Jan
16
2026

How to Use Loans to Pay Off Credit Card Debt

By | Debt Payoff, Financial Independence, personal_loan | No Comments

The average American carries about $6,455 in credit card debt as of early 2025, and that figure is up by $200 year over year, according to TransUnion®, one of the major credit bureaus.

If you’re struggling with credit debt, whether it’s higher or lower than that average figure, one method to consider is taking out a personal loan (ideally with a lower rate than you’re paying on your credit cards) and using the funds to pay off your credit card debt. If you’re currently paying off multiple cards, this approach also simplifies repayment by giving you just one bill to keep track of and pay each month.

Still, there are pros and cons to consider if you’re thinking about getting a personal loan to pay off credit cards. Read on to learn more.

Key Points

•   As companies scramble to respond to Trump’s call for credit card rate caps, personal loans stand out as a cheap, safe solution to credit card debt.

•   Using a personal loan can consolidate multiple credit card debts into a single payment, potentially at a lower interest rate.

•   Personal loans are unsecured and typically have fixed interest rates throughout the loan term.

•   Consolidating credit card debt into a personal loan can simplify financial management and reduce total interest paid.

•   Applying for a personal loan involves a hard credit inquiry, which might temporarily lower your credit score.

•   Personal loans can be obtained from various sources, including online lenders, banks, and credit unions.

How Using a Personal Loan to Pay Off Credit Card Debt Works

Personal loans are a type of unsecured loan. There are a number of uses of personal loans, including paying off credit card debt. Loan amounts can vary by lender and will be paid to the borrower in one lump sum after the loan is approved. The borrower then pays back the loan — with interest — in monthly installments that are set by the loan terms. Some details to consider:

•   Many unsecured personal loans come with a fixed interest rate (which means it won’t change over the life of the loan), though there are different types of personal loans.

•   An applicant’s interest rate is determined by a set of factors, including their financial history, credit score, income, and other debt.

•   Typically, the higher an applicant’s credit score, the better their interest rate will be, as the lender may view them as a less risky borrower. Lenders may offer individuals with low credit scores a higher interest rate, presuming they are more likely to default on their loans.

•   When using a personal loan to pay off credit card debt, the loan proceeds are used to pay off the cards’ outstanding balances, consolidating the debts into one loan. This is why it’s also sometimes referred to as a debt consolidation loan. Ideally, the new loan will have a lower interest rate than the credit cards. By consolidating credit card debt into a personal loan, a borrower’s monthly payments can be more manageable and cost less in interest.

•   Using an unsecured personal loan to pay off credit cards also has the benefit of ending the cycle of credit card debt without resorting to a balance transfer card. Balance transfer credit cards can offer an attractive introductory rate that’s lower or sometimes even 0%. But if the balance isn’t paid off before the promotional offer is up, the cardholder could end up paying an even higher interest rate than they started with. Plus, balance transfer cards often charge a balance transfer fee, which could ultimately increase the total debt someone owes.

💡 Quick Tip: Everyone’s talking about capping credit card interest rates. But it’s easy to swap high-interest debt for a lower-interest personal loan. SoFi credit card consolidation loans are so popular because they’re cheaper, safer, and more transparent.

Understanding Credit Card Debt vs. Personal Loan Debt

At the end of the day, both credit card debt and personal loan debt are both simply money owed. However, personal loan debt is generally less costly than credit card debt. This is due to the interest rates typically charged by credit cards compared to those of personal loans. Also, some people can get trapped by paying the minimum amount on their credit card, which leads to escalating debt as the high interest rate kicks in.

The average credit card interest rate was 24.20% in early 2024. Meanwhile, the average personal loan interest rate was about half that. Given this difference in average interest rates, it can cost you much more over time to carry credit card debt, which is why taking out a personal loan to pay off credit cards can be an option worth exploring.

Keep in mind, however, that the rate you pay on both credit cards and personal loans is dependent on your credit history and other financial factors.

Recommended: Balance Transfer Credit Cards vs Personal Loans

Pros and Cons of Using Loans for Credit Card Debt

While on the surface it may seem like taking out a personal loan to pay off credit card debt could be the best solution, there are some potential drawbacks to consider as well. Here’s a look at the pros and cons:

Pros

 Cons
Potential to secure a lower interest rate: Personal loans may charge a lower interest rate than high-interest credit cards. Consider the average interest rate for personal loans was recently 12.30%, while credit cards charged 24.20% on average. Lower rates aren’t guaranteed: If you have poor credit, you may not qualify for a personal loan with a lower rate than you’re already paying. In fact, it’s possible lenders would offer you a loan with a higher rate than what you’re paying now.
Streamlining payments: When you consolidate credit card debt under a personal loan, there is only one loan payment to keep track of each month, making it less likely a payment will be missed because a bill slips through the cracks. Loan fees: Lenders may charge any number of fees, such as loan origination fees, when a person takes out a loan. Be mindful of the impact these fees can have. It’s possible they will be costly enough that it doesn’t make sense to take out a new loan.
Pay off debt sooner: A lower interest rate means there could be more money to direct to paying down existing debt, potentially allowing the debtor to get out from under it much sooner. More debt: Taking out a personal loan to pay off existing debt is more likely to be successful when the borrower is careful not to run up a new balance on their credit cards. If they do, they’ll potentially be saddled with more debt than they had to begin with.
Could positively impact credit: It’s possible that taking out a personal loan could build a borrower’s credit profile by increasing their credit mix and lowering their credit utilization by helping them pay down debt. Credit score dip: If a borrower closes their now-paid-off credit cards after taking out a personal loan, it could negatively impact their credit by shortening their length of credit history.

How Frequently Can You Use Personal Loans to Pay Off Credit Card Debt?

Taking out a personal loan to pay off credit cards generally isn’t a habit you want to get into. Ideally, it will serve as a one-time solution to dig you out of your credit card debt.

Applying for a personal loan will result in a hard inquiry, which can temporarily lower your credit score by a few or several points. If you apply for new loans too often, this could not only drag down your credit score but also raise a red flag for lenders.

Additionally, if you find yourself repeatedly re-amassing credit card debt, this is a signal that it’s time to assess your financial habits and rein in your spending. Although a personal loan to pay off credit cards can certainly serve as a lifeline to get your financial life back in order, it’s not a habit to get into as it still involves taking out new debt.

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5 Steps to Successfully Pay Off Credit Cards with a Personal Loan

The steps for paying off a credit card with an unsecured personal loan aren’t particularly complicated, but having a plan in place is important. Here’s what you can expect.

Getting the Whole Picture

It can be scary, but getting the hard numbers — how much debt is owed overall, how much is owed on each specific card, and what the respective interest rates are — can give you a sense of what personal loan amount might be helpful to pay off credit cards. You can also use an online personal loan calculator to see how things stack up in detail.

Choosing a Personal Loan to Pay off Credit Card Debt

These days, you can do most — or all — personal loan research online. A personal loan with an interest rate lower than the credit card’s current rate is an important thing to look for. Just be sure you are looking at the loan’s annual percentage rate, which tallies the interest rate and other charges (such as origination fees) to give you a truer picture of the cost of the loan.

Paying Off the Debt

Once an applicant has chosen, applied for, and qualified for a personal loan, they’ll likely want to immediately take that money and pay off their credit card debt in full.

Be aware that the process of receiving a personal loan may differ. Some lenders will pay off the borrower’s credit card companies directly, while others will send the borrower a lump sum that they’ll then use to pay off the credit cards themself.

Hiding Those Credit Cards

One potential risk of using a personal loan to pay off credit cards is that it can make it easier to accumulate more debt. The purpose of using a personal loan to pay off credit card debt is to keep from repeating the cycle. Consider taking steps like hiding credit cards in a drawer and trying to use them as little as possible.

Paying Off Your Personal Loan

A benefit of using a personal loan for debt consolidation is that there is only one monthly payment to worry about instead of several. Not missing any of those loan payments is important — setting up autopay or a monthly reminder/alert can be helpful.

Creating a Budget for Successful Debt Payoff

Before embarking on paying off credit card debt, a good first step is making a budget, which can help you better manage their spending. You might even find ways to free up more money to put toward that outstanding debt.

If you have more than one type of debt — for instance, a personal loan, student loan, and maybe a car loan — you may want to think strategically about how to tackle them. Some finance experts recommend taking on the debt with the highest interest rate first, a strategy known as the avalanche method. As those high interest rate debts are paid off, there is typically more money in the budget to pay down other debts.

Another approach, known as the snowball method, is to pay off the debts with the smallest balances first. This method offers a psychological boost through small wins early on, and over time can allow room in the budget to make larger payments on other outstanding debts.

Of course, for either of these strategies, keeping current on payments for all debts is essential.

Where Can You Get a Personal Loan to Pay off Credit Cards?

If you’ve decided to get a personal loan to pay off credit cards, you’ll next need to decide where you can get one. There are a few different options for personal loans: online lenders, credit unions, and banks.

Online Lenders

There are a number of online lenders that offer personal loans. Many offer fast decisions on loans, and you can often get funding quickly as well.

While securing the lowest rates often necessitates a high credit score, there are online lenders that offer personal loans for those with lower credit scores. Rates can vary widely from lender to lender, so it’s important to shop around to find the most competitive offer available to you. Be aware that lenders also may charge origination fees.

Credit Unions

Another option for getting a personal loan to pay off credit cards is through a credit union. You’ll need to be a member in order to get a loan from a credit union, which means meeting membership criteria. This could include working in a certain industry, living in a specific area, or having a family member who is already a member. Others may simply require a one-time donation to a particular organization.

Because credit unions are member-owned nonprofits, they tend to return their profits to members through lower rates and fees. Additionally, credit unions may be more likely to lend to those with less-than-stellar credit because of their community focus and potential consideration of additional aspects of your finances beyond just your credit score.

Banks

Especially if you already have an account at a bank that offers personal loans, this could be an option to explore. Banks may even offer discounts to those with existing accounts. However, you’ll generally need to have solid credit to get approved for a personal loan through a bank, and some may require you to be an existing customer.

You may be able to secure a larger loan through a bank than you would with other lenders.

Recommended: How to Lower Your Credit Card Debt Without Ruining Your Credit Score

Avoiding the Debt Cycle After Consolidation

Once you’ve paid off your credit card debt, you don’t want to fall back into the same habits that got you in trouble in the first place. Some guidelines:

•   Budget carefully. Try a few different types of budgets until you settle on one that really works for you. Plenty of banks also offer tech tools to help you track the money that’s coming in and going out.

•   Speaking of money going out: Watch your spending carefully. Check in with your money regularly, review your spending habits at least monthly, and scale back as needed.

•   Build an emergency fund (even funneling $25 per paycheck is a smart start) so you can cover unexpected expenses like a big medical bill vs. using your credit card.

•   Avoid credit card spending as much as possible. Use your debit card whenever possible to keep spending in check and avoid interest charges.

The Takeaway

High-interest credit card debt can be a huge financial burden. If you’re only able to make minimum payments on your credit cards, your debt will continue to increase, and you can find yourself in a vicious debt cycle. Personal loans are one potential way to end that cycle, allowing you to pay off debt in one fell swoop and hopefully replace it with a single, more manageable loan.

Whether or not you agree that credit card interest rates should be capped, one thing is undeniable: Credit cards are keeping people in debt because the math is stacked against you. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. SoFi offers lower fixed rates and same-day funding for qualified applicants. See your rate in minutes.


SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Can you use a personal loan to pay off credit cards?

Yes, it is possible to use a personal loan to pay off credit cards. The process involves applying for a personal loan (ideally one with a lower interest rate than you are paying on your credit cards) then using the loan proceeds to pay off your existing credit card debt. Then, you will begin making payments to repay the personal loan.

How is your credit score impacted if you use a personal loan to pay off credit cards?

When you apply for a personal loan, the lender will conduct what’s known as a hard inquiry. This can temporarily lower your credit score. However, taking out a personal loan to pay off credit cards could ultimately have a positive impact on your credit if you make on-time payments, if the loan improves your credit mix, and if the loan helps you pay off your outstanding debt faster.

What options are available to pay off your credit card?

Options for paying off credit card debt include: Taking out a personal loan (ideally with a lower interest rate than you’re paying on your credit cards) and using it to pay off your balances; using a 0% balance transfer credit card; and exploring a debt payoff strategy like the snowball or avalanche method. Other ideas: Consult with a credit counselor, or enroll in a debt management plan.

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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

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

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Jan
15
2026
A close-up of a digital stock market display shows a fluctuating orange graph against a blue background.

6 Top Stock Market Forums to Visit

By | Growing Wealth, invest, Investing | Comments Off on 6 Top Stock Market Forums to Visit

Stock market forums are online discussion platforms where investors can come together and exchange ideas about financial markets, specific stocks, and investment strategies. A forum can be as simple as the comment section of an article or blog post or as formal as a dedicated investing community with tools and moderation.

If you’re interested in learning from others or sharing your own insights, stock market forums can be a powerful resource. Here’s a look at some of the top stock market message boards and forums available today.

Key Points

•   Stock market forums connect investors and facilitate discussions around trends, strategies, and individual securities.

•   Many forums offer educational content, specialized tools, and real-time market commentary.

•   Risks include misinformation, hyper-driven discussions, and advice that may not suit your personal financial situation.

•   Popular forums include Reddit communities, Yahoo Finance, InvestorsHub, Seeking Alpha, Motley Fool, and StockTwits.

•   Always verify forum information independently before making investment decisions.

6 Top Stock Market Message Boards and Forums

Investment message boards and forums generally attract participants who want to learn, share perspectives, and make informed financial decisions. That said, like any online community, stock market forums can also contain heated debates, misinformation and even outright trolling.

The general rules of online engagement apply: remain skeptical, question what you read, and conduct your own research before acting on any advice.

Whether you’re just getting started with online investing or have years of trading experience, the following stock market forums may be worth exploring.

1. Reddit Communities (Various Subreddits)

Reddit remains one of the most influential platforms for stock market discussions. Its wide range of subreddits caters to different investing styles, experience levels, and risk tolerances.

•   r/personalfinance: Covers foundational topics such as budgeting, savings, debt management, investing, and retirement planning.

•   r/wallstreetbets: Known for speculative trades, aggressive risk-taking, and fast-moving discussions.

•   r/CryptoCurrency: Focuses on all things cryptocurrency, including news, technical analysis, and user experiences.

•   r/stocks: A more traditional forum for stock-related news, analysis, and long-term investing discussions.

•   r/investing: Explores broader investing topics, including stocks, bonds, real estate, and alternative investments.

2. Yahoo Finance Community

Yahoo Finance includes a “Community” section that allows users to connect with other investors, participate in discussions, and share portfolios (as percentages rather than dollar amounts).

In addition, Yahoo Finance’s “Conversations” feature lets users comment directly under stock quotes and financial news articles. These threaded discussions often provide quick reactions, different viewpoints, and insights related to specific tickers or market events.

3. InvestorsHub

InvestorsHub is an online platform for stock market investors that offers real-time market data and financial tools, as well as an active online community. The site offers numerous, active financial bulletin boards for discussions and insights on stocks, crypto, penny stocks, and more. There are even boards for topics that aren’t necessarily related to stocks or investing, such as music, cars, recipes, and TV shows.

4. Seeking Alpha

Seeking Alpha is a financial media platform where contributors publish in-depth analysis and opinion pieces on stocks and markets. While almost anyone can submit content, articles are curated for quality.

The comment sections beneath each article function as active discussion forums, often featuring thoughtful debate among experienced investors. The site has strict guidelines that prohibit personal attacks, promotional content, and off-topic discussions. As a result, these forums tend to be largely free of spam or offensive content.

New investors can learn a lot by accessing one article a month for free. To read and interact with more content, however, you’ll need a paid subscription.

5. Motley Fool Community

The Motley Fool is a popular financial and investing advice website offering free articles and premium subscription services. Its discussion platform, the Motley Fool Community, includes free message boards covering topics including saving and budgeting, how to buy stocks, investing strategies, and retirement planning.

The community is generally geared toward long-term investing, making appealing to those building diversified portfolios rather than pursuing short-term trades.

6. StockTwits

StockTwits functions similarly to a social media platform designed specifically for investors and traders. With more than ten million users, it allows members to post short messages, charts, links, and opinions about stocks.

Posts are often tagged with a “cashtag” (such as $AAPL for Apple or $BTC for Bitcoin), making it easy to follow conversations around specific discussions. StockTwits also lets users create watchlists to track stocks they’re monitoring.

Recommended: How to Use Social Media for Investing Tips: The Smart Way

Pros and Cons of Relying on Stock Forums for Information

Stock forums offer a wide range of benefits, but they also have some potential drawbacks to be aware of.

Pros

•   Connecting with other investors: Stock market forums and message boards allow you to exchange ideas, gain different perspectives, and learn from others’ experiences.

•   Educational content and tools: Many platforms offer articles, charts, stock trackers, and analytical tools that can help investors build knowledge.

•   Timely market updates: Online communities often react quickly to earnings releases, breaking news, and market movements.

Cons

•   Advice may not fit your situation: Investment strategies are highly personal. What works for someone else may not align with your goals, timelines, or risk tolerance.

•   Misinformation: Not all posts are accurate. Some information may be outdated, misleading, or intentionally deceptive.

•   Unverified sources: Forum participants may exaggerate their expertise or fail to disclose conflicts of interest.

•   Hyper-driven decision making: Emotional discussions, FOMO, and herd behavior can lead to impulsive investment choices rather than sound analysis.

Always Do Your Own Research Before Investing

Stock forums offer diverse perspectives and can alert investors to new companies or trends they might not have otherwise encountered. However, the information shared on these platforms is often speculative, unaudited, and sometimes biased. It’s important to always verify claims using credible and regulated sources (such as company filings, reputable financial news outlets, and official data) and/or consult a qualified financial professional before making any investment decisions.

The Takeaway

Stock market forums provide spaces for investors and traders to discuss markets, strategies, and individual securities. Different forums cater to different investing styles, so it’s important to choose platforms that align with your goals and experience level.

While these communities can be valuable sources of ideas and education, it’s essential to remain critical and skeptical. Always do your own homework before making investment decisions.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.


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FAQ

What are the advantages of reading a stock market forum?

Stock market forums allow investors to connect with others, share insights, and learn from different perspectives. Many forums also provide access to tools such as charts, stock trackers, and educational content.

What are the risks of reading stock market forums?

Risks include misinformation, undisclosed conflicts of interest, and hype-driven discussions. Investors may also receive advice that isn’t appropriate for their financial situation. It is important to always do your own independent research before acting on any forum-based information.

What is the most popular stock market forum?

Some of the most popular stock market forums today are investment-focused communities on Reddit. Subreddits such as r/stocks, r/investing, r/personalfinance, and r/wallstreetbets collectively attract millions of users and generate large volumes of daily discussion. These communities provide a mix of beginner-friendly guidance, expert insights, and real-time market discussions, but it is important to note that the advice is crowdsourced and not professional financial counsel.

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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.

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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Jan
09
2026
A smiling young woman in a yellow sweater and jeans lies on a gray sofa, typing on a laptop.

How to Recertify Your Income Based Repayment for Student Loans

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | Comments Off on How to Recertify Your Income Based Repayment for Student Loans

If you have federal student loans, you can enroll in an Income-Driven Repayment (IDR) plan, which may make your monthly payments more affordable. That’s because the amount is calculated based on your discretionary income and family size.

Income-Driven Repayment is the umbrella term for several federal repayment programs. (Income-based repayment, on the other hand, refers to one specific IDR plan.) Once you are enrolled in an IDR plan, you will need to recertify annually, by providing updated information about your income and family size — essentially reapplying for the plan. The government uses this information to calculate your payment amount and adjust it if necessary.

You can easily recertify an IDR plan. Read on to find out when to recertify income-driven repayment, how to do it, and upcoming changes to IDR plans you should be aware of.

Key Points

•   Income-driven repayment plans require annual recertification to either reconfirm or update information on income and family size to adjust payment amounts if necessary.

•   Recertifying ensures monthly student loan payments remain manageable by reflecting current income and family size.

•   Failing to recertify by the annual deadline will likely result in higher monthly payments, reverting borrowers to the amount they would pay under the 10-year Standard Repayment Plan.

•   Individuals can opt for automatic recertification by providing consent for the Education Department to access their tax information, or they can fill out a form manually.

•   Required documents for recertification typically include proof of income, such as recent tax returns or current pay stubs, for verification purposes.

What Is Income-Driven Repayment?

Income-driven repayment currently encompasses three different repayment plans. These plans are available to federal student loan borrowers to help make their payments more manageable. It’s an option to keep in mind when choosing a loan or if your current federal loan payments are high relative to your income. The program is intended to make the amount you pay on your student loan each month more affordable.

Under the “One Big Beautiful Bill” signed into law by President Trump, the options for income-driven plans will be changing over the next few years. Currently, however, the three income-driven repayment programs offered for federal student loans are:

•   Pay As You Earn (PAYE) Repayment Plan

•   Income-Based Repayment (IBR) Plan

•   Income-Contingent Repayment (ICR) Plan

For all of these plans, your monthly payment amount is based on a percentage of your discretionary income and the size of your family.

An income-driven plan also extends your loan term to 20 or 25 years. On the IBR plan, borrowers are eligible to get any remaining balance on their loan forgiven after that time.

Recommended: Guide to Student Loan Forgiveness

Which Federal Loans Are Eligible for an Income-Driven Repayment Plan?

IDR plans are available for the following types of federal loans:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans made to graduate or professional students

•   Direct Consolidation Loans that did not repay any PLUS loans made to parents

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans made to graduate or professional students

•   FFEL Consolidation Loans that did not repay any PLUS loans made to parents

•   Federal Perkins Loans, if these student loans are consolidated.

Private student loans are not eligible for IDR plans. For borrowers who are struggling to make their monthly payments on private loans, one option they may want to consider is student loan refinancing. With refinancing, you replace your old loans with one new loan. Ideally, the refinanced loan has a lower interest rate, which can lower monthly payments and save a borrower money.

Using a student loan refinancing calculator can be helpful to see how much refinancing might save you.

Take control of your student loans.

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How Monthly Payments Are Calculated Under IDR Plans

On an IDR plan, your monthly payment amount is generally based on a percentage of your discretionary income, which is defined by the Education Department as “the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.”

Below is a look at how monthly payments are calculated under each plan. You can also use the office of Federal Student Aid’s Loan Simulator tool to see what your payments would be for each of the plans.

Also, it’s important to be aware that the PAYE and ICR plans are currently available to borrowers, but they are set to close to new enrollments on or after July 1, 2027. Borrowers already on these plans have until July 1, 2028, to switch to the IBR plan or the new Repayment Assistance Plan (RAP).

The IBR Plan

As noted above, while most of the other IDR plans will close in 2027, IBR will remain open to current borrowers.

On Income-Based Repayment, borrowers pay 10% of their discretionary income each month for a 20-year term if they first borrowed after July 1, 2014. (The monthly percentage is 15% with a 25-year repayment term for those who borrowed before that date.)

Any remaining balance owed at the end of the loan term will be forgiven on IBR. Although the PAYE and ICR plans no longer offer loan forgiveness, a borrower can get credit for their PAYE and ICR payments if they switch to IBR.

The PAYE Plan

To be eligible for PAYE, an individual must be a new borrower as of October 1, 2007, and have received a Direct loan disbursement on or after October 1, 2011. In addition, a borrower’s monthly payment on the plan must be less than what it would be on the Standard 10-year plan.

On PAYE, monthly payments are 10% of a borrower’s discretionary income, and the loan term is 20 years.

PAYE is currently open, but it’s closing down on July 1, 2027. Borrowers already on the plan will have until July 1, 2028 to switch to the IBR plan or the new plan, RAP.

The ICR Plan

The income-contingent repayment plan sets a borrower’s payments at 20% of their discretionary income and has a repayment term of 25 years. This is the only income-driven option for borrowers with Parent PLUS loans — and those loans must be consolidated first.

ICR closes to new enrollees on July 1, 2027, and those currently on the plan have until July 1, 2028 to switch to IBR or RAP. Otherwise, they will automatically be moved to RAP.

Recommended: Student Loan Repayment Calculator

Take control of your student loans.
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The New RAP Plan

The RAP program is scheduled to launch in the summer of 2026. Here are details on how the plan works.

How RAP Differs From Other IDR Plans

Unlike the existing IDR plans that use discretionary income, RAP will base a borrower’s payments on their adjusted gross income (AGI). Depending on their income, they’ll pay 1% to 10% of their AGI over a term of up to 30 years.

If they still owe money after 30 years, the rest will be forgiven. The federal government will cover unpaid interest and ensure that the loan’s principal goes down by at least $50 each month.

All borrowers are required to pay at least $10 per month on RAP. This plan may offer lower monthly payments than the current IDR options, but borrowers might also pay more interest over the life of the loan due to the longer repayment term.

Eligibility and Enrollment in the RAP Plan

To be eligible for RAP, you must have Federal Direct Loans, Federal Family Education Loans, or Grad PLUS loans (Parent PLUS borrowers are ineligible for RAP). Qualifying loans may be subsidized or unsubsidized.

As of July 1, 2026, new borrowers can enroll in RAP, if they choose. It will be the only income-driven plan available to them. Existing borrowers will be able to choose RAP or IBR.

Borrowers will enroll in RAP through StudentAid.gov. Details about the application process are not yet available; information is likely to be released closer to the July 1, 2026 launch date. Watch for updates from your loan servicer, and check the Student Aid website.

What Is Student Loan Recertification?

Since your current IDR plan is based on your income and the size of your family, you need to reconfirm or recertify these details every year.

When you apply for or recertify an income-driven repayment plan online, the Education Department will ask you for consent to access your tax information. If you give consent, they will automatically recertify your loan every year.

If you choose to recertify manually, you will need to fill out the online form and upload the requested documentation, or print out a PDF and mail it along with the documentation to your loan servicer.

If your financial situation changes ahead of your recertification date — for instance, if you lose your job — you can reach out to your loan servicer and ask them to immediately recalculate your payments.

Why Recertification Matters

Recertification is important because it ensures that your monthly student loan payments are based on your current income and family size, which may help keep your payments manageable. Also, if you fail to recertify, your payments will likely go up — see details about that below.

How to Recertify Income-Driven Repayments

You can apply for income-driven repayments and recertify your status by going online to StudentAid.gov. Filing your application online ensures that it is sent to each of your loan servicers if you have more than one. Alternatively, you may send paper applications to each of your loan servicers.

Steps for Online and Mail Recertification

To file online, go to StudentAid.gov and log in with your FSA ID. Click on “Manage Your Income-Driven Repayment Plan.”

Verify your family size, marital status, income, and spouse’s income, if applicable. If your income has changed since your last tax return, you can upload more recent pay stubs. You can also give consent for the Education Department to access your tax information, allowing automatic recertification in the future.

To recertify by mail, you can download the Income-Driven Repayment Plan Request form on the Student Aid website. Fill out the form and attach the required documents. You’ll send the request to the address provided by your loan servicer.

What Documents Are Required for Recertification

The documents required for recertification are proof of income, such as your most recent tax return or pay stubs. Unless you have chosen automatic recertification, you will need to manually upload these documents for your loan servicer.

When to Recertify Income-Driven Repayment Plans

Your IDR plan recertification deadline is the date one year after you start or renew an IDR plan. Your loan servicer will send you a notification of your upcoming recertification deadline along with the actions (if any) you need to take; you will also receive notices from StudentAid.gov.

If your income has decreased or your family status has changed, you may want to recertify before your annual deadline. You can fill out a recertification form at any time if you’re struggling to make your payments because your financial situation has changed.

What Happens If You Miss the Recertification Deadline?

If you fail to recertify your IBR plan by the annual deadline, you will remain on your current IDR plan, but your monthly payment will switch to the amount you would pay under the 10-year Standard Repayment Plan, which will likely increase your payments.

You’ll be able to make payments based on your income once again when you recertify and update your income information with your loan servicer.

The Takeaway

Income-Driven Repayment plans, which are available to many federal student loan borrowers, can be a way to help make student loan repayments work with a borrower’s budget. Recertification is a critical step borrowers need to take each year to either verify their information or inform the Education Department of changes to their situation that might affect their payment size.

Refinancing is another option some borrowers may want to consider to help manage their student loan debt, especially those with private student loans that don’t qualify for IDR plans or federal benefits and programs.

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

Can you recertify student loans early?

Federal student loan borrowers who are on an income-driven repayment plan can recertify early, which you may want to do if your family has grown or your income has decreased. Otherwise, you need to recertify your loans once a year.

How do I recertify my student loans?

You can recertify your student loans online at the Federal Student Aid website (studentaid.gov), or by downloading and mailing in the Income-Driven Repayment Plan Request form with any supporting documentation. If you mail in the request, you’ll need to send a copy to each of your loan servicers. You can also opt to have your recertification happen automatically every year by giving consent for the Education Department to access your tax information.

When should I recertify my student loans?

Your recertification date is the date one year after you started or renewed your IDR plan. Your loan servicers will send you a notice in advance that it’s time to recertify your loan. The Student Aid website should also send you notices about recertification.

What documents do I need to recertify my IDR plan?

Unless you’ve opted for automatic recertification, you will need to provide proof of income, such as your most recent tax return or pay stubs, when you recertify your IDR plan. You will need to manually upload these documents for your loan servicer.

What if my income has changed since my last recertification?

If your income has changed since your last recertification, you can submit updated information, along with supporting documents such as pay stubs, so that your payments can be recalculated. You can do this at any time through your account on StudentAid.gov or directly to your loan servicer.

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

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


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

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

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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Jan
09
2026
An overhead shot of hands using a laptop next to a beverage and a phone, indicating that someone is figuring out how to pay back federal student loans.

Strategies to Pay Back Federal Student Loans

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

If you borrowed money from the government to help pay for college, the time will come when you need to pay your student loans back. That time typically arrives six months after you graduate or drop below half-time status.

While the prospect of paying student debt may seem daunting while you’re a student with little to no income, don’t stress. The U.S. Education Department offers a number of repayment options, including plans that require you to pay only a small percentage of your monthly salary. Plus, there are steps you can take to make it easier to repay your student loans and potentially save money on interest.

Read on to learn more on how to start paying back your federal student loans.

Key Points

•   You typically begin repaying federal student loans six months after graduating or dropping below half-time enrollment, but interest may accrue during this grace period.

•   There are several repayment plans for loans disbursed before July 1, 2026, including the standard 10-year fixed plan and income-driven repayment (IDR) options tied to your income.

•   You can consolidate multiple federal loans into a single Direct Consolidation Loan to simplify payments, though it doesn’t lower your interest rate.

•   Refinancing federal loans through a private lender might lower your monthly payments or interest rate, but you’ll give up federal protections and forgiveness benefits.

•   Your repayment plan isn’t permanent — you can switch plans as your financial situation changes, and consider consolidating or refinancing later if needed.

Types of Federal Student Loans

To determine the right student loan repayment strategy, it’s important to know what type of student loans you have. Here’s a look at the main types of federal student loans.

Direct Subsidized Loans

Direct Subsidized Loans are a type of federal student loan only for undergraduates who have demonstrated financial need. With these loans, the government pays the interest on the loan while you are in school and during the grace period.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are available to eligible undergraduate, graduate, and professional students, and eligibility is not based upon financial need. Borrowers are responsible for all interest that accrues on the loan.

Direct PLUS Loans

Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for education expenses. These loans are unsubsidized, meaning that interest accrues throughout the life of the loan, including while the student is enrolled in school.

Starting on July 1, 2026, though, Direct Grad PLUS Loans will no longer be available. Students will instead rely on Direct Unsubsidized Loans, which will have new annual and lifetime borrowing caps. Parent PLUS Loans will still be an option, but new limits will apply starting on July 1, 2026.

Direct Consolidation Loans

Direct Consolidation Loans allow borrowers to combine multiple existing federal loans into one new loan with a single monthly payment. This simplifies repayment and can extend the repayment term, potentially lowering monthly costs. However, it won’t reduce your interest rate, since the new rate is a weighted average of the original loans rounded up to the nearest eighth of a percent.

When Do You Have to Pay Back Federal Student Loans?

You need to begin paying back most federal student loans six months after you leave college or drop below half-time enrollment.

Direct PLUS Loans enter repayment once your loan is fully disbursed. However, graduate/professional students who take out PLUS loans get an automatic deferment, which means they don’t have to make payments while they are in school at least half time and for an additional six months after they graduate.

If you’re a Parent PLUS Loan borrower, though, payments are due upon disbursement. You can, however, request a deferment (it’s not automatic). This deferment means you won’t have to pay while your child is enrolled at least half time and for an additional six months after your child leaves school or drops below half-time status.

Grace Periods and Deferment Options

A grace period is the span of time after you graduate, leave school, or drop below half-time enrollment during which you are not required to make federal student loan payments. Most federal loans, including Direct Subsidized and Unsubsidized Loans, offer a six-month grace period. Grace periods give borrowers time to find work, organize finances, and prepare for repayment.

Deferment allows borrowers to temporarily pause federal student loan payments due to qualifying circumstances such as economic hardship, unemployment, military service, or returning to school. During deferment, interest does not accrue on subsidized loans, though it typically continues to accumulate on unsubsidized loans.

Note that under the 2025 federal budget bill, loans made after July 1, 2027 are no longer eligible for deferments based on unemployment or economic hardship.

How to Pay Federal Student Loans

When you leave school, you’ll be required to complete exit counseling. This is an online program offered by the government that helps you prepare to repay your federal student loans. Once you’ve completed your exit counseling, here’s what you’ll need to do to start paying back your federal student loans.

1. Find Your Student Loan Servicer

You can find your federal student loan servicer by logging into your account at StudentAid.gov, where all federal loans and their assigned servicers are listed in your dashboard. This portal provides the servicer’s name, contact information, and details about each loan.

2. Review and Select a Repayment Plan

You’ll then have the option to pick a repayment plan. If you don’t choose a specific plan, you’ll automatically be placed on the 10-year Standard Repayment Plan. However, you can change plans at any time once you’ve begun paying down your loans.

Here’s a look at your repayment plan options, plus tips on why you might choose one plan over another.

Standard Repayment Plan

The Standard Repayment Plan is the default loan repayment plan for federal student loans. Under this plan, you pay a fixed amount every month for up to 10 years (for loans disbursed before July 1, 2026). For loans disbursed after this date, the repayment term will depend on your federal student loan balance. This can be a good option for borrowers who want to pay less interest over time.

Income-Driven Repayment Plans

With income-driven repayment plans (IDRs), the amount you pay each month on your student loans is tied to the amount of money you make, so you never need to pay more than you can reasonably afford. Generally, your payment amount under an IDR plan is a percentage of your discretionary income.

Graduated Repayment Plan

The Graduated Repayment Plan starts with lower payments that increase every two years. Payments are made for up to 10 years (between 10 and 30 years for consolidation loans). If your income is low now but you expect it to increase steadily over time, this plan might be right for you. Keep in mind that this plan is only available for loans disbursed before July 1, 2026.

Extended Repayment Plan

The Extended Repayment Plan, also only available for loans disbursed before July 1, 2026, is similar to the Standard Repayment Plan, but the term of the loan is longer. Extended Repayment Plans generally have terms of up to 25 years. The longer term allows for lower monthly payments, but you may end up paying more over the life of your loan thanks to additional interest charges.

3. Make a Payment

Once you know your servicer and your repayment plan, the next step is making your actual student loan payment. Most borrowers choose the most convenient method, but your servicer typically offers several options.

Online

Most servicers allow you to make payments directly through their online portal, where you can schedule one-time or recurring payments. Paying online is usually the fastest and most reliable method, making it easy to track your balance and payment history.

By Mail

You can also make payments by mailing a check or money order to your loan servicer. Be sure to include your account number and allow enough time for the payment to arrive and be processed before your due date.

4. Set Up Autopay and Payment Alerts

You might also consider signing up for autopay through your loan servicer. Since your payments will be automatically taken from your bank account, you won’t have to worry about missing a payment or getting hit with a late fee. Plus, you’ll receive a 0.25% interest rate deduction on your loan.

5. Explore Other Repayment Options

If your current repayment plan isn’t sustainable, there are several ways to adjust your monthly payments or overall loan strategy. You could consider loan forgiveness, refinancing to a private student loan, or student loan deferment or forbearance.

Loan Forgiveness

Federal student loan forgiveness programs can reduce or eliminate your remaining balance if you meet specific criteria, such as working in public service or teaching in underserved areas. Programs like Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness reward borrowers who make consistent payments while serving their communities. These options can significantly reduce long-term loan costs for eligible borrowers.

Refinancing to Private Student Loan

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

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

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

Deferment or Forbearance

Deferment or forbearance can temporarily pause your student loan payments during financial hardship, unemployment, health issues, or other qualifying situations. While these options offer short-term relief, interest may continue to accrue, depending on the loan type. They should be used sparingly and strategically to avoid increasing your overall loan balance.

Again, for loans made after July 1, 2027, borrowers are no longer eligible for deferments based on unemployment or economic hardship.

Recommended: Student Loan Consolidation vs Refinance

The Takeaway

If you have federal student loans, you generally don’t need to start paying them down until six months after you graduate. At that point, you’ll have the opportunity to choose a repayment plan that fits your financial situation and goals. Whatever plan you choose, you’re never locked in. As your finances and life circumstances change, you may decide to switch to a different payment plan, consolidate, or refinance your student loans.

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 there a way to get rid of federal student loans?

If you repay your loans under an income-driven repayment plan, any remaining balance on your student loans will be forgiven after you make a certain number of payments over 20 or 25 years. Other ways to pursue federal student loan forgiveness are through Public Service Loan Forgiveness and Teacher Loan Forgiveness.

What is the best option for repaying student loans?

The best federal student loan repayment plan for you will depend on your goals and financial situation. If you want to pay the least possible in interest, you might want to stick with the standard repayment plan. If, on the other hand, you want lower monthly payments and student loan forgiveness, you might be better off with an income-driven repayment plan.

What happens if you don’t pay federal student loans?

Typically, If you don’t make payments on your loan for 90 days, your loan servicer will report the delinquency to the three national credit bureaus. If you don’t make a payment for 270 days (roughly nine months), the loan will go into default. A default can cause long-term damage to your credit score. You may also see your federal tax refund withheld or some of your wages garnished.

Can you refinance federal student loans into private loans?

Yes, you can refinance federal student loans into private loans, but this means losing federal benefits like income-driven repayment plans and loan forgiveness options. Private lenders offer competitive rates, but eligibility depends on credit score and financial stability. Consider the pros and cons carefully.

How does income-driven repayment affect loan forgiveness?

For loans disbursed before July 1, 2026, income-driven repayment plans can lead to loan forgiveness after 20-25 years of on-time payments, depending on the plan. Payments are based on your income, making them more manageable. However, any forgiven balance may be taxable as income, and you must maintain eligibility throughout the repayment period.

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

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


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

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

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Jan
09
2026
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How Soon Can You Refinance Student Loans?

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

Typically, student loan borrowers cannot refinance their debt until they graduate or withdraw from school. At that point, federal student loans and the majority of private student loans have a grace period, so it can make sense to refinance right before the grace period ends.

Depending on your financial situation, the goal of refinancing may be to get a lower interest rate and/or have lower monthly payments. Doing so can alleviate some of the stress you may feel when repaying your debt. In this guide, you’ll learn how soon you can refinance student loans, and what options are available, plus the potential benefits and downsides of each.

Key Points

•   Most borrowers can refinance after graduation or when they leave school; some lenders allow earlier refinancing with strong financials.

•   Refinancing federal loans with a private lender forfeits federal benefits like income-driven repayment and forgiveness.

•   It’s possible to refinance only select loans, such as those with high rates or variable interest rates.

•   You may refinance with a cosigner if you don’t meet a lender’s eligibility criteria.

•   Alternatives include federal loan consolidation, income-driven repayment plans, or interest-only payments while still in school.

What Do Your Current Loans Look Like?

Before deciding whether or not to refinance your student loans, you need to know where your loans currently stand. Look at the loan servicers, loan amounts, interest rates, and terms for all loans before making a decision.

Contact Info for Most Federal Student Loans

The government assigns your federal student loans to a loan servicer after they are paid out. To find your loan servicer, visit your account dashboard on StudentAid.gov, find the “My Loan Servicers” section, and choose “View loan servicer details.” You can also call the Federal Student Aid Information Center at 800-433-3243.

Loans Not Owned by the Education Department

For federal loans that aren’t held by the Education Department, here’s how to get in touch:

•   If you have Federal Family Education Loan Program loans that are not held by the government, contact your servicer for details. Look for the most recent communication from the servicer, or check your billing statements for their contact information.

•   If you have a Federal Perkins Loan that is not owned by the Education Department, contact the school where you received the loan for details. Your school may be the servicer for your loan.

•   If you have Health Education Assistance Loan Program loans and need to find your loan servicer, look for the most recent emails or communication about these loans, or check your billing statements.

Private Student Loans

Private student loans are not given by the government, but rather by banks, credit unions, and online lenders. You’ll need to find your specific lender or servicer in order to find out your loan information. Your lender may also be your loan servicer, but not necessarily. Check your most recent communication, including emails, from the lender for their contact information. If they are not the servicer for your loan, ask them who is.

How to Find Out Who Services Your Loan

As noted above, you can find the servicer for your federal student loans on your account at StudentAid.gov in the “My Loan Servicers” section. For loans not owned by the Education Department (except Perkins Loans), check recent billing statements or communications about the loans for your servicer’s contact information. If you have Perkins Loans, contact your school for information about your servicer.

For private student loans, contact your lender for details. They may also be the servicer of your loan, and even if they aren’t they can tell you who is.

Can You Refinance Student Loans While Still in School?

Although it’s not common, you may be able to refinance your student loans while still in school with certain lenders. However, doing so may not make the most sense for your situation.

When you refinance student loans, you exchange your current loans with a new loan from a private lender, preferably with a lower rate. This rate is based on such factors as current market rates and your credit profile.

Pros and Cons of Refinancing Before Graduation

Some of the advantages of refinancing your student loans while still in school include potentially getting more favorable loan terms, such as a lower interest rate on your loans if you qualify, which could lower your monthly payments.

Refinancing also allows you to consolidate all your loans into one loan, which can make them easier to manage.

However, there are disadvantages to refinancing while still in school. For one thing, it can be difficult to qualify for refinancing without a job and a steady income. You may need a creditworthy cosigner in order to qualify. Not only that, many lenders require borrowers to have a bachelor’s degree to be eligible for refinancing.

It’s also important to be aware that refinancing federal loans makes them ineligible for federal benefits and programs, such as income-driven payment plans and forgiveness.

In addition, once you refinance, you will need to start making loan payments, which may be challenging while you’re still in school.

Which Loans Can Be Refinanced While Enrolled?

You can refinance any type of student loan while enrolled in school, assuming that the lender allows it. If you’re still in school and want to refinance, a lender will typically want to make sure you have a job or job offer on the table, are in or near your last year of school, and have a solid credit profile. As noted above, you could also consider refinancing your student loans with a cosigner if you do not meet the lender’s requirements on your own.

A couple of important points if you are considering refinancing federal student loans with a private lender:

•   Doing so means you will forfeit federal benefits and protections, such as forbearance and forgiveness, among others.

•   If you refinance for an extended term, you may have a lower monthly payment but pay more interest over the life of the loan. This may or may not suit your financial needs and goals, so consider your options carefully.

Which Loans Can’t Be Refinanced While Enrolled?

If you find a lender willing to refinance your student loans while still in school, they may not exclude certain types of loan. However, it is generally best not to refinance federal student loans while enrolled. Federal Subsidized Loans, for example, do not start earning interest until after the grace period is over. Since you aren’t paying anything in interest, it doesn’t make sense to refinance and have to start paying interest on your loans immediately.

Federal Loans With Active Deferment or Forgiveness Benefits

If you’re in school at least half-time, your federal loans are automatically in deferment, meaning you don’t have to make payments on them. If you refinance your loans, you lose that benefit, and you need to start making payments on your refinanced loans.

Also, if you plan to pursue student loan forgiveness like Public Service Loan Forgiveness after you graduate, refinancing student loans isn’t the best option for you. Refinancing gives you a new private loan with a new private lender, thereby forfeiting your eligibility for forgiveness and other federal benefits and protections.

Is It Worth Refinancing Only Some of Your Loans?

It may be worth refinancing only some of your loans in certain situations. Here are some instances in which you might want to consider this option.

When Partial Refinancing Might Make Sense

The student loans it may make sense to refinance might include:

•   Loans that have a variable interest rate (if you’d prefer a fixed rate)

•   Loans with a relatively high interest rate, since refinancing may save you money. A student refinance calculator can come in handy when estimating what you might save over the life of the loan.

When you might want to think twice about refinancing:

•   If you have federal loans and plan on using an income-driven repayment (IDR) plan, for example, it makes sense not to include those loans in the refinance (see more about IDR payment plans below).

•   If you have a low, fixed interest rate currently, you should probably keep those loans as is. The main reason to refinance is to secure a lower interest rate or a lower payment.

Pros and Cons of Refinancing Student Loans

Pros Cons

•   Possibly lower your monthly payment

•   Possibly lower your interest rate

•   Shorten or lengthen the loan term

•   Switch from variable to fixed interest rate, or vice versa

•   Combine multiple loans into one

•   Lose access to federal benefits and protections

•   Lose access to remaining grace periods

•   May be difficult to qualify

•   May end up paying more in interest if you lengthen the term

Examples of Refinancing Before Earning a Degree

Some borrowers might want to refinance before earning their bachelor’s degree. Others might choose to wait until they are graduate students.

Case Studies: Undergraduate vs Graduate Borrowers

Undergraduate students may have a challenging time refinancing their student loans without a strong credit profile and a job with a steady income. They might need a cosigner in order to qualify for refinancing.

Graduate students are typically eligible to refinance their undergraduate student loans, assuming they meet the lender’s requirements or use a cosigner. Parents with Parent PLUS Loans are also typically allowed to refinance their loans prior to their child graduating.

Rules will vary by lender, so make sure to do your research and choose a lender that will work with your unique situation.

Alternatives to Refinancing

If refinancing your student loans isn’t the right option for you, there are some alternatives to refinancing you can explore.

Income-Driven Repayment Plans

Income-driven repayment plans for federal student loans base your monthly payments on your discretionary income and family size and extend your loan term to 20 or 25 years. These plans can make your monthly payments more affordable. However, you may pay more interest overall on an IDR plan.

There are currently three IDR plans — the Income-Based Repayment (IBR) Plan, the Pay As You Earn (PAYE) Plan, and the Income-Contingent Repayment (ICR) Plan. On the IBR plan, any remaining balance on your loans is forgiven when your repayment term ends.

Due to the One Big Beautiful Bill, however, changes are coming to IDR plans in July 2027, when most of the plans, except IBR, will no longer accept new enrollees.

Federal Loan Consolidation

Another alternative to refinancing is consolidating student loans. Consolidation combines your federal student loans into one loan with one monthly payment. One of the main differences between consolidation and refinancing is the interest rate on a federal loan consolidation is the weighted average of the rates of the loans you are consolidating, rounded up to the nearest one-eighth of a percentage.

You typically won’t save on interest, but you can lower your monthly payment by extending the loan term. Doing this, however, means you’ll probably pay more in interest over the life of the loan. Consolidating can make your loans easier to manage because you’ll have just one loan payment to make.

Weighing Perks and Interest Rates

Before deciding whether refinancing is right for you, it’s important to consider what you might gain and what you would give up.

Losing Federal Protections vs Lower Monthly Payments

Essentially, you need to consider the cost of losing federal benefits against the perk of potentially securing a lower interest rate through refinancing. Remember,if you refinance your federal student loans with a private lender, those loans will no longer be eligible for federal protections and programs like income-driven repayment plans, federal forbearance, and student loan forgiveness. If you think you might need those programs, refinancing likely doesn’t make sense for you.

But if you can qualify for a lower interest rate, refinancing may be a good fit. Your monthly payments would probably be lower in that case and you also might get a more favorable loan term. Just remember that shortening or elongating your loan term can affect your monthly payment and the total cost over the life of your loan.

For some borrowers, lengthening the term and lowering the monthly payment will be a valuable option, even though it can mean paying more interest over the life of the loan. Only you can decide if this kind of refinancing makes sense for your personal financial situation.

The Takeaway

It’s possible to refinance student loans as soon as you establish a financial foundation or bring a creditworthy cosigner aboard. You can even refinance your student loans while in school, although not all lenders offer this option and it may not make sense for your situation.

It’s also important to understand the implications of refinancing federal student loans with a private lender. If you don’t plan on using federal benefits and protections and you can land a lower interest rate, it might be a move worth considering.

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 soon after taking out a loan can you refinance?

You can refinance a student loan as soon as you meet a lender’s specific eligibility requirements. Many lenders prefer borrowers to have graduated before they refinance and to have a stable job and steady income. However, some lenders do allow students to refinance while they are still in school, though the student may need a creditworthy cosigner in order to qualify.

Can I refinance student loans before graduation?

It’s possible to refinance student loans before graduation, though it can be challenging. While many lenders don’t offer the option to refinance while you’re still in school, there are some that do. Keep in mind that you may need a creditworthy cosigner to qualify for refinancing.

What are the risks of refinancing federal student loans early?

Risks of refinancing federal student loans early include losing access to important federal benefits and programs such as income-driven repayment plans, deferment, and forgiveness. For example, while you’re in school, your federal loans are automatically in deferment, meaning you don’t have to make payments on them. If you refinance your loans, you lose that benefit and need to start making payments on your refinanced loans once they are disbursed.

Can I refinance just some of my student loans?

Yes, you can refinance just some of your student loans. With refinancing, you can pick and choose the specific loans you’d like to refinance. For instance, you could choose to refinance only your private student loans, and keep your federal loans to preserve access to federal benefits and protections. You might also choose to refinance only your student loans with high interest rates. It’s completely up to you.

Will refinancing affect my credit score?

Refinancing requires a hard check of your credit, which typically causes a slight dip in your credit score. However, the drop is generally just a few points and it’s temporary. Making on time loan payments may help build your credit again over time.

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

SoFi 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., Puerto Rico, U.S. Virgin Islands, or American Samoa, 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 4/22/2025 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.


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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