The Trump Administration’s One Big Beautiful Bill (OBBB) was signed into law on July 4, 2025, and with it, a complex array of student loan changes that can be confusing to decode. It impacts all corners of the federal student loan system, from student and parent borrowing limits to income-driven repayment and loan forgiveness.
Whether you’re an existing borrower or expect to borrow federal education loans in the future, the Trump education policy that piggybacked on the OBBB could affect your access to federal student loan aid and available repayment relief programs.
Here’s what you need to know regarding the new domestic policy bill and how it affects student loans, repayment plans, forgiveness, and more.
Key Points
• Trump’s education policy introduces borrowing caps, fewer repayment options, limited deferment relief, and restrictions on federal aid programs like Pell Grants, PSLF, and PLUS Loans.
• The bill could increase student loan payments by reducing income-driven repayment options and limiting deferment and forbearance relief.
• The bill expands Pell Grant access for short-term training programs, but disqualifies those who receive a full scholarship for that academic year.
• The bill phases out most existing income-driven repayment plans, including SAVE, PAYE, and ICR, replacing them with the RAP plan, which bases payments on AGI.
• To stay ahead of the changes, borrowers can stay up-to-date with DOE news and updates, be proactive with loan management, and may consider refinancing to a private student loan.
What’s in the New Domestic Policy Bill for Student Loans?
The new domestic policy bill — One Big Beautiful Bill — imposes greater borrowing restrictions for some federal student loan borrowers and offers limited options if they can’t make their student loan payments.
Trump education policy changes include caps on federal loan borrowing limits; redefining eligibility markers for programs like the Pell Grant and Public Service Loan Forgiveness; eliminating future access to Grad PLUS Loans and a majority of flexible student loan repayment options; and setting restrictions on parent borrowing for undergraduate students. A provision that restricts borrowers from requesting economic hardship and unemployment deferment relief on loans borrowed after July 1, 2026 is also included in the bill.
Why the Bill Could Lead to Higher Student Loan Payments
The changes could result in higher student loan payments for many federal student loan borrowers as a whole. Key provisions impacting payments include:
• Using AGI for Repayment Assistance Program (RAP) payment calculations instead of borrowers’ discretionary income and family size, and a minimum $10 monthly payment regardless of income.
• Fewer and more restrictive student loan relief options, like deferment and forbearance.
How the Bill Could Change Federal Aid and Loan Programs
The 2025 student loan changes under the OBBB are nuanced, sometimes impacting borrowers differently, and at varying timelines, based on when they borrowed their loan or their repayment status. Below are a few standout changes to know about the new Trump education policy.
Pell Grants and Subsidized Loans
The OBBB redefines which students are eligible for the federal Pell Grant. The provision expands access to Pell funding for students who are enrolled in short-term career training programs, which is a benefit for borrowers who are taking an alternative education path. Students who receive a full scholarship are now ineligible for a Pell Grant award in the same academic award year.
Although the domestic policy bill didn’t change the subsidized Direct Loan program, it eliminated the Graduate PLUS Loan program by July 1, 2026. New federal student loan borrowing caps will also be in effect.
As a whole, these eligibility provisions and limits impact how easily students and parents can access federal loan assistance, and might hinder college affordability for postgraduate students and families of undergraduates.
Many of the existing income-driven repayment (IDR) programs — including the newest Saving on a Valuable Education (SAVE) Plan from the Biden-Harris era — are affected by the current administration’s domestic policy bill. As of August 1, 2025, interest began accruing on loans that were under the SAVE Plan forbearance. SAVE is expected to be eliminated by July 1, 2028. Borrowers can, however, switch to another eligible income-driven repayment plan.
The OBBB kept the Income-Based Repayment (IBR) Plan with some modifications. By July 1, 2028, the SAVE Plan, Pay As You Earn (PAYE) Plan, and Income-Contingent Repayment (ICR) Plan — which is the only income-driven plan currently available to Parent PLUS Loan borrowers — will be terminated. The provision also eliminates the Graduated and Extended Plans.
In their stead, a new income-driven option, the Repayment Assistance Plan (RAP), was created. Instead of using discretionary income and family size to determine monthly payments as its predecessors did, the RAP calculates monthly payments using borrowers’ adjusted gross income (AGI) and offers only a $50 payment reduction per dependent. RAP also extends the repayment period to 30 years (compared to 20 or 25 years on IDR plans, currently). The RAP isn’t available to Parent PLUS Loan borrowers.
Another 2025 student loan change from the OBBB is a modified Standard Plan for loans borrowed on or after July 1, 2026. Instead of a 10-year repayment period, the modified Standard Plan is designed with a 10- to 25-year period, based on the total amount you’ve borrowed. Both the RAP and modified Standard Plan could keep student loan borrowers in repayment longer. Keep in mind, though, that by staying in repayment longer, borrowers will end up paying more in interest over the life of the loan.
The repayment plans you can access depend on your loan status and when your loans were disbursed.
• For borrowers currently in repayment: Borrowers can generally remain on their existing plan, including the old IBR Plan, at least through July 2028.
• For new federal loans borrowed before July 2026: Borrowers can enroll their loan in the modified Standard Plan, RAP, or new IBR.
• For new federal loans borrowed after July 2026: Borrowers can enroll their loan in the modified Standard Plan or RAP.
Ultimately, these sweeping changes streamline the number of federal loan repayment options from seven down to just two. Borrowers are left with fewer options to choose from, and could face higher monthly payments under the remaining plans.
Forgiveness Application Backlogs
The OBBB doesn’t explicitly call out changes in processing timelines for loan forgiveness. However, the Department of Education’s “reduction in force” in March 2025, IDR Plan court actions, and the tapered revamp of qualifying repayment plans might present further delays in processing loan forgiveness applications.
What You Can Do to Stay Ahead of These Changes
The Trump administration’s domestic policy bill has many moving pieces when it comes to the federal student loan program. Here are a few ways to feel more prepared as provisions of the OBBB are implemented.
Be Proactive with Loan Management
Although no immediate student loan action is required from federal student loan borrowers, it might make sense to act sooner than later. For example, borrowers currently enrolled in SAVE can choose to switch to the old IBR Plan — which bases payments on discretionary income and family size — rather than being automatically moved to the RAP plan, which calculates payments using adjusted gross income (AGI).
The Education Department might directly send you key information and updates that affect your loans. For example, the Department of Education is reaching out to approximately 7.7 million borrowers who are on the SAVE Plan with next steps on how to switch repayment plans.
Ensure that the contact information on your loan accounts is up to date so you don’t miss crucial changes and timelines.
Consider Locking in a Private Refi Rate
As federal student loan repayment options shrink, some borrowers might explore student loan refinancing. Refinancing your federal student loans entails moving your federal education debt to a private lender. If you’re looking for ways to lower your monthly payment, locking in a lower private refinancing rate might be an option, if you qualify.
However, proceed with caution. Refinancing federal student loans cuts you off from accessing federal benefits, like student loan forgiveness and income-driven repayment.
The federal student loan landscape is about to look considerably different than it does today. These student loan changes could make monthly payments rise for federal student loan borrowers, and might make it more challenging for future low-income students and families to afford a college education.
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
Will Trump’s education policies raise student loan payments?
Yes, Trump’s education policy changes could increase payments for many borrowers by ending income-driven repayment plans like SAVE, PAYE, and ICR, and replacing them with the new RAP plan, which may result in higher costs for low-income borrowers.
What is in the new domestic policy bill that could affect student loans?
The OBBB limits Direct PLUS Loan limits for graduate students and parents, tightens annual and aggregate borrowing limits on Direct Loans, eliminates most existing income-driven repayment plans, and limits repayment plan options for future federal loan borrowers, among other changes.
Could income-driven repayment plans change under new proposals?
Yes, income-driven repayment plans have been overhauled entirely, with the exception of the IBR plan, which incurred minor modifications. By July 1, 2028, the new RAP plan will be the only available IDR plan for new Direct Loans.
How might Pell Grants or federal loan forgiveness programs be impacted?
The new legislation altered Pell Grant eligibility to include short-term training programs, but restricts access to students who receive full scholarships for the academic year. Federal loan forgiveness programs are impacted by the restructuring of income-driven repayment plans. Borrowers who take out Direct Loans on or after July 1, 2026 can only access the RAP plan, which offers forgiveness after 30 years instead of 20 or 25 years through current IDR plans.
What can student loan borrowers do to prepare for policy changes?
The full implementation of President Trump’s domestic policy bill as it relates to student loans is expected by July 1, 2028. In the meantime, borrowers can keep their student loan account information updated, take note of key timelines for certain changes, and stay on top of notifications from the Education Department.
photo credit: iStock/designer491 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).
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As part of the latest Public Service Loan Forgiveness (PSLF) program news, the Education Department’s proposed PSLF changes are now published on the Federal Register and open for public comment until mid-September. The amended regulations restrict certain employers from inclusion under the program, thereby limiting PSLF access to borrowers who are employed by excluded organizations.
This is one of many anticipated overhauls to the federal student loan system prompted by the Trump administration. Here’s an overview of the Public Service Loan Forgiveness changes and how they might affect you.
Key Points
• Public Service Loan Forgiveness (PSLF) is a federal program that forgives the remaining balance on your Direct Loans after you have made 120 qualifying payments while working full-time for a qualifying public service employer.
• On March 7, 2025, President Donald Trump signed an executive order that excludes certain organizations from qualifying as employers under the Public Service Loan Forgiveness program.
• Borrowers who made student loan payments while employed by an organization excluded under the new PSLF rules may no longer qualify for loan forgiveness, potentially delaying their eligibility.
• New borrowers, specifically those who take out loans on or after July 1, 2026, will have their PSLF-qualifying repayment plans limited to the revamped Standard Repayment Plan or the RAP, which offers forgiveness after 30 years.
• If you’re relying on PSLF for your federal student loans, keep accurate records of your student loan payments and employment records, and stay in communication with your loan servicer about changes regarding PSLF.
What Is Public Service Loan Forgiveness (PSLF)?
The Public Service Loan Forgiveness program was created under the College Cost Reduction and Access Act of 2007 during the Bush administration. It was designed to incentivize federal student loan borrowers to pursue public-sector careers, which have historically offered lower wages for college graduates compared to the private sector. In exchange, borrowers would receive partial, tax-free loan forgiveness on their remaining eligible federal student loan balances after meeting PSLF requirements.
As of October 2024, over one million federal student loan borrowers have received loan forgiveness relief through the Public Service Loan Forgiveness program.
To receive PSLF, borrowers must make 120 qualifying full payments toward their eligible federal student loans. These payments must have been made while:
• Enrolled under a qualifying repayment plan, such as an income-driven repayment (IDR) plan
• Employed by a qualifying U.S. government or nonprofit organization, and
• Working full-time for a qualifying employer.
Only after successfully satisfying all of the program requirements can borrowers submit a request for PSLF either through the PSLF Help Tool or by mailing a paper PSLF form to the Department of Education.
Recent Changes to PSLF Under the Trump Administration
The Trump administration’s Public Service Loan Forgiveness changes aren’t in full effect yet, though they’re in motion. On March 7, 2025, President Donald Trump signed an executive order to exclude certain organizations from being qualifying employers under PSLF. These include organizations that engage in:
“… illegal activities, including illegal immigration, terrorism, chemical and surgical castration or mutilation of children, child trafficking, illegal discrimination, and a pattern of violating state laws…”
According to Forbes, many legitimate organizations could be targeted by this proposal, including nonprofits whose mission simply disagrees with the administration, health care nonprofits that provide gender-affirming care to minors, those that continue with DEI initiatives, legal groups that support peaceful (nonviolent) protests against government policy, and more. Critics argue the order is unconstitutional and illegal, likely triggering lawsuits, though changes are not yet in effect.
The Notice of Proposed Rulemaking for this provision was opened for public comment starting on August 18, 2025.
In addition to this PSLF program news, President Trump signed the One Big Beautiful Bill (OBBB) Act into law on July 4, 2025. For loans borrowed before July 1, 2026, the OBBB sunsets many of the current PSLF-qualifying repayment plans by July 1, 2028. Among the list includes the Biden administration’s Saving on a Valuable Education (SAVE) Plan, Income-Contingent Repayment Plan, and Pay As You Earn Plan. It also eliminates other fixed repayment plans, like the Graduated and Extended Plans.
New federal student loans — including new federal Direct Consolidation Loans — that are borrowed or consolidated on July 1, 2026 or later will only have access to two repayment plans:
• A reworked Standard Repayment Plan that sets borrowers’ repayment period based on their total loan amount, or
• The Repayment Assistance Plan (RAP), a new income-driven repayment plan that’s based on borrowers’ adjusted gross income (AGI), with a $50 monthly reduction per dependent.
Who Is Most Affected by the New PSLF Restrictions?
These new PSLF changes restrict some existing borrowers from achieving loan forgiveness through PSLF. Borrowers who are immediately impacted by the limitations are those who made student loan payments while employed by an organization that falls under the Trump administration’s exclusion definition.
Trump’s exclusion definition disqualifies employers that have engaged in illegal activities on or after July 1, 2026. This includes organizations that disagree with the Trump administration, legal defense organizations, health care nonprofits, and even some colleges and universities who allow pro-Palestinian protests, for example.
Any payment progress they made might no longer meet the “qualifying employer” provision under new PSLF rules and could push back forgiveness longer.
How These Changes Could Affect Future Borrowers
The next subset of borrowers who might be significantly affected by the Trump administration’s PSLF changes are new borrowers, specifically those who borrow a new loan on or after July 1, 2026. The PSLF-qualifying repayment plans that borrowers can choose from for these new loans are limited to two options: the revamped Standard Repayment Plan or RAP, the only remaining income-driven plan option available.
The RAP calculates monthly payments based on borrowers’ AGI, reducing payments by $50 for each dependent, and offers forgiveness after 30 years of qualifying payments. The minimum monthly payment is $10, including for borrowers who fall well below the poverty line.
By comparison, current income-driven repayment plans have a repayment period of 20 or 25 years, and they calculate payments based on borrowers’ discretionary income and family size, which could result in a $0 monthly payment — generously offering relief to borrowers with large families.
What You Can Do If You’re Relying on PSLF
The next steps to consider greatly depend on where you are along your PSLF journey. Whether you’re just thinking about a career in public service or are already pursuing PSLF, here are a few ways to prepare for the upcoming Public Service Loan Forgiveness changes.
Keep Accurate Documentation
Track all activity related to your federal student loans. This includes gathering key documents such as your loan’s promissory note, payment confirmations, employment records, and detailed logs of communications with your servicer, including dates, times, and the names of representatives you spoke with.
Consider downloading your StudentAid.gov loan account details quarterly — including outstanding balances, loan statuses, etc. — and keeping this, and the information above, in a secure, digital folder for quick reference.
Explore Refinance as a Backup Option
Understanding all of your repayment options, including student loan refinancing, can help you make an informed decision about your student debt repayment. A student loan refinance is offered through a private lender. Your existing private and/or federal student loans are paid in full by the private lender, and a new refinance student loan is created in the amount that was paid on your behalf.
The new loan will have a new rate and new repayment terms. Although refinancing is an option if the PSLF changes affect you, it’s important to weigh the pros and cons of refinancing federal student loans before moving forward. Upon refinancing your federal student loans, you’ll forfeit impactful federal benefits, including Public Service Loan Forgiveness, income-driven repayment plans, and student loan deferment.
Speaking with a loan servicer or counselor is crucial for those relying on Public Service Loan Forgiveness, as it helps ensure that you are on the right track to meet the program’s requirements. These professionals can provide guidance on eligible loans, employment verification, and the necessary forms to submit, which can be complex and vary over time, especially with the recent changes being proposed.
The Takeaway
For public servants hoping to reach student loan forgiveness, Trump administration changes to the definition of a “qualifying employer” and eligible PSLF repayment plans might feel unsettling. Fortunately, the legislation under the OBBB doesn’t go into effect overnight. Current borrowers have a three-year runway to determine the best course of action for their unique situation.
In the meantime, students should stay connected to their student loan servicer regarding any changes that may take place regarding Public Service Loan Forgiveness.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
What is Public Service Loan Forgiveness (PSLF), and who qualifies?
Public Service Loan Forgiveness is a program that offers tax-free federal student loan forgiveness. To qualify for PSLF, borrowers must make 120 qualifying payments while enrolled in an eligible repayment plan and working full-time for a qualifying employer. The latest PSLF program news signals changes to the eligibility criteria in the coming years, but these anticipated restrictions aren’t in effect yet.
How did the Trump administration change the PSLF program?
The Public Service Loan Forgiveness changes led by the Trump Administration include reducing PSLF-qualifying repayment plan options, and limiting PSLF eligibility by redefining which employers qualify. For example, excluding employers that “engage in activities that have a substantial illegal purpose” such as illegal immigration and terrorism.
Who is most affected by the new PSLF restrictions?
Borrowers who plan on taking out new federal student loans after July 2026, and current PSLF-enrolled borrowers who are employed by an organization that is excluded from the PSLF program are most impacted by the latest PSLF restrictions.
What should I do if I was planning to use PSLF but no longer qualify?
Technically, the PSLF changes aren’t in full effect yet, so no urgent action is required. However, current borrowers who were pursuing PSLF, but whose employer no longer qualifies under PSLF, could explore whether loan forgiveness through an income-driven repayment plan makes sense for their situation. The IDR forgiveness path isn’t contingent on working for a qualifying employer, but it can take up to 30 years to qualify for loan forgiveness, and you might be liable for taxes on the forgiven amount.
Can refinancing my student loans affect my eligibility for forgiveness?
Yes, refinanced federal student loans are ineligible for loan forgiveness through the Education Department. A student loan refinance is provided by a private lender so it isn’t a qualifying education loan for federal loan forgiveness.
photo credit: iStock/designer491 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.
While medical doctors have high earning potential, the first few years of a doctor’s career — known as residency — tend to be defined by long hours and relatively low pay.
So if you’ve got a medical career ahead of you — and medical school student loans to pay off — what sort of financial life can you expect? In this article, we’ll explore the average pay for medical residents and what they can do to manage their finances during this time.
Key Points
• The average medical resident earns around $66,712 annually their first year (PGY-1), which translates to $5,560/month before taxes.
• Residents often work up to 80 hours/week, making their hourly rate roughly $16–$17.
• Budgeting, roommate living, and minimizing fixed costs like transportation and subscriptions can help stretch income.
• Meal prepping and cooking at home can significantly reduce monthly expenses.
• Refinancing student loans during residency may reduce interest accrual and allow for low monthly payments, though federal benefits may be forfeited.
How Much Do Medical Residents Make?
So, how much do doctors make during residency? According to the Association of American Medical Colleges, the average medical resident salary was $66,712 as of July 2024. Before taxes, that’s roughly $5,560 per month.
Medical residents are known to work very long hours. The Accreditation Council for Graduate Medical Education requires hospitals to ensure that residents work no more than 80 hours a week. If you do the math, an annual salary of $66,712 breaks down to $16-$17 an hour if a resident puts in a full 80 hours a week.
Making that money stretch can be a challenge — especially in high cost-of-living areas. To help, here are six tips for getting by (and even thriving) while living on an average resident salary.
The average resident has little time to keep track of their expenses, but building a simple budget could be the difference between making it work and ending up short. Your first step should be to make a list of all “necessary” spending, such as rent, utilities, transportation, and food.
Next you’ll want to look how much you bring home each month, including your resident’s salary and any additional income from your partner or family support. Then look at how much money you have left over. That’s how much you have to spend on “extras” each month, like dining out, travel, or clothing. You might decide to set spending limits for each category (for example, $100 for eating out) or monitor your spending as the month progresses. Or, you can do both.
2. Consider Personal Preferences and Trade-Offs
A budget can feel like a hassle, but if you set it up right, it can also be freeing. By knowing exactly how much you can spend, you can then decide what’s important for you to prioritize and what you don’t mind cutting out.
Maybe you’ll decide that you want to cut cable, but you don’t want to stop meeting up with friends at your local wine bar. Or perhaps you’ll give up eating out so you can spend more on rent. Making a budget is just analyzing each trade-off. Ask yourself, “Do I want this, or something else?”
3. Focus on Fixed Costs
One substantial way you can make an impact on your budget is by making “big wins” on fixed costs, such as housing, car payments, or utilities. For example, lowering a bill by $20 each month is going to have a bigger effect than saving a few dollars on small purchases. Looking at your own fixed spending, where could you ask for better rates or cut back entirely?
While you’re at it, look at your subscription services and other memberships. Though not often considered a “fixed cost,” they can add up quickly to become a significant expense. When you put them on autopay, it’s easy to forget about them and miss the chance to cancel them each month or year. Take time to go through your credit card statement to make sure you’re not paying for a service that you’re not able to use because you’re so busy.
4. Share a Living Space
When you’re trying to save money, there’s usually no financial win that’s bigger than saving on your housing costs. To do this, you can move into a more affordable place, live with roommates, or rent out a room in your place. Not only can a roommate help you save on rent, but also on utilities like water, electric, and cable.
Some folks don’t like the idea of having roommates because they lose some privacy. But if you’re a busy resident who’s not home very much and is trying to eke by on a small salary, it can be a great way to save money.
5. Choose Less Expensive Transportation
Transportation may be your second biggest expense after housing, especially if you have a car payment. But even if you’ve already paid off the vehicle, you’ll need to cover the cost of car insurance, as well as maintenance and sometimes parking. It can add up.
If you’re living in an area with good public transportation or you’re able to live within walking distance of the hospital, you might want to get rid of your car to save money. In some areas, Uber or Lyft offer a flat-rate, monthly pass option that can be less expensive than owning and maintaining a car.
If you’re not ready to sell your car quite yet, simply try using it less. Even this small act may save you money each month. For example, if you’re spending $120 per month on gas but could ride public transportation for $30 per month, you may save over $1,000 on transportation in a year.
6. Cook at Home
While it may be unreasonable to think that a medical resident will cook every meal, it may be worth taking a few hours each week to make a batch of meals that you can eat throughout the week. Preparing meals and eating at home could potentially save residents hundreds of dollars a month.
Another Option: Refinance Medical School Loans
Like most people who attended medical school, there’s a very likely chance you took out student loans. Managing these loans while you’re living on an average resident salary may be important for your financial success.
It is important to understand your medical school loan repayment strategies. One of the first decisions you may want to make is whether you want your loans to go into forbearance or to make payments on your loans during residency.
Student loan forbearance may seem like an ideal option for a person on a medical resident salary, but that might not always be the case. Federal medical school student loans accrue interest during that time, and that interest is added to your balance at the end of your forbearance period. This is called compounding, or capitalization, and means that you’re paying interest on top of interest.
You may want to consider refinancing your medical resident student loans. Refinancing is the process of paying off one loan (or many loans) with another, generally to lower your overall interest rate or to change the terms of your loan.
Refinancing student loans won’t be for everyone, as you will lose access to federal loan programs such as Public Service Loan Forgiveness (PSLF) and income-driven repayment plans.
Refinancing student loans won’t be for everyone, as you will lose access to federal loan programs such as Public Service Loan Forgiveness (PSLF) and income-driven repayment plans.
💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.
The Takeaway
Despite the relatively low pay compared to fully licensed physicians, residency is an important phase that offers invaluable training and experience. It’s important for residents to manage their finances wisely, considering the long-term benefits of their education and the potential for higher earnings in the future.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
What is the average salary for medical residents in the United States?
The average salary for medical residents in the United States typically ranges from $50,000 to $70,000 per year, depending on factors such as the year of residency, specialty, and location.
How does the salary of a medical resident compare to that of a fully licensed physician?
Medical residents generally earn significantly less than fully licensed physicians. For example, while a resident might make between $50,000 and $70,000 annually, a practicing physician can earn anywhere from $150,000 to over $400,000 per year, depending on their specialty and experience.
What factors can influence the salary of a medical resident?
Several factors can influence a medical resident’s salary, including the year of residency (PGY-1 to PGY-4), the specialty they are pursuing, the geographic location of the hospital or institution, and the specific hospital or program they are affiliated with.
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.
Refinancing defaulted student loans can be challenging, but it is not impossible. Almost 43 million borrowers have federal student loan debt and owe, on average, $39,075. As recent graduates begin their careers, it can be overwhelming to figure out how to make monthly student loan payments.
Ignoring your payments may seem like an easy way out, but student loan default can have extreme consequences. If you’re struggling with student loan payments or are already in default, there are ways to recover.
Keep reading to learn more on what to do if your student loans are in default, and whether refinancing defaulted student loans is an option.
• Most lenders avoid refinancing loans that are in default due to the high risk, but there are steps you can take to improve your chances.
• Before refinancing, consider rehabilitation or consolidation to get your loans out of default, which can make you eligible for refinancing.
• To increase your odds of qualifying for a refinance, work to resolve the default status, have a good credit score, and meet other financial criteria.
• Refinancing can potentially lower your interest rate and monthly payments, making it easier to manage your debt.
• Consulting with a financial advisor or student loan expert can provide guidance and help you navigate the best options for your specific situation.
What Is Student Loan Default?
If you’re in student loan default, it means you have failed to make payments on your student loans for several months in a row.
Federal student loans are considered delinquent once you miss a student loan payment. After 90 days of delinquency, your loan servicer can report the missed payments to the three major credit bureaus. Generally, after 270 days of nonpayment, your loan will go into default.
If you have private student loans, they can go into default even sooner. Typically, after you miss three payments (or 120 days), your private student loans go into default. Different lenders have different terms when it comes to default, however, so be sure to check with yours to get the specifics.
How Common Is Defaulting on Student Loans?
Defaulting on student loans is fairly common. The latest data from EducationData.org finds that one in 10 student loan borrowers has defaulted on a loan. In fact, roughly 5.3 million borrowers are in default (as of 2025), and about 6.24% of loans are in default at any given time. As of 2021, the median loan balance among delinquent and defaulted borrowers was $15,307.
What Are the Consequences of Student Loan Default?
Defaulting on your student loans can have some steep consequences. For starters, the entire balance of your student loans could become due in full.
If you default on your student loans, your lender may eventually turn your debt over to a collection agency who will usually start calling, emailing, and even texting you to try and collect on your debt. You may even have to pay collection fees on top of the debt.
If you default, you may lose eligibility for programs that could help you manage your debt, such as deferment, forbearance, or Public Service Loan Forgiveness.
Once your student loans are in default, your loan servicer or collection agency will report your default to the three major credit bureaus, which will negatively impact your credit score.
And if your servicer can’t collect the money you owe on your federal student loans, they can ask the federal government to garnish a portion of your wages or your tax refund.
How Can You Recover From Student Loan Default?
If you failed to make payments on your student loans and they’ve gone into default, you don’t have to let it ruin your financial future. Here are some steps you can take to get back on track.
Loan Rehabilitation
One option for getting out of student loan default is student loan rehabilitation. To rehabilitate your loan, you work with your loan servicer and agree in writing to make nine reasonable and affordable monthly payments over a period of 10 months.
In order to rehabilitate a Direct Loan or FFEL program loan, your monthly payments must be no more than 20 days late. Your loan servicer will determine the new monthly payment, which is 15% of your discretionary income.
When you have successfully rehabilitated your loan, the default may be wiped from your credit history. Note that any late payments reported to the credit bureaus before the loan went into default will remain on your credit reports.
Under Trump’s One Big Beautiful Bill, borrowers can rehabilitate defaulted loans twice (up from once), and for new loans, the minimum monthly payment during rehabilitation is $10.
Consumer Credit Counseling Services (CCCS)
Consumer Credit Counseling Services (CCCS) are typically nonprofit organizations that offer free or low-cost counseling, education, and debt repayment services to help people regain control of their finances and make a plan to get out of debt.
If you’ve defaulted on your student loans, a credit counselor can help by analyzing your financial situation and student debt, laying out all the options for student loan debt relief, and helping you choose the best path forward.
One word of caution: Credit counseling agencies are not the same thing as debt settlement companies, which are profit-driven businesses that often charge steep fees for results that are rarely guaranteed. Even if they are successful in reducing your debt, their fees (plus the unpaid interest and late payment charges on the debt) can add to what you initially owed, reducing your actual savings.
Repaying Your Loan in Full
Another option to get out from under the shadow of student loan default is to repay your loans in full. Of course, if you had the funds to do so, you probably wouldn’t have defaulted in the first place. That said, you could look into ways to cover the balance due, such as borrowing from a family member or close friend.
Options for Private Student Loans
If you have private student loans that are in default, you can contact your lender and see what possibilities are available. Some lenders may have hardship options similar to federal programs. As mentioned, the time it will take for your unpaid private loan to go into default depends on the lender — but the timeframe could be relatively short, even just 120 days.
However, if you’ve only recently missed a payment, you can start making payments again (and repay the missed payment) to try to prevent your loan from going into default.
Is Refinancing an Option for Defaulted Student Loans?
If your student loans are currently in default, refinancing your loans can be difficult. When you refinance your student loans, you take out a new loan with a private lender to pay off the existing loans. When you apply for a refinancing loan, lenders will use your credit score and financial history, among a few other factors, to determine if you qualify.
How to Increase Your Chances of Refinancing Defaulted Student Loans
If your loan is already in default, your credit score has likely decreased significantly and will likely impact your ability to get approved for a new loan. If you have a family member or friend who is willing to cosign the loan, however, you may be able to refinance your student loans that way.
Another possibility for refinancing your student loans would be to rehabilitate your loans first. A lot of lenders might turn you down for having a defaulted loan on your credit history, but others might be willing to look past that and onto your education and income potential to approve you for a loan.
And finally, you can work to build your credit score. Paying bills on time, reducing credit card balances, and addressing any negative marks on your credit report can boost your score and make you a more attractive candidate to lenders.
Another way to recover from student loan default is to consolidate your student loans in default. If you have federal loans, you can pursue defaulted student loan consolidation with the Direct Consolidation Loan program. This program allows you to combine one or more federal loans into a new consolidation loan.
To be eligible, you must either make three full, on-time, and consecutive payments on the defaulted loan or agree to make payments on an income-driven repayment plan.
Private student loans aren’t eligible for Direct Consolidation Loans. However, you can consolidate these loans with a private lender by refinancing.
Tips for Consolidating Defaulted Student Loans
To consolidate federal student loans, first gather all the documents you need. This includes your personal information such as your name, address, email, Social Security number, and FSA ID; financial information such as your income; and details about your loans, including amounts, account numbers, and loan servicers.
Next, go to studentaid.gov to fill out the Direct Consolidation Loan application. You’ll need your FSA ID to log in. Specify the loans you want to consolidate.
Then, choose one of the income-driven repayment plans if that’s the option you prefer. Review the plans in advance to determine which one is the best option for you.
Filling out the application typically takes less than 30 minutes.
Choosing to consolidate defaulted student loans has advantages and disadvantages you’ll want to weigh before you move forward.
Advantages include:
• One loan and one monthly bill. This means there will be less for you to keep track of.
• Lower payments. When you consolidate, you can choose an income-driven repayment plan or choose to lengthen the term of your loan, which could lower your monthly payments. (Note: You may pay more interest over the life of the loan if you extend your term.)
• Fixed interest rate. You’ll get a fixed interest rate for the life of your loans with Direct Loan Consolidation. The new rate is a weighted average of all your federal loan rates, rounded to the nearest eighth of a percent.
• Access to forgiveness programs. With a Direct Consolidation Loan, you might be able to get access to programs you weren’t eligible for previously, such as Public Service Loan Forgiveness.
Disadvantages include:
• Longer repayment period. You could end up repaying your loans for an extra year or two, which will cost you more overall.
• Pay more in interest over the life of the loan. With consolidation, the outstanding interest on your loans is added to the principal balance, and interest may accrue on that higher balance.
• Possible loss of benefits. Consolidating loans other than Direct Loans could mean giving up perks you have with those loans, such as rebates or interest rate discounts.
Below is a comparison chart of the pros and cons of student loan consolidation.
Pros of Student Loan Consolidation
Cons of Student Loan Consolidation
Simplified payments with just one bill to pay each month.
Longer repayment period means paying more overall.
Monthly payments may be lower.
Pay more in interest over the term of the loan.
Fixed interest rate.
Could lose benefits associated with current student loans.
Possible access to certain forgiveness programs.
How to Manage Student Loans Without Going Into Default
If you’re struggling to make student loan payments but haven’t yet defaulted on your loan, taking action now could help prevent financial issues in the future. Here are some options that could help you take control of your student loan debt and avoid going into default.
Forbearance or Deferment
If you’re unable to make payments on your student loans due to a sudden and temporary economic change, you might consider applying for student loan deferment or forbearance. Both allow you to temporarily pause your loan payments.
If your loans are in forbearance, which is currently granted for 12 months at a time, you will be responsible for paying accrued interest during the forbearance period. If your loans are placed in deferment, which can last up to three years, you may not be responsible for accrued interest during the deferment period, depending on the type of loan you hold.
While your loans are in deferment or forbearance, you do have the option to make interest-only payments on the loan. If you choose not to, the accrued interest on most loans will be capitalized, or added to the principal balance. You’ll then be charged interest based on the larger loan amount.
Note that under Trump’s new One Big Beautiful Bill, for loans made after July 1, 2027, borrowers are no longer eligible for deferments based on unemployment or economic hardship. Forbearance is also capped at nine months instead of 12 months in any 24-month period, decreasing federal flexibility for struggling borrowers.
Apply for Income-Driven Repayment (IDR)
Another option to help manage your student loans is income-driven repayment. Depending on the type of plan you qualify for, your monthly payments will be anywhere from 10% to 20% of your discretionary income.
Income-driven repayment plans also stretch out the repayment term of the loan to either 20 or 25 years, depending on the specific plan. This means that while you could pay less per month, income-driven repayment could cost you more in interest over the life of the loan. The good news is that if you have any remaining debt at the end of the term, it will be forgiven (but you may need to pay income taxes on the canceled amount).
Starting July 1, 2026, borrowers must switch to the Income-Based Repayment (IBR) plan or the new Repayment Assistance Plan (RAP). The other three income-driven repayment plans will cease to exist by July 1, 2028.
The Repayment Assistance Plan (RAP) is a new income-driven repayment plan that’s based on borrowers’ adjusted gross income (AGI), with a $50 monthly reduction per dependent. The RAP plan provides cancellation after 30 years of payments.
The Takeaway
Refinancing defaulted student loans can be a complex process, but it is not impossible. While most lenders are hesitant to refinance loans in default, exploring options like rehabilitation or consolidation can help get your loans back on track.
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
Does consolidating student loans remove default?
Consolidating student loans can remove the default status if you consolidate through a Direct Consolidation Loan. This new loan pays off your defaulted loans and resets your payment history, allowing you to start fresh. However, the default is not removed from your credit report.
Can you consolidate defaulted student loans?
Yes, you can consolidate defaulted student loans. If you have federal loans, you can consolidate them with Direct Loan Consolidation. To be eligible, you must either make three full, on-time, and consecutive payments on the defaulted loan or agree to make payments on an income-driven repayment plan. You can fill out an application at StudentAid.gov.
Can you refinance student loans that are in default?
You can refinance student loans that are in default, but it may be difficult. That’s because your credit score has likely decreased, which may impact your ability to get approved for refinancing. If you have a family member or friend who is willing to cosign the loan, you may be able to refinance your student loans that way. Or, you could rehabilitate your loans first, which could help improve your odds of being approved for refinancing.
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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
With inflation and interest rates rising, many people are looking for ways to generate additional income these days — and finding reliable sources of passive income, which require less effort than most jobs — has become particularly desirable.
Creating and managing passive income streams isn’t a truly passive activity, however. Generating passive income usually requires upfront work, or sometimes a substantial investment to get the ball rolling. And depending on what your passive income ideas are, whether you’re renting out property or selling a product via online platforms, you’ll likely have ongoing tasks to keep the money coming in. That said, passive income can in some cases deliver more income with less effort than a traditional job that requires a fixed number of hours per week.
Key Points
• Passive income is money earned without regular, active involvement.
• Investing in businesses, P2P lending, and rental properties are some ways to generate passive income.
• Benefits of passive income include extra money with less effort, freedom, and flexibility.
• Initial work and investments are often needed to set up a stream of passive income.
• The opposite of passive income is active income, which usually involves a job and is also known as earned income.
What Is Passive Income?
Passive income is money that you earn without active involvement. In other words, it is income that isn’t attached to an hourly wage or annual salary. Passive income ideas could include things like cash flow from rental properties, dividend stocks, sales of a product (that requires little or no effort), royalties, and more.
Essentially, these side hustles can help you earn money without contributing much, if any, active effort. If you are paid for a service you perform, that’s active income — you have to put in time and energy in order to get paid. If you can continue making money while staying mostly hands-off, that can be a form of passive income. That doesn’t mean you won’t have to put work in up front to get started — you probably will. But besides some maintenance, passive income shouldn’t require your active involvement.
There are obvious benefits to these low-effort side hustles over traditional active income. Earning more money without putting in more hours offers the opportunity to make extra cash without burning yourself out. If you’re successful enough, it might even give you the freedom and flexibility to quit your day job and do whatever you want instead, whether that’s going to school, traveling, writing, or making art.
39 Passive Income Ideas to Help You Make Money
There are a number of ways to earn passive income. Some options, like the following types of passive income, take relatively little active supervision.
A fairly simple way to earn passive income through your investment portfolio is to invest in bonds with high yields. That is, you’ll receive regular payments from the bond-issuer, generating income and return on your investment.
Similar to a CD, a bond is a way of locking up a certain amount of money for a fixed period of time. In short, bonds are purchased for a fixed period of time (the duration), investors receive interest payments over that time, and when the bond matures, the investor receives their initial investment back.
Generally, investors earn higher interest payments when bond issuers are riskier. An example may be a company that’s struggling to stay in business. But interest payments may be lower when the borrower is trustworthy, like the U.S. government.
2. Invest in a Business
Although this may take an up-front investment, buying into a business and becoming a silent partner can be another passive income source.
Even if the company you are thinking of investing in seems solid, it’s important to have an understanding of the challenges the organization may face. There are some red flags to look out for, such as a company whose revenue is earned from just a couple of clients — or just one client — as opposed to several.
It’s also important to lay out the exact terms of your investment and compensation.
3. Become a Peer-to-Peer (P2P) Lender
Peer-to-peer (P2P) lending platforms are another type of crowdfunding that allows people to borrow money from individual investors. Through these sites, you can be matched with an individual seeking a loan, and lend your money at a rate that could be higher than the usual bank rates.
That’s because investors taking part in peer-to-peer lending tend to bear the bulk of any risk. It is possible that borrowers will default on their loans, leading to a higher risk if an investor were to lend money with a lower credit rating, for example. Returns are never guaranteed and while investors will receive a return on the money they invest, they could also lose some or all of it in the long run.
4. Buy a Rental Property
Another popular passive income source is rental property. You might want to purchase a home to rent out to an ongoing tenant or list a property on a short-term rental site. Hiring a property management company lessens your day-to-day involvement, thereby making this venture a more passive income strategy than active.
Obviously, setting up this type of income requires a pretty big outlay, and it may be a while before your investment property generates a profit over and above the many expenses required to run it, if it ever does. In addition, there are always risks in the rental markets to keep in mind.
5. Invest in Crowdfunded Real Estate
If you don’t have thousands of dollars to spend on a piece of property, you can always check out your options on crowdfunded real estate sites. These may require a smaller initial investment, and likewise the costs are also shared.
Crowdfunded real estate investments can be complex, however, and you’ll want to balance the risks and rewards.
6. Invest in Dividend Stocks
When companies choose to share a portion of their profits with the investors who own shares of the firm, those payments are called dividends, and they work generally the same way from company to company.
Typically, dividends are paid in cash (though some might be paid in stock), on a regular schedule. Dividends are usually paid quarterly, though there are variations.
Investors might receive dividends from companies they’re invested in, or from mutual funds they’re invested in that hold shares of dividend-paying companies.
There is no guarantee that investing in dividend stocks will continue to earn you passive income. As Liz Young Thomas, Head of Investment Strategy at SoFi, points out, “A stock’s dividend yield will fluctuate because it’s based on the stock’s price and prices can be volatile. You should also consider other factors like a company’s track record of increasing the dividend, the dividend payout ratio, debt load, and cash on hand when determining the overall health of an investment.”
If you’re just getting started with investing, you may want to use automated investing tools to help you choose the appropriate allocation of assets for your goals.
Typically, an automated platform — also called a robo-advisor — is a digital investing service that provides you with a questionnaire so you can establish your financial goals, risk preferences, and time horizon.
On the backend, a sophisticated algorithm then recommends a pre-set, automated portfolio that aligns with your responses. These portfolios often have lower account minimums compared with traditional brokers, and the portfolios themselves are typically comprised of low-cost exchange-traded funds (ETFs) — which adds to the cost efficiency of some robo products.
You can use a robo investing as you would any account — for retirement, as a taxable investment account, or even for your emergency fund — and you typically invest using automatic deposits or contributions. The allocation in each portfolio is usually pre-determined, and investors cannot change the investments.
One way to earn income in a retirement account is by investing in mutual funds. You can choose the level of risk you want to take with your money by finding a mutual fund that is higher or lower risk.
When you join a company’s affiliate program, you earn a commission from every product that someone purchases from that company. In many cases, all you have to do is post the link on your blog, website, or social media pages.
10. Rent Out Your Car
Another one of the best passive income opportunities is renting out your car on a site like Turo. It’s basically the Airbnb of cars, and could generate thousands of dollars per year, in some cases.
11. Advertise on Your Car
If you have a clean driving record as well as a newer car, consider getting in touch with a car advertising agency. You simply drive around town with ads on your car and easily generate passive income.
12. Rent Your Parking Space
Do you have space in your driveway that you aren’t using? Then rent it out on platforms like Stow It, where you can find people who will pay to rent out the space.
13. Rent Storage Space
If you have extra space in your garage, shed, or storage unit, then you could start earning passive income by using a peer-to-peer storage site like Stashii to find people who need your space.
14. Invest in Real Estate Investment Trusts (REITs)
An alternative to becoming a property owner or landlord are real estate investment trusts, or REITs. REITs are publicly traded companies on the stock market that own income-producing real estate, such as apartment complexes, office buildings, retail centers, storage units, and more. They give you the chance to invest in real estate portfolios without having to manage the properties yourself. REITs sometimes come at a higher risk than other types of funds, so it’s important to research potential REITs or REIT funds, and consider how they may play a role in a diversified portfolio.
Perhaps you don’t have a car, but you do have a bike that’s just sitting around. Your bike could be a lucrative passive income source, especially if you live in a high-traffic area. List your bike on Spinlister to get started.
16. Rent Out a Room or Property
Even if you don’t own an investment property, with your landlord’s permission, you may be able to rent out a room in your apartment or list it on Airbnb.
17. Pet Sit in Your Home
If you love pets, you can earn passive income by welcoming pets into your home while their owners are on vacation. For instance, you could charge $30 to $80 per day just for running a doggy daycare. You can gain clients through word of mouth or use a site like Rover to find customers.
18. House Sit for Someone
When your friends go out of town, they may need someone to stay in their home and do simple things like water their plants and collect their mail. You can easily make money and have somewhere new to stay for a little bit. Along with making yourself available to friends, you can sign up to be a house sitter on HouseSitter.com.
19. Buy and Sell Domain Names
Some domain names are cheap, while others cost a lot of money because they are in high demand. One thing you could do to start another passive income stream is to purchase domain names you think will be popular. Purchase low for around $10 to $100 and then sell them for a much higher price later on.
20. Rent Your Tools
Have you ever done a home improvement project that required you to purchase tools? You may never need to use those tools again. Thankfully, now you can rent tools, and rent out your tools, on peer-to-peer platforms such as Sparetoolz to earn passive income.
21. Invest in Royalties
Let’s say you don’t have any songwriting ability, but you would like to make money on other artists’ work. You can invest in royalties through Royalty Exchange and earn passive income on the intellectual property.
22. Purchase a Billboard
You can make thousands of dollars per month if you own a billboard where companies can advertise their products and services. Do your research and make sure you get the right permits before committing to a billboard.
23. Purchase a Blog
If you don’t have the time or energy to create content for your own blog, then look into ones that are already successful and see if the owners are willing to sell. You could also hire someone to manage your blog so that you’re truly earning in a passive way.
24. Create an Online Course
If you have a special skill or knowledge about a certain topic, you may be able to create a video course where you teach people about that topic and charge them to take the course.
25. Sell Digital Products
You may want to research online platforms where you can sell everything from digital art to e-books. Whether you’re an artist, graphic designer, or writer, you can create digital products to sell online.
26. License Your Photos
Many companies, bloggers, and individuals use stock photos on a regular basis. You may be able to upload your best photos to stock media platforms and earn passive income on them.
27. Create a Mobile App
If you’ve been dreaming about an amazing phone app that you think a lot of other people would use, you may want to look into hiring a development team to create it.
28. Sell a Product
You may be able to earn passive income through sales of a product that you create. This could be a book that you write or a physical product that you design and make. You might also list items you already own on sites like eBay and earn extra income through those sales.
29. License Your Music
Do you love to write songs? Then you could license your music and start earning passive income. You’ll just have to team up with a music licensing company to get started.
30. Self-Publish a Book
Through platforms like Amazon’s KDP, you can self-publish a book and earn a royalty on it every time someone makes a purchase. You will be able to set the price of your book and be in full control of your book’s Amazon page, where you can list pictures of the book, reviews, and videos promoting it.
31. Sell Blank Books
You can start selling books online without having to write anything. How? By focusing on blank books, such as journals, sketchbooks, and planners. Simply find a design you believe will appeal to people and begin collecting royalties when people buy your books.
32. Create Greeting Cards
Another artistic endeavor that could be a good passive income stream is creating greeting cards that you sell to a wholesale or retail stationery company that accepts independent artist submissions.
33. Sign Up for Dropshipping
If you want to sell products and make money online but don’t want to store any of the goods, you could always look into dropshipping to create passive income. With dropshipping, you don’t have to have much money to start since you don’t need inventory to fulfill orders for customers.
34. Start a Blog
Blogging seems like a pretty cool space to operate in and gives you a lot of creative freedom. You can make your blog all about crafts, share tutorials, ideas, and more. It’s up to you how your space operates.
Blogging might seem like too much work to many people, but it doesn’t have to be a full-time job for everyone. For some people, blogging can be fun after a day at the office — and, with time and effort, it could turn into something more lucrative.
Here are a few ideas on how you can make passive income from blogging:
• Affiliate marketing
• Google AdSense: Cost Per Click and Cost Per Impression
• Sponsored posts
• Selling products
35. Start a YouTube Channel
If you enjoy creating videos more than writing, then consider starting your own YouTube channel. Once you get enough viewers, you can begin to generate passive income through YouTube advertising.
36. Publish an Ebook
Like an online course, an ebook is a way to share your expertise with the world. Anyone can self-publish a book online through services like Amazon’s Kindle Direct Publishing, iBooks Author, or Kobo Writing Life.
The percentage of royalties you earn varies depending on the publisher. Of course, the more marketing you do, the more copies you’re likely to sell — and there’s no shortage of online marketing strategies to investigate. But once you write and publish the e-book, it’s out there ready to generate passive income for you.
37. Create a Podcast
Podcasts are still popular, and they can generate some passive income for you. If you start a podcast that resonates with people, then you can grow your audience and monetize your show by sponsoring with ad partners. If you get enough listeners, you may be able to sign up for podcast advertising networks.
38. Start an ATM Business
When people are out at a bar or nightclub or they’re frequenting a cash-only business, they may need cash right away. If you own an ATM business and you place your ATM in high-traffic locations, you could start to generate passive income through surcharge fees. Typically, you could earn around $3 per withdrawal.
39. Start a Vending Machine Business
Similar to an ATM business, a vending machine business allows you to use your creativity and determine high-traffic areas where you could make a lot of money. If you buy in bulk, you’ll be able to save on the snacks and drinks you purchase for your machines.
Potential Benefits of Earning Passive Income
There are only 24 hours in a day. If you go to a job each day that pays you a set amount of money, that is the maximum amount that you’ll ever make in a 24-hour period. That is called earned income.
By investing some of that earned income into different passive income ideas, you may be able to increase your earnings. Diversifying your income stream may also improve your financial security. Some benefits of passive income are:
• More Free Time: By earning money through passive income sources, you might be able to free time in your schedule. You may choose to spend more time with your family, pursue a creative project or new business idea, or travel the world.
• Financial Security: Even if you still plan to keep your 9-to-5 job, having multiple sources of income could help increase your financial security. If you lose your job, become sick, or get injured, you may still have money coming in to cover expenses. This is especially important if you are supporting a family.
• Tax Benefits: You may want certain legal protections for your personal assets or to qualify for tax breaks. Consulting with an attorney and/or tax advisor to explore setting up a formal business structure like a sole proprietorship, a limited liability company (LLC), or a corporation, for example, might help you decide if this is a good route for your particular situation.
• Location Flexibility: If you don’t have to go into an office each day, you’ll be free to move around and, possibly, live anywhere in the world. Many streams of passive income can be managed from your phone or laptop.
• Achieve Financial Independence: The definition of financial independence is having enough income to cover your expenses without having to actively work in order to cover living expenses. This could allow you to retire early and have more freedom to live your life the way you choose. Whether you’re interested in retiring early or not, passive income can be one way to help you reach financial independence.
• Pay Off Debt: Passive income may help you to supplement your income so that you will have the opportunity to pay off any debts more quickly.
Potential Downsides of Earning Passive Income
Although it might sound like a dream come true to quit your job and travel the world, earning through passive income is not quite that simple.
• Earning Passive Income Is Not a Passive Activity: Whether you’re generating passive income through a rental income, running a blog, or in another way, you will still need to put in some time and effort. It takes upfront investment to get these income sources up and running, and they don’t always work out as planned.
If, for example, you run an Airbnb, you have to maintain the property, ensure a high-quality experience for guests, and address any issues or concerns guests may have to secure positive reviews.
• Passive Income Requires Diversity: In order to earn enough passive income to quit your job and cover all your expenses, you would most likely need more than one source of income. Although you may no longer need to clock into a 9-to-5 job, you will likely still need to spend time managing multiple income streams.
• It’s Lonely at the Top: It might sound great to never have to go to the office again and to have the freedom to travel, but earning money through passive income can become lonely.
Not having anyone to talk to during the day might make you feel lonely, and if you aren’t self-motivated, you may find it difficult to stay on task if you need to manage your passive income streams.
• Getting Started May Require Investment: Depending on how you plan to create passive income, it may require an initial financial investment. You may need money for a down payment on an investment property, the development of a product you plan to sell, or for investment into dividend stocks.
Managing Passive Income Streams
No matter which type of passive income you choose to pursue, it’s important to keep track of your personal finances and both your short-term and long-term financial goals.
Tracking multiple sources of income in a monthly budget can be a complex task. To be profitable, it’s important to pay attention to how much money you put into the maintenance of your passive income stream(s), such as property upkeep or monthly online services.
The Takeaway
Establishing passive income streams is one way to diversify your income and can help you build wealth and achieve financial freedom in the long term. There are a variety of ways to earn passive income, such as through investing, rental properties, and automated investing.
Some passive income sources require a financial commitment or upfront investment, such as purchasing a rental property, and others may require a time commitment. And passive income, of course, is rarely 100% passive. Often there is considerable time and effort that goes into setting up a passive income stream. And some sources of passive income (from investing, real estate, running a business or creative endeavor) require ongoing maintenance.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.
FAQ
Do you need to pay taxes on passive income?
In most cases, yes, you’ll need to pay income taxes (or any other applicable taxes) on the income generated by passive income streams.
What are some advantages of creating passive income streams?
Generating passive income may help you reach your financial goals sooner, pay off debt, or even achieve financial independence, though there may be some drawbacks and extra responsibilities that come along with it.
Why might it be a good idea to try and develop passive income streams?
Creating passive income streams may help diversify your income and can help you build wealth and achieve financial freedom in the long term. There are a variety of ways to earn passive income, such as through investing, rental properties, and automated investing.
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