government will cover the accrued interest while the borrower is enrolled in school, during the grace period, and during any periods of deferment. Not having to pay interest on your loans during school can really help—especially since interest accrues and capitalizes, or gets added to the principal loan amount, and then accrues more interest. There are no subsidized federal loans for graduate students—only for undergrads.

The government does not pay the interest on unsubsidized Direct loans. That means, even while you’re in school, the loans are accruing interest. You don’t have to make payments on the loans while you’re a full-time student, but interest is building up. As the interest accrues, it is added to the loan’s principal.

That’s why it’s possible to have a higher remaining loan balance than the initial loan amount after graduation. Individuals with an unsubsidized student loan do have the option to make interest-only payments on the loan during periods of deferment, including while they’re in school, but are not required to do so.

Federal loans have fixed interest rates (that are set annually), meaning they don’t change over the life of the loan.

Recommended: Student Loan Grace Periods: What You Need to Know

Interest Capitalization and Federal Borrowing Limits

Individuals with an unsubsidized student loan do have the option to make interest-only payments on the loan during periods of deferment, including while they’re in school, but are not required to do so. A federal student loan borrower who exits a period of deferment on an unsubsidized loan may face capitalized interest.

Interest capitalization is when unpaid interest accrues over time and gets added to your principal loan balance. The U.S. Department of Education eliminated most instances of federal student loan interest capitalization effective July 2023.

Federal student loan borrowing limits vary depending on factors like your year in school and whether or not you are a dependent student. For example, first-year undergrads who are considered independent or whose parents are not able to take out parent loans have a maximum borrowing amount of $9,500 (of which only $3,500 can be subsidized) annually. The maximum for dependent students is $5,500 in their first year, with the same $3,500 cap on subsidized loans.

PLUS Loans

Direct PLUS loans can be borrowed directly by a graduate student, or Parent PLUS loans can be taken out by an undergrad’s parents. PLUS loans, in both forms, have the same benefits as other federal loans in that the interest rate is fixed and there are flexible repayment options.

Unlike other federal loans, PLUS loans require a credit check. They’re designed for graduate and professional students, who have had more time to build up a credit score. The maximum PLUS loan amount you can borrow is the full cost of tuition less any other financial assistance.

When taking out student loans for college, a lot of the options depend on your FAFSA and your family’s financial need or ability to pay. If you’re a dependent student, then there will likely be some expectation of parental contribution, and your parents may be offered the option of taking out Parent PLUS loans.

Parent PLUS loans are similar to Direct PLUS loans, except parents are expected to begin repaying the loan while the student is still in school—though they can request a deferment until graduation.

Direct Consolidation Loans

After graduation, students might have a number of different federal student loans. That can obviously be confusing. If you want to consolidate all federal loans into one place, then you may be able to pool them into a Direct Consolidation Loan. This allows you to only make one monthly payment toward all your federal student loans.

A Direct Consolidation Loan will not lower your overall interest rate. The interest rate on your new Direct Consolidation Loan is simply a weighted average of the interest rates, rounded up to the nearest eighth of a percent, of your existing federal loans. Consolidation could wipe out any history of payments you were making toward PSLF. Only federal loans can be consolidated with a Direct Consolidation Loan.

Private Student Loans

Students who don’t receive enough funding from the federal government may look to private student loans as an option to finance their education. Private loans are offered by banks, online lenders, and credit unions.

💡 Quick Tip: Federal student loans carry an origination or processing fee (1.057% for Direct Subsidized and Unsubsidized loans first disbursed from Oct. 1, 2020, through Oct. 1, 2024). The fee is subtracted from your loan amount, which is why the amount disbursed is less than the amount you borrowed. That said, some private student loan lenders don’t charge an origination fee.

Applying for Private Student Loans

Private lenders do not use the FAFSA to determine a potential borrower’s creditworthiness. Instead, students interested in borrowing private loans will fill out a loan application directly with a lender. Before applying, lenders will generally allow people to get a quote to see if they prequalify and at what rates. This can be helpful when evaluating different lenders.

The terms, interest rates, and borrowing limits on private loans may vary by lender. Lenders typically use factors like the borrower’s credit score to determine the interest rate they qualify for. When borrowing a private student loan you’ll generally have the option to choose between a fixed or variable interest rate.

Private lenders offer different student loan repayment options. Some offer deferment plans while the borrower is enrolled in school, and others require payments to start as soon as the loan is disbursed.

Another private student loan option is to consolidate or refinance your existing student loans after graduation. This might be beneficial if it lowers your interest rate and saves you money over the life of your loan. You may pay more interest over the life of the loan if you refinance with an extended term. Refinancing federal student loans with a private lender forfeits your access to PSLF, Teacher Loan Forgiveness, and federal IDR plans.

Understanding the Student Loan Statement

When you take out a loan, you sign a promissory note, which outlines the interest rate, loan amount, and repayment terms. If you hold federal student loans, when you graduate you select a repayment plan. If you don’t do anything, you’ll automatically be put on the Standard Repayment Plan.

For most federal loans, the Standard Repayment plan is a set monthly payment for up to 10 years. There are a few other repayment plans to choose from, including four income-driven repayment plans. The different plans allow you to pay back your loan over different time periods. The longer the repayment term, the more you’ll pay in interest over the life of the loan.

When you look at your student loan statement, you may see each loan listed as the total loan amount, how much principal remains, how much interest has accrued since your last payment, your current interest rate, and how much your current monthly payment is—in addition to any fees, such as late fees, you might owe.

The Benefits of Refinancing Student Loans

It’s possible to consolidate both federal and private student loans into one new loan when you refinance your student loanswith a private lender. If an applicant qualifies for a lower interest rate and a shorter term, it could reduce the amount of money paid in interest over the life of the loan. As mentioned earlier, you may pay more interest over the life of the loan if you refinance with an extended term.

Make sure to weigh the benefits that come with your federal loans against the value of refinancing. When you refinance federal loans they will no longer be eligible for federal borrower protections.

The Takeaway

The two main categories of student loans are private and federal. Federal loans are awarded to students based on information they provide in their FAFSA annually. Federal loans issued since July 2006 have a fixed interest rate and are eligible for a variety of federal repayment plans.

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.

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.

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

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.


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.

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Oct
23
2023
Understanding a Student Loan Statement: What It Is & How to Read It

Understanding a Student Loan Statement: What It Is & How to Read It

By | Going to College, Student Loans, student_loan | Comments Off on Understanding a Student Loan Statement: What It Is & How to Read It

Your student loan statement gives you all the important information about your student loan. If you took out one or more student loans to help pay for college, knowing how to read your student loan statements can help you manage your student debt and repayment.

What Are Student Loan Statements?

Student loan statements are detailed summaries of your student loan. They provide information such as the last payment received, the current amount due, and where to send payments.

You’ll typically receive your student loan statement from your loan servicer three weeks before payment is due each month. If you have multiple student loans with more than one servicer, you’ll receive a student loan statement from each servicer every month.

Why Is It Important to Know How Much You Owe?

Keeping track of any debt is essential. You’re responsible for your student loan debt and making monthly payments on time until it’s paid off. Even missing one payment could cause you to fall behind.

A missed or late payment on your student loan debt could also hurt your credit. Your payment history makes up 35% of your FICO® credit score, so having late payments in your recent credit history could make it more difficult to be approved for credit cards or other loans.

Missed student loan payments may also incur late fees. Private lenders have their own rules when it comes to late fees and consequences, but they may start adding late fees after a grace period. Private student loans usually go into default as soon as you miss three monthly payments, but some go into default after one missed payment.

If you default on a federal student loan, usually after payment is 270 days past due, the government can collect your debt by withholding money from your wages and your income tax refund and other federal payments. But a temporary “on-ramp” protection will generally prevent most federal student loans from entering defaulted loan status from the 12-month period of October 2023 through September 2024.

Take control of your student loans.
Ditch student loan debt for good.

Where Do I Find My Student Loan Statement?

Your student loan statement will typically come by mail from your student loan servicer unless you’ve opted to receive statements online.

Borrowers are generally expected to make required loan payments when due. The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1, 2023, and payments to resume in October 2023.

If you haven’t received any student loan statements or if you’re not sure, there are ways to find your student loan balance, such as requesting and reading your credit report.

Private Student Loans

If you have private student loans, you can contact your lender directly and ask them how to get your student loan statements. You can also try contacting your school’s financial aid office for information about your private student loan and the company that originated your loan.

Another option is to get a free credit report from each of the three credit bureaus, Equifax®, Experian®, and TransUnion®. This may give you basic information on any active student loan accounts you have opened in your name.

Recommended: Guide to Private Student Loans 

Federal Student Loans

If you have federal student loans, there are a few ways to find your student loan statement. One way is to go to studentaid.gov and log in with your Federal Student Aid (FSA) ID. You can find your student loan balances, loan servicers, and interest rates on the site.

As with private student loans, you can also contact your school’s financial aid office for more information on your federal student loans.

Recommended: FAFSA Guide

Student Loan Statements

Not all student loan statements look the same, but they generally provide the same key details about your student loan. Knowing how to read your student loan statement is an important step in helping you manage your student loan debt.

Payment Summary

The payment summary shows the current amount due if payment is made by the due date. If you have other amounts due in addition to the current payment, like fees or a past due amount, those will also be shown in the payment summary.

Monthly Payment

The monthly payment will tell you what you are expected to pay, which includes the principal and interest, by the due date. The principal is the amount you borrowed, and the interest is what you’re paying to borrow the money.

Your required payment will be the same each month for the life of your loan unless you’ve chosen a variable rate for a private student loan or you’re enrolled in a federal income-driven repayment (IDR) plan.

Recommended: 7 Tips to Lower Your Student Loan Payments

Amortization Schedule

Your student loan repayment follows a student loan amortization schedule. Amortization is the process of paying back an installment loan through regular payments. When a student loan is amortized, it means that your monthly payment is divided into principal and interest payments.

Current Balance

Your current balance is what you owe on the date of the student loan statement. This is the total amount, including principal, interest, and any fees.

Original Balance

Your original balance is the amount that you borrowed before you made any payments toward your student loan.

Interest Rate

The interest rate on your student loan is how much you pay to borrow the funds. Federal loans issued since July 2006 have fixed interest rates, meaning they don’t change over the life of the loan.

The fixed rate for federal student loans depends on the type of loan. Federal student loans for graduate or professional school typically charge higher rates than federal loans for undergraduate study.

Private lenders determine rates for borrowers based on their creditworthiness. They offer undergraduate loans and graduate student loan options.

Negative amortization — having your loan balance grow over time if your monthly payment amount is less than the interest accruing — generally won’t occur if you make payments on the Saving on a Valuable Education (SAVE) Plan. That’s because the SAVE Plan offers a permanent interest subsidy that helps prevent your federal loan balance from growing if you qualify for a $0 (or very low) monthly payment.

Managing Your Student Loans

After you know your lender or loan servicer, you can easily manage your student loans. Student loan management may be different depending on whether you have a federal student loan or a student loan from a private lender.

Federal student loans allow you to select a repayment plan. Repayment plans are typically divided into traditional plans and IDR plans, such as the SAVE Plan. This allows you a choice: quickly paying off student loan debt to minimize interest charges or lower monthly payments for greater affordability.

You can also consolidate your federal student loans or refinance federal and private student loans, resulting in one monthly payment. You may pay more interest over the life of the loan if you refinance with an extended term.

Private lenders may have their own flexible repayment plans. They may offer you the choice of deferring payments, paying interest only, paying your full monthly payment, or making a low fixed payment while you’re still in school.


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

Should You Refinance or Consolidate to Simplify Repayment?

Combining multiple student loans into a single loan with one monthly bill can simplify your student loan repayment. However, the choice to consolidate student loans vs. refinance depends on your personal situation and your end game.

Federal student loan consolidation combines multiple federal loans into a single loan through the U.S. Department of Education. Federal consolidation generally won’t lower your total interest costs but can lower your monthly payments by extending the repayment period. (A longer repayment period means more total interest paid over the life of the loan.)

Private lenders offer student loan refinancing — some refinance both federal and private student loans — which means paying off your current loans with one new private student loan, ideally with a lower interest rate.


💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.

The Takeaway

Your student loan statements give all the details of your debt. Federal student loan borrowers can expect to receive billing statements now that the pandemic-related payment pause has ended.

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

What is a student loan statement?

A student loan statement gives you a detailed breakdown of your loan, including the last payment received, the current amount due, and where to send your payments.

How do I get to my student loan statement?

Federal student loan borrowers can get their student loan statements from their loan servicer. If you don’t know who your loan servicer is, visit your Federal Student Aid account dashboard.

Private student loan borrowers can contact their lender directly to ask for student loan statements. If you’re unsure who your lender is, you can get a free credit report from each of the three credit reporting agencies or contact your school’s financial aid office.

How do I read student loan statements?

Not all student loan statements look the same, but they generally provide the same information. Your student loan statement should give you a payment summary and tell you your monthly payment amount, due date, current and original balance, and interest rate.

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


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

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

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23
2023
Student Loan Forbearance Extension: Can You Get It Extended?

Student Loan Forbearance Extension: Can You Get One?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | Comments Off on Student Loan Forbearance Extension: Can You Get One?

Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance of federal student loans. As a result, student loan interest accrual resumed on Sept. 1, 2023, and payments in October 2023.

Although the pandemic-related pause that began in March 2020 is no longer in effect, the Biden administration has implemented a temporary “on-ramp” protection. Any federal student loan borrower who received the Covid-19 forbearance relief will be eligible for the 12-month on-ramp protection automatically. This means you’ll be protected from having your federal student loans reported as delinquent if you fail to make any required loan payments from October 2023 through September 2024.

Below we highlight how the on-ramp protection works and how federal student loan borrowers may also benefit from the Saving on a Valuable Education (SAVE) Plan.

What Is a Student Loan Forbearance Extension?

Congress authorized the initial Covid-19 student loan forbearance in March 2020 when it passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act suspended federal student loan payments and federal student loan interest accrual through September 30, 2020.

Two presidential administrations — starting with the Trump administration — extended the Covid-19 forbearance through executive action. The Biden administration issued several extensions to the Covid-19 forbearance up until the 2023 debt ceiling bill ended the practice.

Federal student loan borrowers facing financial difficulties may request a general forbearance, and some borrowers may qualify for a mandatory forbearance. A general or mandatory forbearance can temporarily suspend making loan payments during an approved period.

Federal student loan forbearances typically have 12-month durations, but you can request an extension if you meet the requirements. The cumulative limit on a general forbearance is three years.

Recommended: What Is Student Loan Forbearance?

Will Student Loan Forbearance Be Extended?

The passage of the 2023 debt ceiling bill guarantees the Covid-19 forbearance will not be extended. Federal student loan interest accrual resumed Sept. 1, 2023, and borrowers are now expected to make required payments when due.

So the Covid-19 student loan forbearance will not be extended, and the Biden administration’s one-time student loan forgiveness plan under the HEROES Act will not take effect. The Supreme Court rejected Biden’s broad debt relief plan in June 2023, finding the HEROES Act did not authorize the program.

Although the Covid-19 forbearance will not be extended under the HEROES Act, the Biden administration has implemented temporary “on-ramp” protections.

If you’re covered by the on-ramp, you’re protected from having your federal student loans reported as delinquent or placed in default from October 2023 through September 2024. But federal student loan interest will still accrue during the on-ramp, so failing to pay may increase your student debt burden.


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

How to Extend or Pause Student Loan Payments in General

If you’re concerned about your ability to resume student loan payments beyond the temporary on-ramp protection, consider talking to your student loan servicer about:

•   General student loan forbearance

•   General student loan deferment

•   An income-driven repayment plan

•   Public Service Loan Forgiveness program

Income-Driven Repayment (IDR)

Based on your income and family size, an IDR plan can set your student loan payments at an affordable repayment amount per month for you. There are four plans, which last for a certain number of years and forgive any remaining balance after that:

•   Saving on a Valuable Education (SAVE) Plan

•   Pay As You Earn (PAYE) Plan

•   Income-Based Repayment Plan

•   Income-Contingent Repayment Plan

The SAVE Plan replaced the former REPAYE Plan in July 2023. If you were enrolled in the REPAYE Plan at that time, you’ve been automatically enrolled in the SAVE Plan.

The SAVE Plan can give you a $0 monthly payment if your income is within 225% of the federal poverty guideline (or less than $32,805 for a single borrower and $67,500 for a family of four in 2023).

Another benefit to the SAVE Plan is that your loan balance won’t grow over time if your monthly payment amount is less than the interest accruing.

Refinancing

It’s possible to consolidate both federal and private student loans into one new loan when you refinance your student loans with a private lender. If an applicant qualifies for a lower interest rate and a shorter term, it could reduce the amount of money paid in interest over the life of the loan. You may pay more interest over the life of the loan if you refinance with an extended term.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

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Alternative Student Loan Financing Options

As you’re thinking about college funding, keep this in mind: You can choose from a number of college financing options, including scholarships, grants, and private student loans:

•   Scholarships. Scholarships are awarded based on merit or need, and students do not need to repay them. Students can get scholarships through businesses, colleges, and other organizations. There are online scholarship search tools that can help you find opportunities you might be eligible for.

•   Direct PLUS Loans. Direct PLUS Loans can help graduate or professional students pay for college. They can also help parents of dependent undergraduate students pay for their child’s college education. You might want to consider a parent PLUS loan refi to a lower rate if you’re repaying a PLUS loan.

•   Grants. Students can get grants from states, the federal government, a public body, and/or other organizations to pay for college.

•   Private student loans. Private student loans are given by commercial lenders, not the U.S. Department of Education. Unlike most federal student loans, you will undergo a credit check and possibly have to get a cosigner to sign on the loan with you.

The Takeaway

The Covid-19 forbearance is no longer in effect and won’t be extended under the HEROES Act. This means federal student loan borrowers are generally expected to make required loan payments when due. (A temporary on-ramp protection from October 2023 through September 2024 may protect you from typical delinquency impacts, but it won’t stop your interest from accruing.)

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

How do I know when my student loan payments will resume?

Federal student loan payments resumed in October 2023. You may receive billing statements from your federal loan servicer going forward.

What does student loan forbearance mean?

Forbearance means a borrower can temporarily suspend making loan payments during an approved period. There are two main types of forbearance for federal student loans: general and mandatory. This does not include the former Covid-19 forbearance, which ended as required under the bipartisan Fiscal Responsibility Act of 2023.

What are income-driven repayment plans?

An alternative to forbearance, income-driven repayment plans can set your monthly loan payments at an affordable amount for you. There are four plans. Each lasts a certain number of years and forgives any remaining balance after that. Beginning in July 2024, borrowers with original principal balances of less than $12,000 can have their remaining loan balance forgiven after 10 years of monthly qualifying payments under the SAVE Plan.

Photo credit: iStock/Andrea Migliarini

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.

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

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.


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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Oct
21
2023
A Look into the Public Service Loan Forgiveness Program_780x440

A Look Into the Public Service Loan Forgiveness Program

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

If you are employed by a government or a nonprofit, you might be able to get forgiveness for the remaining balance on your federal student loan through the Public Service Loan Forgiveness Program (PSLF).

Created by the Department of Education (DOE) in 2007, PSLF is intended to help public-service professionals who may not earn large salaries and must struggle to repay their federal student loans. In this context, many teachers, firefighters, and social workers qualify.

The program has drawn frequent criticism for being hard to navigate and difficult to qualify for, charges that the DOE says it is addressing to make sure as many people as possible can access PSLF. To that end, the DOE is conducting a payment count adjustment that will update borrowers’ progress toward PSLF. To become eligible for the adjustment, borrowers with privately held Perkins or FFEL Program loans must first submit a Direct Consolidation Loan application. The deadline for submission is April 30, 2024.

Below is the latest information on PSLF eligibility and student debt forgiveness.

What is Public Service Loan Forgiveness?

The PSLF program provides professionals a way out of their federal student loan debt by working full-time in public service. The remaining balance on your Direct Loans will be forgiven—meaning you will not have to pay it back–after you’ve made the equivalent of 120 qualifying monthly payments under an accepted repayment plan and while working full-time for an eligible employer.

What Are Public Service Loan Forgiveness Jobs?

The question for many people is who qualifies for PSLF? The jobs include teachers, firefighters, first-responders, nurses, military members, and doctors. But with this program, it is not only the type of job you have that determines if you can get forgiveness but also the type of employer. That is crucial. Qualifying employers include federal, state, local, tribal government and non-profit organizations.

To find out if your employer qualifies for PSLF, you can search through the Federal Student Aid search tool.


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

Who Is Eligible for the Public Service Loan Forgiveness Program?

How does PSLF work? To qualify, borrowers must meet certain eligibility criteria. They include:

Work for a Qualified Employer

Part of PSLF eligibility requires working for a qualified government organization (municipal, state, federal, military, or tribal) or a qualified 501(c)(3) non-profit organization. Full-time AmeriCorps or Peace Corps volunteers are also eligible for PSLF. (Learn more about military student loan forgiveness.)

Some other types of non-profits also qualify, but not labor unions, political organizations, and most other non-profits that don’t qualify for 501(c)(3) status. Working for a government contractor doesn’t count; you have to work directly for the qualifying organization.

Only full-time workers are eligible — that is, workers who meet their employer’s definition of full-time or work a minimum of 30 hours per week. People employed at multiple qualifying organizations in a part-time capacity can be considered full-time as long as they’re working a combined 30 hours per week.

Note that time spent working in religious instruction or worship does not count toward meeting the full-time requirement.

Recommended: How To Get Out of Student Loan Debt

Having Eligible Loans

Eligible loans include Direct loans such as Stafford loans, PLUS loans (but not Parent PLUS loans), and Federal Direct Consolidation loans.

If you want to have your Federal Family Education Loan (FFEL) or Perkins loans forgiven, you’ll have to consolidate them into a Direct Consolidation Loan first. Any payments you made on the FFEL Program loans or Perkins Loans before you consolidated won’t count toward the necessary payments.

Private student loans are not eligible for Federal forgiveness programs.

Recommended: Student Loan Forgiveness Guide

Applying for Public Service Loan Forgiveness

There are a few hoops to jump through in order to pursue PSLF. To apply for the program, you’ll need to take the following steps:

1. Consolidate FFEL Program and Perkins Loans

Borrowers with FFEL Program and Perkins Loans must consolidate them with a Direct Consolidation Loan. Consolidation applications must be submitted no later than April 30, 2024. This is necessary because if you consolidate your loans afterward, you won’t get credit for any qualifying payments you made on those loans. Already consolidated your Direct loans? Consider consolidating your Perkins Loans separately and start making new qualifying payments.

2. Sign Up for an Income-Driven Repayment Plan

There are several income-driven repayment plans to choose from.They are designed to make your student loan debt more manageable by giving you a monthly payment based on your income and family size.

The latest IDR program is called the Saving on a Valuable Education (SAVE) Plan. It lowers payments for almost all people compared to other IDR plans because your payments are based on a smaller portion of your adjusted gross income (AGI). Also, if you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month.

Note: As a result of the CARES Act, months that you were in repayment while the requirement to make a payment was paused still count as qualifying payments if you also certify your employment for the same period of time.

3. Certify Your Employment

To do this, print out an Employment Certification form and get your employer to fill it out and send it in for approval. The Federal Student Aid website suggests filling this form out annually or at least every time you switch jobs.

You can also use the Public Service Loan Forgiveness Help Tool at StudentAid.gov/pslf/ to find qualifying employers and get the forms that you need.

4. Make 120 Qualifying Monthly Payments

You must make these payments while you’re employed by a qualified public service employer. Switching employers isn’t a problem, so long as you are still working for a qualifying organization.

5. Apply for Forgiveness

After you make the final payment, submit your application for forgiveness.

Current State of the Program

Because the program was created in 2007, the first borrowers to qualify for loan forgiveness applied in 2017. However, early estimates by the Government Accountability Office (GAO) reported the denial rate as more than 99%. At the same time, many borrowers weren’t even aware that the forgiveness program exists.

In 2022, the Biden Administration addressed these issues by introducing a “limited PSLF waiver,” which allowed student loan holders to receive credit for payments that previously didn’t qualify for PSLF. The waiver deadline expired on Oct. 31, 2022.

However, post-deadline, the effort to make it easier to qualify for PSLF is continuing. The DOE extended elements of the waiver through the IDR account adjustment program. To be eligible for the adjustment, Perkins and FFEL Program loan holders must submit a Direct Consolidation Loan application no later than April 30, 2024.

President Biden announced in October 2023 that during his administration the DOE had secured relief for “almost $51 billion for 715,000 public servants through Public Service Loan Forgiveness (PSLF) programs, including the limited PSLF waiver and Temporary Expanded PSLF (TEPSLF).”

Beware of false communications from scammers posing as the DOE or your loan servicer. Read up on the latest student loan forgiveness scams.

Pros and Cons of the Public Service Loan Forgiveness Program

The advantages of the program are pretty straightforward. The disadvantages have more to do with how the program is executed in the real world.

Pros of PSLF

1.    The balance of your student loans is forgiven after a set time. This works as a kind of bonus to make up for the low pay earned by people working in the public sector.

2.    The amount forgiven usually isn’t considered income, so you aren’t taxed on it (and you don’t have to save additional money to account for the IRS bill). With other loan forgiveness programs, you might see a big tax bill.

3.    Professionals in qualifying jobs are making a difference, and your government appreciates it enough to give you a break on your federal student loans.

4.    You may pay less monthly because you’re on an income-driven plan. This means paying out less of your hard-earned cash every month.

Cons of PSLF

1.    The program is only open to those with certain types of employers. And it’s contingent on staying with a qualifying public service employer for 10 years. With the SAVE program, qualifying loan holders may be able to pay off their federal student loans no matter who their employer is.

2.    Some borrowers aren’t aware of the program, partly due to a lack of education by employers, loan servicers, and schools.

3.    There are a lot of hoops to jump through to get your loans forgiven. Plus, if you don’t jump through a hoop properly, you can jeopardize your forgiveness.

4.    The extra money that can potentially be earned from working for a corporate employer may help you pay off your loans sooner than through PSLF.

5.    You might end up paying more in interest by making 120 payments than if you budgeted to aggressively repay your loans in less than 10 years.

Alternatives to the Public Service Loan Forgiveness Program

Another program available to some individuals is the Teacher Loan Forgiveness program. This program is available to full-time teachers who have completed five consecutive years of teaching in a low-income school. This program has strict eligibility requirements that must be met in order to receive forgiveness.

If you receive Teacher Loan Forgiveness, the five-year period of service that supported your eligibility will NOT count toward PSLF. However, the limited PSLF waiver discussed above temporarily waived this restriction for individuals who previously received Teacher Loan Forgiveness.

These federal forgiveness programs do not apply to private student loans. If you are looking for ways to reduce your interest rate or monthly payments on private student loans, refinancing with a private lender can be an option. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)

It is important to mention that refinancing your federal student loans with a private lender may make you ineligible for the Public Service Loan Forgiveness program, should you choose that route.

The Takeaway

The Public Service Loan Forgiveness program is one way for eligible borrowers to have their federal student loans forgiven. Recent changes to the program by the Biden Administration promises to make qualifying for PSLF easier. However, if you have student loans that aren’t eligible for PSLF, consider taking advantage of either refinancing or income-driven repayment.

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


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

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


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

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

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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