Taking a break from financial obligations can offer some breathing room, but it’s important to understand how deferred payments may affect your credit score.
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It didn’t take long after President Biden announced his student loan forgiveness program in August 2022 for the scammers to get up and running. The Better Business Bureau (BBB) and federal agencies have unearthed hundreds of ads, text messages, phone calls, and emails targeting student loan borrowers. Their purpose? To get consumers to divulge private financial information or to pay for unnecessary services. In response, the U.S. Department of Education issued warnings about the student loan forgiveness scams and advice on how to avoid them.
The ongoing student loan payment pause hasn’t slowed the scammers down. Keep reading to learn how student loan forgiveness program scams try to fool you, and how you can avoid getting duped.
The student loan forgiveness plan would cancel up to $10,000 in federal student loan debt for single borrowers with an adjusted gross income of less than $125,000 a year, or less than $250,000 for married couples. Pell Grant recipients could have as much as $20,000 in student debt canceled. To refresh your memory, check out this story on the student debt relief plan.
The DOE officially began to accept applications for forgiveness on Oct. 17, 2022, but had to stop in November due to legal challenges to Biden’s program.
Meanwhile, the pause on federal student loan payments for all borrowers has been extended several times. Repayment could potentially resume as late as 60 days after June 30, 2023, when the U.S. Supreme Court is expected to release its decision on the challenges to President Biden’s student debt cancellation program.
While borrowers wait for updates, scammers are actively using phony government websites, false promises, and other criminal schemes to lure unsuspecting consumers. Here’s what you need to know to avoid student loan forgiveness scams.
Recommended: What Biden’s Student Loan Forgiveness Means for Your Taxes
Watchdogs have identified a variety of scams related to student loan forgiveness. Some are aimed at borrowers searching out information on the internet, and others directly target people who hold student loans. Fortunately, certain patterns are coming into focus. Here’s a rundown of what officials have seen so far.
Recommended: How Do Student Loans Work? Guide to Student Loans
These scams include texts, calls, and emails sent to borrowers conveying a false sense of urgency that they must take action before a certain date or miss out on forgiveness. In reality, the messages are designed to scare you into disclosing personal financial information, which criminals may then use for identity theft and other financial fraud. Be very wary of any “student loan forgiveness center” calls.
On Oct. 17, the DOE opened the official forgiveness application portal . The deadline for applications is the end of 2023, but you’ll want to apply a lot sooner if your payments will be resuming in January.
What’s more, for many borrowers who already have income information on file with the DOE, forgiveness will be automatic. No application — and no deadline — is necessary.
Especially while borrowers were waiting on an email from the DOE informing them that the forgiveness application was open, scammers are sending fraudulent emails that look as if they might be from the government in an effort to collect personal financial information. This and other fraudulent strategies are expected to continue.
To make sure you’re responding to a legitimate email, always check the address of the sender. The full address isn’t always obvious on a phone or other mobile device: That interface often shows only the name of the sender. Always click on the sender’s name to see the actual address.
The address is likely to be the real thing if it has a .gov ending, something not easy for fraudsters to imitate.
You can sign up for student loan forgiveness notifications and updates from this DOE webpage .
There are lots of offers on the internet and elsewhere to help borrowers claim their loan forgiveness — for a fee. While not all of the companies offering these services are illegitimate, the DOE has warned that it won’t be necessary to pay for help. They promise the application will be simple and quick to complete.
Predatory companies love to use webinars and videos explaining the details of the loan forgiveness program. The ending is always the same: a plea to sign up for their paid service, with the promise they’ll get you your debt relief. They may claim they can get you additional benefits, get your benefits faster, or get you to state tax breaks if you pay them upfront. In some cases, the outlaws charge hundreds of dollars for unnecessary service.
A real government agency will never ask for an advance processing fee. And legitimate student loan servicers will never charge a fee for providing information about your loans. You can check if a company works with the DOE at the Federal Student Aid site on avoiding scams .
Recommended: 9 Smart Ways to Pay Off Student Loans
To protect yourself from student loan forgiveness program scams, familiarize yourself with the following tips. They can help you avoid the threat of costly identity theft or financial fraud that can result from these schemes.
Never give out your FSA ID, student aid account information, or password. The DOE and the company that services your federal student loans will never call or email asking you for this information. Along the same lines, never give your personal or financial information — including your Social Security number and bank account information — over the phone or email. (That said, the beta version of the forgiveness application asks for your Social Security number but not your FSA ID.)
Avoid upfront fees. Think twice before paying anyone for help filling out the application. It is highly likely you won’t need help because the government is promising a free and easy-to-use application. Paying a fee before the application is even available is totally unnecessary.
Stay up-to-date. Having the most accurate and current student loan forgiveness information is the best defense against fraud. As mentioned above, sign up with the DOE for notifications and updates. And keep an eye on the Better Business Bureau and Federal Student Aid websites for the latest official information.
Update your contact information. To receive official notices related to student debt relief, make sure the government and your loan servicer have your most current contact information. If your income information is already on file at the DOE, qualifying borrowers will automatically receive loan forgiveness without having to apply. All borrowers, whether or not they have to apply, will be notified by the DOE when the application goes live.
To make sure you get these notices and other updates, sign up with StudentAid.gov to receive text alerts. If you don’t have a StudentAid.gov account, create one now .
You’ll also want to make sure your student loan servicer has your most recent contact information. You can find your federal student loan servicer’s contact information at Studentaid.gov/manage-loans/repayment/servicers
Understanding how student loan forgiveness scammers work is an important step toward protecting yourself. Staying up to date on the latest official news and announcements can also help you bypass the onslaught of scams out there. Another important defense: Actively manage your student loan accounts and make sure all of your information is accurate and up to date.
SoFi can help. If you have more federal student debt than the new debt relief plan will forgive, or you don’t qualify for loan forgiveness, or you have private student loans, you may want to consider refinancing your debt before rates rise further.
If you do qualify for forgiveness and you refinance your federal student loans, you will no longer qualify for the new program. If you still wish to refinance, leave up to $10,000 unrefinanced ($20,000 for Pell Grant recipients) to receive your federal benefit. Remember: Good information is your best weapon when it comes to managing all aspects of student debt.
Look out for false email alerts claiming to be from the government and phony government websites. These schemes attempt to get you to divulge personal financial information, which can then be used for identity theft and other financial fraud. Other scammers are offering unnecessary forgiveness application help for a costly upfront fee.
Information is your best defense. Sign up for government alerts and notifications, and keep an eye on advice from official outlets. Also, make sure your contact information is current with both the government and your loan servicer.
No. If your income information is already on file with the Department of Education, you will not need to apply for student loan forgiveness. You’ll receive it automatically.
Photo credit: iStock/Pekic
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SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.
In dental school you’re taught the skills you need to become a successful dentist. What they don’t tell you is how to effectively handle your dental school debt. A typical dental school graduate enters the profession with a student loan burden topping $293,900, according to the Education Data Initiative.
That’s $90,000 more than the average medical school debt. Right when dentists are ready to hit the accelerator on their careers, the reality of repayment presents a sizable speed bump.
The good news is, you’ve picked the right profession when it comes to ROEd, or the “return on education” you should reap down the road. The average base salary for general dentists is $217,620, and more than $355,570 for specialists who provide implant services, per a 2021 survey by DentalPost and Endeavor Media.
At this stage of the game, it’s important to have a plan for paying down your debt as efficiently as possible. Getting your finances in order early is especially critical if you anticipate borrowing more money down the road to open your own practice or buy a home.
Below, we explain the various student loan payment options available and how to know which one makes the most sense for you.
Federal student loan borrowers have four repayment plans to consider. They all set your monthly loan payment at an amount deemed affordable based on your income and family size. You can change your plan anytime without incurring fees.
• Standard Repayment Plan. Spreads payments evenly over 10 years. Under this plan, if you have a loan balance of $250,000 at 7.54%, your monthly payment will be about $2,900. This is the default plan if no other plan is chosen.
• Graduated Repayment Plan. With this plan, payments start lower and then gradually increase over time, usually every two years. Repayment takes place over 10 years.
• Extended Repayment Plan. Choose either fixed or graduated payments. Repayment takes place over 25 years.
• Income-Driven Repayment Plans. There are four types of income-driven repayment plans that tie a borrower’s income to their loan payments. Repayment takes place over 20 or 25 years. At the end of the repayment period, the remaining balance is forgiven (though this amount may be taxable).
Thanks to their higher income, dental professionals often pay off their loans before the end of the repayment period, making the forgiveness benefit irrelevant. Also, you may not be eligible for forgiveness programs if your income is over a certain threshold. (Still, we’ll get into forgiveness programs a bit more in the next section.)
Keep in mind that the longer your repayment term, the more interest you pay over the life of that loan. The shorter your term, the less you’ll pay in interest, but the higher your monthly payment will be.
A student loan payoff calculator will give you an idea of your monthly payment for different repayment terms.
Recommended: How To Get Out of Student Loan Debt
The Public Service Loan Forgiveness (PSLF) program is an option if you start your career at an eligible nonprofit or public service agency. Work for a local, state, tribal, or federal government organization or for a nonprofit organization, and you may be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan. Serving as a full-time AmeriCorps or Peace Corps volunteer also counts.
Examples of qualifying government employers are the U.S. military, public colleges, and public child and family service agencies, but not government contractors.
There are also a number of federal and state loan-repayment assistance programs that reward dentists for providing service to certain segments of the population. The Indian Health Service Loan Repayment Program, for example, offers dentists who serve American Indian communities up to $20,000 per year toward the repayment of school loans.
Student loans from private lenders do not qualify for PSLF.
Federal student loan consolidation lets you combine multiple federal student loans into a single new loan with a fixed rate. Your new rate is the weighted average of the old student loans’ interest rates rounded up to the nearest eighth of a percentage point. That means the rate might actually be slightly higher than the prior rate on some of the loans.
If your monthly payment decreases, it’s likely the result of lengthening the term (up to 30 years), which can mean paying more interest over time.
By the way, you can’t include private student loans in this type of a consolidation loan.
For many dental school grads, consolidating multiple student loans into a single loan with a private lender, and then refinancing the balance at a lower interest rate, makes sense. Student loan refinancing makes it easier to manage your finances: You’ll get one bill each month from a single lender, instead of several bills for varying amounts that are based on different rates.
Depending on how you structure your loan, a lower interest rate might allow you to pay back your debt faster. That can save you a substantial amount of money over the life of the loan.
You can also choose a term that lowers your monthly payments, leaving more money in your pocket to be used for other things: building an emergency fund, starting a family, and investing for retirement.
Here are some ways you can set yourself up for success from the very start of your career.
• Create a budget you can stick to. Leave room for annual and quarterly expenses as well as incidentals.
• Start a savings plan. The sooner you start saving and investing, the sooner you can enjoy compound growth, which is when your money grows faster over time.
• Set up automatic payments for student loans. This helps you make payments on time, plus many loan service providers offer a discount if you arrange to autopay.
• Look into different ways to invest. In addition to maxing out your 401(k) or 403(b), you may also want to consider vehicles such as a health savings account or individual retirement account.
• Get familiar with your employee benefits package. Find out what perks your employer offers, such as help with student loan repayment.
Recommended: Budgeting as a New Dentist
Though a typical dental school student owes nearly $294,000 by the time they graduate, there are several student loan payment options that can help borrowers pay down debt more efficiently. All four federal student repayment options, for example, set your monthly payments based on your income and family size. And depending on your employer, you may also qualify for a forgiveness program.
Have multiple loans? Federal student loan consolidation lets you combine them into one new loan with new terms and a new interest rate. Student loan refinancing, which lets you consolidate multiple student loans into a single loan with a private lender, is another option to consider.
It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for example, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more—at no extra cost.
†Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE THAT THE WHITE HOUSE HAS ANNOUNCED UP TO $20,000 OF STUDENT LOAN FORGIVENESS FOR PELL GRANT RECIPIENTS AND $10,000 FOR QUALIFYING BORROWERS WHOSE STUDENT LOANS ARE FEDERALLY HELD. ADDITIONALLY, THE FEDERAL STUDENT LOAN PAYMENT PAUSE AND INTEREST HOLIDAY HAS BEEN EXTENDED TO DEC. 31, 2022. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE THE AMOUNT OR PORTION OF YOUR FEDERAL STUDENT DEBT THAT YOU REFINANCE WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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If you’re a doctor or studying to be one, chances are you have student loans. A typical medical school graduate has an average student loan debt of $202,450, according to the Education Data Initiative. That’s seven times as much as the average college student owes.
Paying back the loans can be a challenge for doctors during residency and the early part of their career. But the good news is, the profession tends to pay well. In 2023, a typical entry-level doctor earned around $210,000 per year.
No matter how much you owe, it’s smart to have the right repayment strategy in place. This can help ensure your monthly loan payments are manageable and your financial health is protected.
Let’s take a closer look at the various student loan payment options available.
When it comes to federal student loans, borrowers have four different repayment options. No matter which plan you choose, your monthly loan payment will be based on your income and family size. If you need to change your plan at any time, you can do so without incurring fees.
• Standard Repayment Plan. This plan spreads out payments evenly over 10 years. For example, if you have a loan balance of $200,000 at 6.54%, your monthly payment will be about $2,275.
• Graduated Repayment Plan. With a graduated plan, your payments start out lower and then gradually increase over time, typically very two years. Repayment takes place over 10 years.
• Extended Repayment Plan. You can choose either fixed or graduated payments, and repayment takes place over 25 years.
• Income-Driven Repayment Plans. There are four types of income-driven repayment plans: Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (RPAYE). Repayment takes place over 20 or 25 years, depending on your income and the plan you choose. At the end of the repayment period, the remaining balance is forgiven, though this amount may be taxable.
As you weigh your options, think about the length of the repayment term and the monthly payment amount. With a longer repayment term, your monthly bill is lower but the amount of interest you pay over the life of the loan is higher. With a shorter term, you pay less in interest over the life of the loan but your monthly payment is higher. A student loan payoff calculator will give you an idea of your monthly payment for different repayment terms.
Recommended: 4 Student Loan Repayment Options — and How to Choose the Right One for You
Loan forgiveness programs can wipe out some or all of your medical student loan debt, provided you meet certain criteria. If you work for an eligible nonprofit or public service agency, for example, you may qualify for the Public Service Loan Forgiveness (PSLF) program. Considering a job with a local, state, tribal, or federal government organization or with a nonprofit organization? You could be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan.
You may also qualify for a federal or state loan-repayment assistance program if you provide service to certain areas or segments of the population. For instance, the National Health Service Corps Loan Repayment program will erase as much as $50,000 of eligible student debt, tax-free, if you work for at least two years in an approved medical facility.
Student loans from private lenders do not qualify for PSLF.
If you’re paying off more than one federal loan, federal student loan consolidation may be an option worth exploring. Consolidation lets you combine different federal student loans into a single new loan with a fixed rate. The new rate is a weighted average of all your federal loan rates, rounded up to the nearest eighth of a percent. This may result in a slightly higher rate than you were paying before on some loans.
When you consolidate, you have the option to choose a new repayment plan that extends the life of the new loan up to 30 years. Keep in mind that you can’t include any private student loans in this type of consolidation loan.
With student loan refinancing, you combine private and federal student loans into one new loan with a private lender, and then refinance the balance at a potentially lower interest rate. This in turn can lower how much you pay in interest over the life of your loan. Refinancing can also make it easier to manage student loan payments. Instead of bills from different lenders, you get one bill each month from one lender.
You can choose a new length for your loan, which lets you adjust your monthly payments. This may be especially helpful if you choose to refinance during your residency.
Recommended: A Guide to Private Student Loans
Attending medical school isn’t cheap, and it’s common to graduate with significant student loan debt. The good news is, there are several repayment options that can help you tackle your debt more efficiently and protect your financial health. For example, if you have federal student loans, your monthly payments are based on your income and family size. You may qualify for a forgiveness program, which could erase part or all of your balance.
Have more than one loan? Consolidation lets you combine multiple federal loans into a single loan with new terms and a new fixed rate. With student loan refinancing, you combine private and federal student loans into a single loan with a private lender and then refinance it at a potentially lower interest rate.
Refinancing can be a great choice for working medical school graduates who have higher-interest PLUS loans, Direct Unsubsidized Loans, and/or private loans.
SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.
Paying off a mortgage early, if doable, seems like the smartest plan in the world. But the question remains: Should you pay off your mortgage early? Dedicating most of your money to a home loan means you may not be able to fund your business, investments, a college fund, an emergency fund, travel, or fun purchases.
There are a lot of scenarios where your money may be put to better use elsewhere.
Here’s what to consider before you decide to go all-in on paying off your mortgage early.
Sometimes paying off your mortgage early could make sense. For example:
You have emergency savings, the three to six months of living expenses in reserve that most experts recommend.
And your college savings plan, if that’s a need, is funded.
You’re contributing the max to your 401(k), IRA, and other retirement accounts. If that’s not the case, you may want to do that before paying off the mortgage.
If a mortgage takes up a large portion of your monthly expenses, it may make sense to eliminate the mortgage payment if you know you’re going to be on a limited income soon (such as retirement).
Take a look at the loan you signed, or any mortgage calculator tool for that matter. On many standard 30-year loans, you will pay just as much in interest as you do in principal. Paying off a home mortgage loan early could save you a lot of money in interest over the life of a home loan.
If you’re in the fortunate position of paying off your mortgage early, there are a few reasons to rethink doing so.
If investments provide a return greater than the interest rate you’re paying on your mortgage, it may make sense to hold off on paying off your home loan. Remember, past performance doesn’t guarantee future returns.
Many investments also have better liquidity than a mortgage. It is generally considered inadvisable to use borrowed money to fund investments. Make sure to consider your risk tolerance and investment objectives when deciding to invest instead of paying down your mortgage.
What about buying a rental property instead of paying off a mortgage? Purchasing investment property could generate cash flow.
And adding to a real estate portfolio is one way to build generational wealth.
As long as you still have a mortgage, you may take out a home equity loan — a catch-all term for fixed-rate home equity loans, home equity lines of credit (HELOCs), and cash-out refinancing.
So you might want to hold on to your mortgage if a kitchen remodel is in the plans.
Mortgages tend to have much lower interest rates than credit cards do. If you’re a “revolver” who carries balances from one month to the next, or in a family of revolvers, paying off that debt first makes sense.
Nearly half of U.S. families report having revolving balances on one or more of their credit cards, with the average revolving family owing over $8,000, recent data shows.
If paying off your mortgage makes sense for your financial situation, it’s helpful to know how to pay off your mortgage early. A handful of strategies may work for different mortgage kinds.
One strategy homeowners use to pay off their mortgage early is to pay biweekly. If you pay every two weeks instead of monthly ($1,000 every two weeks, for example, instead of $2,000 a month), by the end of the year you’ll have made a full extra payment. Mortgage servicers may charge fees if you do this, though.
If you want to get more aggressive, making an extra payment every month will decrease the principal quickly. You’ll want to make sure the payment is applied to principal only.
Paying a bit extra every month is one sure way to shrink total interest paid and the loan term. For a mortgage loan of $450,000 at a 5.6% fixed rate for 30 years, total interest paid would be $480,008. Putting $400 more toward the mortgage payment every month would whittle total interest paid to $329,881 — a savings of $150,127. And the mortgage would be paid off in 21 years and 10 months instead of 30 years.
Changing a 30-year mortgage to a 15-year term with a mortgage refinance will likely result in a larger monthly payment (depending on how much you owe) but a substantial amount in interest savings.
With a shorter mortgage term, payments eat into the principal more quickly. If you stack extra payments on top of a 15-year mortgage, you’ll quickly decrease your loan balance on your way to a paid-off mortgage.
Recasting your mortgage involves making a large lump sum payment and having your lender reamortize the mortgage. Your monthly mortgage payment will be recalculated based on how much you owe after the large payment. The term and interest rate will stay the same.
With a recast, you don’t have to go through the application process, and the administrative fee is usually a few hundred dollars.
To decide on a mortgage recast vs. refinance, weigh the pros and cons of each.
Making lump sum payments will go far toward paying down your mortgage. Just make sure the payments go directly toward the principal.
A loan modification alters the terms of your original loan to make it more affordable, which could ultimately lead to an earlier mortgage payoff date. This mortgage relief option is reserved for those experiencing financial hardship.
Changes to the terms of the mortgage are designed to potentially lower the mortgage payment so that the homeowner avoids foreclosure. Talk to your lender if you’re thinking about going this route.
Recommended: Help Center for Home Loans
Paying off your mortgage early is a lofty goal, but if you have other financial needs or can make a better return elsewhere, it may make sense to keep your mortgage.
Whether you’re shopping for a mortgage or refinancing one, SoFi may be able to help you meet your financial goals.
SoFi Mortgages come with competitive rates, flexible terms, and knowledgeable loan officers to help you along the way.
No. Property taxes do not change based on whether or not you’ve paid off your mortgage. If you do pay off your mortgage, it might seem like you’re paying more because you’ll pay taxes all at once.
When a mortgage is paid off, an escrow account, if one was in place, is closed. Homeowners will need to contact their property insurance company and taxing entity to have the charges sent directly to them. If there is extra money in the escrow account, it will be sent back to the homeowner when the mortgage is paid off and the escrow account is closed.
Your credit score won’t be greatly affected by paying off your mortgage early. The account will remain on your credit for 10 years as a closed account in good standing.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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