Advanced placement, or AP, classes that are offered in high school can help a student prepare for college, be a more competitive applicant, and save money on tuition. Those are among the reasons that many students consider taking AP classes in high school.
Here’s a closer look at what AP classes are, what the benefits of taking them are, and how they can affect a student’s college experience.
Key Points
• AP classes can save money on college tuition by earning credits through high scores on exams.
• They make college applications more competitive by showing readiness for advanced coursework.
• AP classes can prepare students for college by simulating college-level academic challenges.
• Scholarships, grants, and federal and private student loans are additional college financing options.
• Completing FAFSA is advised to assess eligibility for financial aid.
What Are AP Classes?
AP stands for “advanced placement,” and AP classes prepare students for college by giving them college-level work during high school. Their dedication is awarded accordingly, as they can earn college credit and placement by taking corresponding AP exams.
One of the primary motivators for enrolling in AP classes is they prepare students to take and pass AP exams. Students who earn qualifying AP scores on these exams can receive credits from most colleges and universities in the United States.
Depending on their high school’s offerings, students can enroll in one or more of the 40-plus AP classes that cover a variety of subject matters such as arts, languages, sciences, mathematics, and literature.
In order to enroll in an AP class, there may be prerequisite classes that you must take first. It’s recommended that even if students meet the required qualifications in order to take an AP class, that they consider carefully if they are prepared to take a college level course.
The three main benefits of taking AP classes in high school relate to saving money, becoming a more competitive college applicant, and preparing for success in college.
Benefit #1: Saving Money on College Tuition
AP classes will take up a lot of your time in high school but can also save time and money down the line in college. When you receive a high score on an AP exam, the college you attend in the future may give you credit that cancels out the need to take a similar college class.
Some schools may offer advanced placement instead, which allows you to effectively test out of introductory level courses in the specific subject, but may not be counted toward credit.
Policies vary by school, but the more AP exams you pass, the more credits you may be able to earn. These credits could allow you to skip classes which could save you a semester of attending an introductory English literature or Spanish class. Add up enough of these credits, and you could potentially shave off an entire semester or more of your time spent at college.
Note that the policy on AP scores will vary from school to school, and not all schools offer credit for AP classes. Some schools may require a four or five on the AP exam in order to qualify for credit, while others may accept a three. It’s wise to look for details on this kind of policy when conducting your college search.
Generally, you can use AP credits to your financial advantage in two ways. You can either graduate early, which will save money on tuition, fees, and living expenses. Or, you can take lighter course loads across a four year period and can make time to take a part-time job or could add a second major or minor.
At the very least, you may be able to avoid paying for textbooks or lab fees in classes in which you have already mastered the subject matter.
Benefit #2: Making Your College Application More Competitive
When you apply for college, you typically work hard to put your best foot forward and to prove that you will thrive once you land on campus in the fall. College admissions departments carefully comb through transcripts, test scores, and personal essays to see if students will not only be a good fit at their school but to ensure the student has every chance of succeeding once they enroll.
This is one of the reasons AP classes can be beneficial to high school students. When a student thrives in an AP class, they are essentially thriving in a college class. Before an AP student arrives at college, they will clearly understand what will likely be expected of them, how rigorous the course work can be, and what steps they need to take to succeed academically.
Alongside proving preparation, AP students could receive a bit of a grade point average (GPA) boost if they earn good grades. Some high schools, but not all, will give more weight to AP grades than normal ones. For example, receiving a B in an AP class may provide as many points towards your GPA as if you earned an A in the non-AP version of the class.
Taking an AP course is akin to taking an actual college course, which can help you get a taste for college. If structured properly, an AP course should give you a preview of what skills you need to succeed in a college class and what the workload might look like.
Learning to manage time properly, developing strong research and analytic skills, and covering material more quickly in an AP class can be helpful preparation for the rigors of college life.
Taking AP classes can also help you identify your interests and passions which may lead you to the right college. Having a preview of what it would be like to study French, Psychology, or Chemistry in college can help guide you during the application process towards schools that have strong programs in your chosen area of interest.
College Financing Options
When it comes to paying for college, there are a lot of different options available to students, including scholarships, grants, and federal financial aid.
But figuring out what you qualify for and how to apply can be overwhelming. A great first step is to complete the Free Application for Federal Student Aid (FAFSA). This will let you know what financial aid you are eligible for. For students and parents that need extra help covering the cost of attending college, student loans are a potential option. There are two types of student loans, federal and private.
Federal loans come with a fixed interest rate. With a subsidized federal loan, you don’t pay any interest while you are in school at least half-time. With an unsubsidized federal loan, interest begins to accrue right away (though you don’t have to start making payments until six months after you graduate).
Private student loans are available through banks, credit unions, and online lenders. Interest rates can be fixed or variable and will depend on the lender. Students that have excellent credit (or have cosigners who do) tend to get the lowest rates. Just keep in mind that private student loans may not offer the same protections, like income-based repayment plans, that come with federal student loans.
The Takeaway
Advanced placement or AP classes can benefit students in three key ways. It can give them a taste of college-level work and prepare them for what’s ahead. It can make them a more competitive applicant since it shows colleges that a student has undertaken advanced work. And it can potentially help a student save on tuition since they may be able to opt out of introductory and prerequisite courses. If a student still needs help with tuition costs, scholarships, grants, federal, and private student loans are possible sources.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
FAQ
What is the benefit of taking an AP class in high school?
The AP Program allows students to pursue college-level work while in high school and receive college credit, advanced academic standing, or both when they attend college. This can save money on tuition.
Do colleges care if you take AP classes in high school?
Yes, colleges often want to see evidence that applicants were able to excel in challenging classes in high school. For this reason, it can be advisable to take AP classes if they are offered and you are qualified to take them.
What are the disadvantages of taking AP classes in high school?
There can be disadvantages of taking AP classes in high school. These include an increased workload, the potential for lower grades since the courses are more challenging, and the cost of taking the AP exams (currently $99 each for students in the U.S., U.S. territories, and Canada).
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
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Most people aren’t prepared for the wild and sometimes-bumpy ride of negotiating counteroffers in real estate, even though the experience is remarkably common.
Home sellers are free to make a counteroffer if they’re dissatisfied with a buyer’s initial bid. Usually, that counteroffer indicates they’ve accepted the buyer’s offer subject to certain changes, including updates to contingencies, closing date, and sales price.
Counteroffers are a fairly standard part of the home-buying process, but the rules of engagement might not seem remotely intuitive at the time. To help you understand how counteroffers in real estate work, what the typical negotiating steps look like, and how to counteroffer on real estate, here’s a guide you can cram with.
Key Points
• Common reasons for counteroffers include changes to sales price, requesting a later closing date, changing the earnest money deposit, and removing certain contingencies.
• The number of counteroffers can vary and can ping-pong back and forth for weeks or longer depending on the market and circumstances.
• To negotiate effectively, buyers should have a comprehensive picture of costs, including closing costs, and be prepared to make a strong initial offer backed by market data.
• Negotiable items in a counteroffer include possession date, personal property, home warranty, and earnest money deposit.
• Being timely and responsive is crucial in the counteroffer process, as offers may come with expiration dates, typically ranging from 24 to 48 hours.
Common Reasons for Counteroffers
From the beginning of the home-buying process, unexpected twists and turns can arise. After sifting through hundreds of listings, attending several showings, and putting an offer in on a dream home (or two, or three), the deal can still be far from done.
There are many reasons why it takes time to buy a house, and counteroffers can certainly be one of them. Counteroffers in real estate can come into play in these scenarios:
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A Change in Sales Price
One of the most commonly contested items during the purchase of a house is the sales price. If buyers come in with an offer lower than the asking price and sellers might counter with the original asking price (if they’re unwilling to negotiate) or somewhere between the asking price and the offer.
Sometimes sellers simply need more time to vacate the premises. Whether they have unfinished business or unexpected plans, they may present a counteroffer that extends the escrow period to allow them more time to move out.
Increasing the Earnest Money Deposit
In some cases, the seller could up the ante by increasing the earnest, or “good faith,” money deposit the buyer submits with the offer. Earnest money deposits are typically between 1% and 3% of the purchase price, but in a hot market, there’s a chance the seller could ask for more to ensure the buyer is serious about purchasing the property.
💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.
The Removal of Certain Contingencies
Contingency clauses detail actions or conditions that must be met before a real estate contract becomes binding. If you’re a first-time homebuyer (or even if you aren’t) it’s wise to brush up on these terms. Common contingencies, which most sellers will see as standard in a real estate offer, are:
• An appraisal contingency to protect buyers if the property is valued at less than the amount they offer.
• A financing contingency that allows buyers adequate time to get a mortgage or other financing to purchase the property.
• An inspection contingency that ensures buyers have the right to a thorough inspection of the property within a specified period of time.
Some contingencies, however, are considered less than standard. For example, a home sale contingency grants buyers a set amount of time to sell their existing home so they can finance the new property. Some sellers may find this contingency burdensome, particularly in a hot market, so they could make a counteroffer that removes the home sale contingency. They can also counter with a “kick-out clause” that gives a real estate agent the right to keep showing the house while buyers attempt to sell their existing home.
Requesting Repairs
If a home inspection reveals that repairs or renovations to the property are needed, the buyer could submit a counteroffer to negotiate a lower price or ask the seller to complete the repairs before closing.
Deciding Who Covers Closing Costs
In a buyer’s market, it might be possible to negotiate the house price or to request that the seller pay some or all of the closing costs. These costs can include appraisal fees, settlement fees, title policies, recording fees, land surveys, and transfer tax. Many buyers are surprised by how expensive closing costs are, but in particularly hot markets with multiple offers, sellers can counter with a simple “no” to indicate they won’t be covering those costs for the buyer.
How Do Counteroffers Work in Real Estate?
While real estate counteroffers vary depending on the market, the seller’s unique circumstances, and other standalone factors, there are some fairly standard parameters to the counteroffer process:
What’s a ‘Normal’ Number of Counteroffers?
There’s no legal limit to the number of counteroffers in real estate transactions. Initial offers, counteroffers, and subsequent counteroffers could ping pong back and forth for weeks or more.
Knowing the local real estate market trends can be key here. In a buyer’s market with plenty of houses for sale, sellers might want to be cautious about submitting an unnecessary number of counter offers.
Similarly, in a seller’s market where inventory is low and buyer competition is high, buyers might want to limit the number of counteroffers they push back at the seller.
Can a Seller Make Simultaneous Counteroffers?
Depending on the state where the real estate transaction takes place, a seller may or may not be able to make counteroffers to more than one buyer. That said, most real estate agents advise against multiple simultaneous counteroffers, as it could end up in two legally binding contracts for the seller.
How Long Does the Process Take?
Number of counteroffers aside, homebuyers can expect a closing to take about 45 days, on average. But how long it takes still varies from buyer to buyer, with factors like whether they’re paying cash, how long it takes them to find an inspector, and if the house appraises at a lower value, affecting the overall timeline.
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How to Counteroffer in Real Estate
To some degree, there’s such a thing as real estate counteroffer etiquette. Here are a few things to consider when engaging in the counteroffer process:
Have a Comprehensive Picture of Costs
For buyers, having an accurate handle on what it will cost to buy the house is essential for negotiating counteroffers discerningly.
Closing costs can be one of the most negotiated items between buyers and sellers and add up to as much as 5% of the mortgage amount. Having a firm grasp of how much to expect in closing costs can help guide the counteroffer process.
Setting realistic expectations for the monthly housing payment (including the mortgage principal and interest, insurance, maintenance, any homeowners association fees, and other costs) and what they can afford to pay as a lump sum at closing can help shape this picture for the buyer.
A mortgage calculator helps buyers break down the cost of purchasing a home. Understanding the various factors that might affect your home loan costs is important, too.
A “strong” offer is backed by data that defines what’s happening in the market and research (with the help of an agent) about what’s considered “fair market value.” Being preapproved for a home loan will make you an attractive candidate from the seller’s point of view.
Coming in at 15% or more under the fair market value is generally considered a “lowball” offer and can start buyers off on the wrong foot. In some cases, sellers might skip right over anything that isn’t considered a strong offer.
Know What Can Be Negotiated
One of the first steps in making a real estate counteroffer is knowing what can be negotiated:
• Possession date. Giving the sellers more time to move out could mean an exchange for a condition the buyer desires. Buyers hoping to move in sooner might make a counteroffer requesting an earlier possession date.
• Personal property. Some of the seller’s personal property – like furniture, window treatments, artwork, or gardening tools – could be negotiated into the contract in a counteroffer.
• Home warranty. Older houses can come with their own unique sets of systems and appliances, so buyers might make a counteroffer asking the sellers to cover the cost of a one- to two-year home warranty ($350 to $700 annually, on average) if unexpected repairs need to be made after move-in.
• Earnest money deposit. Whether buyers are trying to reduce their risk of something going wrong during closing or strengthen their offer, they can negotiate a lower or higher earnest money deposit with a counteroffer.
Be Timely and Responsive
Real estate offers and counteroffers often come with a set expiration date, so time is usually of the essence. Forty-eight hours is a standard acceptance window in many real estate markets, but in hot markets offers might expire within 24 hours or less.
Some sellers take this concept to a whole new level, setting stringent requirements around offer acceptance. It’s up to buyers to determine whether or not they’re willing to reply quickly enough to meet the sellers’ time demands or risk losing the deal.
Try Not to Take Things Personally
It might not feel like “all’s fair in buying and selling a home” since it’s one of the biggest financial transactions many will make in their lifetime. But buyers and sellers shouldn’t be surprised if it comes with a liberal amount of give-and-take.
And while it might seem like a personal affront to have a real estate offer rejected, it’s possible (and even likely) that the seller has multiple offers or was simply able to strike a better deal.
When push comes to shove and purchase comes to close, buying a house is a matter of business, no matter how personal the home-buying journey can feel.
The Takeaway
Real estate offers and counteroffers are a common form of business negotiation, and a first step in making a counteroffer is knowing what can be negotiated. Being cognizant of counteroffer etiquette can also be helpful.
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FAQ
How do you handle counteroffers in real estate?
Counteroffers are an expected part of the negotiation process so approach any counteroffer calmly. Know your goal for the overall cost of your home purchase or sale, and what levers you can pull to get there, including a lower/higher price or a change in contingencies or closing timeline. Come back with your strongest counteroffer but always be prepared to walk away.
What are the steps in a counteroffer?
Understand the complete picture of costs involved in the transaction. Go in with your strongest counteroffer, in a timely fashion, and don’t take it personally if you don’t get 100 percent of what you want from the deal.
What is the general rule of counteroffers?
The number one rule of counteroffers, whether you’re buying or selling, is to know what total price you can ultimately afford. Keep calm and negotiate on, but don’t get emotionally involved — you may need to walk away at any time.
‡SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.
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It is very unlikely that you can directly pay your mortgage lender with a credit card. However, there are a few workarounds that can help you pay your home loan with plastic. But it’s important to understand other factors involved when paying your mortgage with this kind of card, such as possible fees and other financial consequences.
Read on to learn how to pay your mortgage with a credit card and what to consider before you do so.
Key Points
• It’s highly unlikely that you can pay a mortgage directly with a credit card, but there are some workarounds.
• Third-party services like Plastiq allow credit card payments for mortgages, but charge fees.
• Fewer and fewer companies allow you to buy a money order with a credit card.
• Cash advances or balance transfers from credit cards may be used to pay mortgages, but both typically come with fees and higher interest rates.
• Alternatives to using credit cards for mortgage payments include requesting mortgage forbearance or loan modification, refinancing, or taking out a personal loan or home equity line of credit.
How to Pay Your Mortgage With a Credit Card
If you’re wondering if you can pay your mortgage with a credit card – It’s highly unlikely that you can do so directly. That said, there are several ways you can use workarounds to pay your mortgage with a credit card, including using a money order, utilizing third-party services, and getting a cash advance.
Use a Third-Party Service
Some third-party services facilitate mortgage payments using your credit card and send a payment to your lender on your behalf. Companies like Plastiq allow you to use select credit cards to make mortgage payments through their platform.
For the privilege, you’ll most likely need to pay a convenience fee — Plastiq charges a processing fee of 2.90% — each time you make a mortgage payment using your credit card. And, depending on how that payment is delivered (say, check or bank transfer), you may also be charged an additional fixed fee that can range from 99 cents to $39. You may also have the option to make recurring payments or to make your payments manually.
Buy a Money Order
Depending on your location and the retailer, you may be able to purchase a money order with your credit card. Then you’ll simply take the money order and deposit it at your bank and transfer the amount to your mortgage lender.
Keep in mind that most retailers may not accept credit cards as a form of payment for money orders — several major companies, including 7-11 and Western Union, have ceased this service – so it’s best to check ahead of time if you plan to use plastic. Even if you can, money orders tend to have a limit of $1,000. That means if you want to go this route, it may take you a few transactions before your money orders total enough for your mortgage payment.
Additionally, you may incur a fee for each money order you buy. Also keep in mind that some credit card issuers treat money order purchases as cash advances, which can result in a fee and interest charges at a rate that’s usually higher than the standard purchase APR on a credit card.
Transfer a Balance to Your Bank Account
You could attempt to conduct a balance transfer, with the funds going into your bank account — some credit card issuers may allow this type of transaction. Most commonly, credit card issuers provide cardholders with balance transfer checks to facilitate these types of transactions. There may be balance transfer fees involved, and interest may accrue depending on your credit card terms.
Get a Cash Advance
As another method to pay your mortgage with a credit card, you can get a cash advance at the ATM with your credit card. You’d then deposit the cash into your bank account and use the funds to make your mortgage payments. You could also consider using the funds to purchase a cashier’s check and then mailing it to your lender.
Going this route most likely means you’ll have to pay a cash advance fee, and interest on cash advances will accrue on your credit card with no grace period and often at a significantly higher rate than on your everyday purchases. Credit limits may be lower for cash advances as well.
Increasingly many consumers now use payment apps called digital wallets – like Apple Pay, Google Pay, and Samsung Pay, among others – to store payment information so that they can make payments quickly and easily. These apps are common now for point-of-sale transactions of all kinds, so you may wonder if this is a way to pay your mortgage with a credit card. Some lenders might allow you to pay with a digital wallet, but they would still typically require that your payments come from a debit card or bank account, not a credit card.
Do All Mortgage Lenders Accept Credit Card Payments?
No, most mortgage lenders do not accept credit card payments directly from the borrower.
If you’re curious about why this is, know that paying debt with a credit card isn’t usually a financially responsible move. Mortgage companies likely don’t want the added risk when someone is paying for their home loan with credit vs. cash. Also, it can be expensive for lenders to accept credit cards, given that processing and other fees can take a bite out of every incoming amount of money.
Factors to Consider When Paying a Mortgage With a Credit Card
Before paying your mortgage with a credit card, consider the following.
Fees vs Rewards
Similar to those considering paying taxes with a credit card, many people may want to pay their mortgage with a credit card because they want to earn rewards. Since third-party services will charge you fees — or you’ll pay the fees charged directly by your credit card issuer for balance transfers or cash advances — you’ll want to make sure the value of the rewards outweighs what you’re paying in fees.
Remember, the fees may seem small, but they can quickly add up over time. Also, in many cases, rewards cards may only count certain transactions as eligible for rewards. Many issuers don’t consider balance transfers as qualifying transactions, for example.
The Cost of Interest
If you don’t pay off your balance each month, interest will start to accrue on your credit card — and credit card interest rates are typically much higher than your mortgage interest rate, even if you have a good APR for a credit card.
Additionally, if you go the cash advance route, these transactions may have higher credit card interest rates, and there’s no interest-free grace period.
Effect on Your Credit Score
If your credit card balance starts to get too overwhelming and you miss making the credit card minimum payment, it could negatively impact your score.
Even if you make on-time payments, having a high balance could affect your credit utilization, which is the ratio between your balance and your available credit. The higher your credit utilization, the more it could negatively impact your score.
Challenges You May Face When Paying a Mortgage With a Credit Card
One challenge with using a credit card for mortgage payments is the time it takes to do so. Any of the above-mentioned methods will take you some time and effort to complete successfully. That’s because it’s unlikely your lender will accept a direct credit card payment and you will instead have to use a workaround.
There are also the fees to consider — determining whether paying the extra charges and potentially a higher interest rate is worth it takes some careful calculations.
Limited Payment Channels
Even with a workaround, your options for paying your mortgage with a credit card are quite limited. Major vendors have stopped accepting credit card payments for money orders, so the most viable methods are probably using a third=party service or getting a balance transfer or cash advance from your credit card, all of which cost money.
Potential for Increased Debt
Since credit card APRs are typically much higher than mortgage rates, putting your mortgage payment on your credit card (even indirectly) will mean that you’re risking hefty interest on top of your mortgage payment. And, since cash advances and balance transfers are among your most likely options and those typically come at even higher APRs, using them to pay for your mortgage opens you up to even more debt.
Should You Pay Your Mortgage With a Credit Card?
Making mortgage payments with a credit card might possibly be a good idea if you’re looking for a way to earn more rewards or get some financial breathing room. However, given the downsides, such as high fees and the impact it may have on your credit, you may be better off pursuing other options first. Also keep in mind that using a credit card to pay your mortgage may trigger a higher cash-advance interest rate than your typical interest rate since you can’t pay directly.
Alternatives to Using a Credit Card for Your Mortgage
Here are several options you can choose from instead of paying your mortgage with a credit card. Let’s start with what to do if the situation is urgent.
• Consider mortgage forbearance: If you’re struggling with your payments and experiencing a significant hardship, you can contact your lender to see if mortgage forbearance is possible. This could allow you to temporarily stop paying or have your monthly payments reduced until you can get back on your feet.
• Seek help from a housing counselor: You can find a reputable housing counselor that’s approved by the U.S. Department of Housing and Urban Development (HUD) by contacting the Homeowners HOPE Hotline or using the housing counselor tool on the Consumer Financial Protection Bureau’s website. They could suggest options to help you manage your mortgage payments. You may have to pay a small fee for the service, but it could be more affordable than using a credit card to pay your mortgage.
Refinancing or Loan Modification
If mortgage forbearance doesn’t seem necessary yet, there are other options worth considering: refinancing and loan modification.
Refinancing involves replacing your old mortgage with a new one – ideally with terms that will make it more manageable for you. The new mortgage might have a longer term or a better interest rate, resulting in lower monthly payments. The downside is that you’ll need to pay closing costs and, usually, to get more advantageous terms, you’ll need a good credit score and a regular income.
If refinancing doesn’t seem like a good option for you, you could go to your lender and request loan modification – changes in the terms of your mortgage that will make it easier for you to make your payments. This could involve a longer term or a better interest rate, for instance. Your lender is not under any obligation to offer this option, but it’s worth asking.
Personal Loan or HELOC
Another option to help with your mortgage payments could be a loan. Both personal loans and home equity lines of credit (HELOCs) are flexible loan types that might help you manage your mortgage in the short term. A personal loan is typically available at a fixed interest rate for up to $100,000 or even more. It’s usually paid back over a term of up to 10 years. A HELOC is a revolving line of credit, usually with adjustable interest rates. You can draw out funds, up to a set amount, during the initial draw period and during the subsequent repayment period, you pay back what you’ve borrowed, with interest. A HELOC is secured with your home equity, so the interest rate is typically lower than it is with a personal loan, but if you don’t make your payments, your house is at risk.
The Takeaway
While you probably can’t pay your mortgage directly with a credit card, there are workarounds that are possible, as long as you understand what you’re getting into and are strategic about what you’re doing. Before you move forward with paying your mortgage with your credit card, make sure you weigh the fees involved vs. the rewards you could earn as well as any interest you could accrue and potential impacts to your credit. Understanding the pros and cons of this scenario is an important step in using your credit card responsibly.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
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FAQ
Can you use a credit card to pay a mortgage?
Can you pay your mortgage with a credit card? Probably not directly, but you may be able to do so through indirect methods. Some of these include going through a third-party service, making a balance transfer, purchasing a money order using your credit card, or getting a cash advance. Each of these methods will come with its own set of fees and/or higher interest rates.
Can paying a mortgage with a credit card impact credit score?
If you end up with a high balance on your credit card as a result of your mortgage payment, it could negatively impact your score if you have a high credit utilization. Or, if you end up missing or being late on a payment (perhaps you’re struggling to make the monthly payments), then your score could also be impacted.
Are there fees for paying a mortgage with a credit card?
There will probably be fees, depending on how you use your credit card to pay for your mortgage. For instance, you may incur balance transfer, cash advance, or third-party fees.
What are the risks of using a credit card to cover mortgage payments?
You would likely need to use a workaround to pay your mortgage with a credit card, which can require some advance planning and time. And typically, the workarounds will either involve third-party fees and/or repaying your credit card company at a higher-than-usual APR. Building up debt in this way can also have a negative impact on your credit score.
Is it ever a good idea to pay a mortgage with a credit card?
It’s rarely a good idea to pay your mortgage with a credit card. If it’s an emergency and paying with a credit card is your only option, it’s likely better than defaulting on your loan. If you have a new credit card with a signup bonus spending threshold you need to reach within a short time period, it might be worth it to consider paying through a third-party service so long as you are sure you’ll be able to pay off your credit card swiftly.
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Risk tolerance refers to the level of risk an investor is willing or able to assume as a part of their investment strategy. Knowing yourself and your risk tolerance is an essential part of investing. Of course, it’s good to have a diversified portfolio built with your financial goals in mind.
Still, the products and strategies you use should ideally fall within guidelines that make you feel comfortable, emotionally and financially, even when the market hits a rough patch. Otherwise, you might resort to knee-jerk decisions, such as selling at a loss or abandoning your plan to save, which could cost you even more.
Key Points
• Risk tolerance is the level of risk an investor is willing to assume to achieve financial goals.
• Factors that influence risk tolerance may include risk capacity, time horizon, and emotional risk capacity.
• Investors tend to fall within or between three main categories of risk tolerance: conservative, moderate, and aggressive.
• Someone with a conservative risk tolerance may focus on preserving capital, as opposed to maximizing potential returns.
• Diversifying investments into different risk buckets can help you align your risk tolerance with your personal goals and timelines.
What Is Risk Tolerance?
As noted, risk tolerance is the amount of risk an investor is willing to take to achieve their financial goals when investing — whether through online investing or any other type of investing. In a broad sense, an investor’s risk tolerance level comprises three different factors: risk capacity, time horizon, and emotional risk.
What Factors Determine Your Risk Tolerance?
There are a few key factors that ultimately determine your risk tolerance. It mostly boils down to your financial situation or capacity to take risks (or, how much money you actually have to take risks with), how long you plan on being in the markets, and your individual emotional capacity for risk.
Your Financial Capacity to Take Risks
Risk capacity is the ability to handle financial risk. While it’s similar to risk tolerance, and can certainly influence it, it’s not the same thing.
When determining risk tolerance, it’s important to understand your financial and lifestyle goals and how much your investments will need to earn to get you where you want to be.
The balance in any investment strategy includes deciding an appropriate amount of risk to meet your goals. For example, if you have $100 million and expect that to support your goals comfortably, you may not feel the need to take huge risks. When looking at particular investments, it can be helpful to calculate the risk-reward ratio.
But there is rarely one correct answer. Following the example above, it may seem like a good idea to take risks with your $100 million because of opportunity costs — what might you lose out on by not choosing a particular investment.
Your Investing Time Horizon
How much time do you have to invest? That’s another key element in determining your risk tolerance.
Unlike your emotional attitude about risk, which might not change as long as you live, your risk capacity can vary based on your age, your personal financial goals, and your timeline for reaching those goals. To determine your risk capacity, you need to determine how much you can afford to lose without affecting your financial security.
For example, if you’re young and have plenty of time to recover from a significant market downturn, you may decide to be aggressive with your asset allocation; you may invest in riskier assets like stocks with high volatility or cryptocurrency. Your risk capacity might be larger than if you were older and close to retirement.
For an older investor nearing retirement, you might be more inclined to protect the assets that soon will become part of your retirement income. You would have a lower risk capacity.
Additionally, a person with a low risk capacity may have serious financial obligations (a mortgage, your own business, a wedding to pay for, or kids who will have college tuition). In that case, you may not be in a position to ride out a bear market with risky investments. As such, you may use less-risky investments, like bonds or well-established dividend stocks, to balance your portfolio.
On the other hand, if you have additional assets (such as a home or inheritance) or another source of income (such as rental properties or a pension), you might be able to take on more risk because you have something else to fall back on.
Your Emotional Comfort With Market Swings
Your feelings about the ups and downs of the market are probably the most important factor to look at in risk tolerance. This isn’t about what you can afford financially, it’s about your disposition and how you make choices between certainty and chance when it comes to your money.
Conventional wisdom may suggest “buy low, sell high,” but emotions aren’t necessarily rational. For some investors, the first time their investments take a hit, fear might make them act impulsively. They may lose sleep or be tempted to sell low and put all their remaining cash in a savings account or certificate of deposit (CD).
On the flip side, when the market is doing well, investors may get greedy and decide to buy high or move their less-risky investments to something much more aggressive. Whether it’s FOMO trading, fear, greed, or something else, emotions can cause any investor to make serious mistakes that can blow up their plan and forestall or destroy their objectives. A volatile market is a risk for investors, but so is abandoning a plan that aligns with your goals.
And here’s the hard part: it’s difficult to know how you’ll feel about a change in the market until it happens.
The Levels of Risk Tolerance
Generally, it’s possible to silo investors’ risk tolerances into a few key categories: aggressive, moderate, and conservative.
But those terms are subjective, and depending on the institution they can be broadened to include other levels of risk tolerance (for example, a moderate-aggressive level). But because risk tolerance is subjective, the percentages of different assets is hypothetical, and ultimately an investor’s portfolio allocation would be determined by the individual investor themselves.
Again: the hypothetical allocation or investment mix, as it relates to any individual investor’s risk tolerance or risk profile, is not set in stone. You can read more about conservative, moderate, and aggressive risk tolerances below, but first, to help you get an idea of what the investment mix or allocation might look like for a broader range of risk tolerance profiles, here’s a hypothetical rundown of how an investor from each category might allocate their portfolio:
Risk Tolerance Level and Hypothetical Investment Mix
Bonds, Cash, Cash Equivalents
Stocks
Conservative
70%
30%
Moderately Conservative
55%
45%
Moderate
40%
60%
Moderately Aggressive
27%
73%
Aggressive
13%
87%
And here’s a bit more about what the three main risk tolerance categories could entail for investors:
Conservative Risk Tolerance
A person with conservative risk tolerance is usually willing to accept a relatively small amount of risk, but they truly focus on preserving capital. Overall, the goal is to minimize risk and principal loss, with the person agreeable to receiving lower returns in exchange.
Examples of Lower-Risk Investments
Some examples of lower-risk investments, assets, or holdings could include:
• Cash or cash equivalents
• Treasuries
• Money market funds
Moderate Risk Tolerance
An investor with a moderate risk tolerance balances the potential risk of investments with potential reward, wanting to reduce the former as much as possible while enhancing the latter. This investor is often comfortable with short-term principal losses if the long-term results are promising.
Examples of Moderate-Risk Investments
Some examples of moderate-risk investments, assets, or holdings could include:
• Certain diversified funds or ETFs
• Fixed income vehicles, such as corporate or municipal bonds
• Commodity funds or real estate investment trusts (REITs)
Aggressive Risk Tolerance
People with aggressive risk tolerance tend to focus on maximizing returns, believing that getting the largest long-term return is more important than limiting short-term market fluctuations. If you follow this philosophy, you will likely see periods of significant investment success that are, at some point, followed by substantial losses. In other words, you’re likely to ride the full rollercoaster of market volatility.
Examples of Higher-Risk Investments
Some examples of higher-risk investments, assets, or holdings could include:
• Crypto
• Precious metals
• Junk bonds
How to Determine Your Own Risk Tolerance
Determining your risk tolerance isn’t always easy, but giving it all some thought can help you get a sense of where you land. You can also try out our quiz to see what your risk tolerance is.
Risk Tolerance Quiz
Take this 9 question quiz to see what your risk tolerance is.
⏲️ Takes 1 minute 30 seconds
There are steps you can take and questions to ask yourself to determine your risk tolerance for investing. Once you know your risk preference, you should be able to open an investing account or open a retirement account with more confidence. Both low risk tolerance and high risk tolerance investors may want to walk through these steps to ensure they know what investment style is right. Matching your specific risk tolerance to your personality traits can help you stick to your strategy over the long haul.
Consider the following questions, especially as they relate to your post-retirement life – or, what your life might look like once you reach your financial goals (which, for many people, is retirement!).
1. What will your income be? If you expect your salary to ratchet higher over the coming years, then you may want to have a higher investment risk level, as time in the market can help you recover from any losses. If you are in your peak-earning years and will retire soon, then toning down your risk could be a prudent move, since you don’t want to risk your savings this close to retirement.
2. What will your expenses look like? If you anticipate higher expenses in retirement, that might warrant a lower risk level since a sharp drop in your assets could result in financial hardship. If your expenses will likely be low (and your savings rate is high), then perhaps you can afford to take on more retirement investing risk.
3. Do you get nervous about the stock market? Those who cannot rest easy when stocks are volatile are likely in a lower-risk, likely lower-return group. But if you don’t pay much attention to the swings of the market, you might be just fine owning higher-risk, (potentially) higher-return stocks.
4. When do you want to retire? Your time horizon is a major retirement investing factor. The more time you have to be in the market, the more you should consider owning an aggressive portfolio. Those in retirement and who draw income from a portfolio are likely in the low risk-tolerance bucket, since their time horizon is shorter.
What to Do After You Find Your Risk Tolerance Level
Assuming you’ve figured out your risk tolerance, the next question is: Now what? The answer is taking a bit of action to make sure your investment activities align with your risk tolerance.
Aligning Your Portfolio WIth Your Profile
With your risk tolerance in mind, dig into the specific holdings and try to make sure that they align with your comfort levels. As noted, you may have a very low risk tolerance; your investments and overall portfolio might reflect that with heavy holdings in lower-risk investments, like Treasuries.
Conversely, if you have a high risk tolerance, your portfolio may have more higher-risk investments, such as certain stocks, crypto, and others.
The Importance of Re-evaluating Over Time
Note, too, that your risk tolerance can and will change over time. That means you should reevaluate your portfolio over time, too, to ensure that your tolerance continues to align with your holdings. That doesn’t mean that you’ll be constantly making changes, but maybe once or twice per year, give some thought to how your tolerance may have changed, and how your portfolio may need to change accordingly.
The Takeaway
Risk tolerance refers to an investor’s comfort with varying levels of investment risk. Each investor may have a unique level of risk tolerance, though generally, the levels are broken down into conservative, moderate, and aggressive. The fact is, all investments come with some degree of risk, some greater than others. No matter your risk tolerance, it can be helpful to be clear about your investment goals and understand the degree of risk tolerance required to help meet those goals.
Investors may diversify their investments into buckets, including some less-risky assets, some intermediate-term assets, and some for long-term growth, based on their personal goals and timelines.
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FAQ
Can my risk tolerance change over time?
Yes, your risk tolerance can and in all likelihood will change over time as your goals, time horizon, and financial situation change.
What is the difference between risk tolerance and risk capacity?
Your risk tolerance refers to your psychological or mental comfort with certain levels of investment risk, while your risk capacity has to do with your financial ability to absorb those risks.
Should I move my investments to lower risk options if the market is volatile?
If you feel uncomfortable during bouts of market volatility, it could be a sign that your risk tolerance isn’t as high as you thought. In that case, you can consider making changes to your portfolio to invest in assets more closely aligned with your risk tolerance.
Is it bad to have a low risk tolerance?
No, it’s not bad to have a low risk tolerance. But there can be downsides to only investing in lower-risk investments, including the potential to see lower returns, which you may want to think about.
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Defaulting on student loans can happen after a borrower misses a series of payments on their loan. The number of loan payments missed before the loan enters default is different depending on whether the loans are federal or private, but the consequences of defaulting on either type can be severe. Ramifications include having the loans go to a collections agency and potential negative impacts on your credit score.
Read on to learn more about what student loan default is and what happens if you default on student loans.
Key Points
• Missing just one federal student loan payment leads to delinquency, which can be reported to credit bureaus after 90 days of missed loan payments.
• Federal student loans default after 270 days of nonpayment, while private loans typically default after 90 to 120 days, though this may vary by lender.
• Default on federal loans results in the remaining loan balance becoming immediately due in full, wage garnishment, and loss of eligibility for forgiveness and forbearance, among other consequences.
• Private loan default can lead to collection agency involvement.
• Options to avoid default include contacting the lender, loan rehabilitation, loan consolidation, refinancing, and seeking credit counseling or legal aid.
What Is Student Loan Default?
Student loan default is a term for when you stop paying student loans by failing to make the required monthly payments on federal or private loans.
For example, if a borrower is having issues making monthly payments on their federal student loans and they stop paying them, after a certain number of missed payments, the loan will enter default.
There are serious repercussions for defaulting on student loans. What happens if you default on student loans is the balance of your loan becomes due in full immediately, your wages may be garnished, and your credit rating is damaged, among other consequences.
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How Long It Takes to Enter Default
The length of time it takes to enter default depends on the type of student loan you have. For federal Direct loans and Federal Family Education Loans (FFEL), if a borrower fails to make a payment for 270 days, their loan is considered to be in default. (If a borrower has a federal Perkins loan, their loan can be deemed to be in default after just one missed payment.)
Private student loans have a different timeline for default, which can vary by lender. In general, however, private student loans are considered to be in default after 90 or 120 days of missed payments, depending on the lender.
Student Loan Default vs. Delinquency
Student loan delinquency is the early stage of missing a required loan payment. If you fail to pay over an extended period, you could face greater consequences for reaching late-stage delinquency.
Federal student loans are considered delinquent when you’re past due on a required payment by at least one day but less than nine months. Federal student loans are typically reported to the credit bureaus as delinquent if you are 90 or more days past due.
A delinquent federal student loan typically goes into default if you fall at least 270 days past due on required payments.
Lenders of private student loans can set their own parameters for delinquency vs. default. Banks, credit unions, and online lenders offer private student loans. Some may consider you in default if you are 90 or more days delinquent on a private student loan. Others may define default as falling 120 days past due after receiving a final demand letter.
Can You Default on Student Loans?
Yes, it’s possible for borrowers to default on student loans. If you are struggling to make monthly payments on your federal student loans and just stop paying them, after a certain number of missed payments, the loan will be in default.
Private student loans can also go into default, though, as mentioned above, this can happen more quickly than it does with a federal student loan.
Defaulting on federal student loans is a process that takes place over a period of nonpayment. Typically when you first miss a payment, the loans are delinquent but not yet in default. At 90 days past due, your lender can report your missed payments to credit bureaus. And, as mentioned above, when you reach 270 days past due, your student loans are typically considered in default.
For private student loans, the terms for default can vary. Private student loan lenders may consider you in default if you’re 90 or 120 days or more past due on a required payment.
Private lenders may also place student loans in default if the borrower declares bankruptcy, passes away, or defaults on another loan. Terms can vary by lender, so if you have private student loans, double-check how they define default.
Defaulting on student loans can have serious consequences, but there are ways to avoid defaulting on your student loans — or recover if your loans are currently in default.
What Happens When Your Student Loans Default?
Here are four potential consequences of what happens if you default on student loans.
1. Collection Agencies Might Come Knocking
When a borrower defaults on student loans, the lender may eventually turn the debt over to a collection agency. The collection agency will then attempt to recover the payment, typically reaching out to you with frequent letters and phone calls.
Collection agencies may also attempt to determine what other assets, including bank accounts or property, would allow you to pay your debt. On top of dealing with regular calls from debt collectors, you may also be responsible for paying any additional fees the collection agency charges on top of your student loan balance.
2. Loan Forgiveness and Forbearance Options Are No Longer on the Table
Student loan default on federal loans means that the federal government can revoke your access to programs that might make it easier for you to pay your loans, including loan forgiveness or forbearance. This means that even if you qualify for something like the Public Service Loan Forgiveness program, you could be rendered ineligible if you let your loans go into default.
3. Your Credit Score Might Be Impacted
Once your student loans are in default, the lender or the collection agency will report your default to the three major credit bureaus. This means that your credit score could take a hit. A low credit score can make it harder for you to get a competitive interest rate when borrowing for other needs, like a car or home loan. In fact, having federal student loans in default can make it difficult to buy or sell real estate and other assets.
4. You Might Have to Give up Your Tax Refund, or a Portion of Your Wages
If your loan holder or a collection agency can’t recover the amount owed, they can request that the federal government withhold your tax refund and even garnish some of your income. For example, if you filed your taxes and were eligible for a refund, the government would instead take that refund money and apply it toward your defaulted student loan balance. On top of that, the government can garnish your wages, which means that they can take up to 15% of each paycheck to pay back your loans.
5. You Could Lose Eligibility for Future Federal Aid
When your federal student loans go into default, you lose eligibility for additional federal aid, such as federal loans and federal Pell Grants. If you were planning to return to school, for instance, you will not be able to get federal student aid to do so.
How Can You Get Student Loans Out of Default?
Defaulting on student loans is a serious matter, but the good news is that there are ways of getting out of default.
To help recover from defaulted student loans, first, stop avoiding collection calls. If your student loan provider or a collection agency is calling, your best bet is to meet your lender or the agency head-on and discuss your options. The lender or the collection agency will be able to talk through the repayment options available to you based on your personal financial situation. They want you to pay, which means that they might be able to help find a payment plan that works for you.
The lender may be able to offer options tailored to your individual circumstances, such as satisfying the debt by paying a discounted lump sum, setting up a monthly payment plan based on your income, consolidating your debts, or even student loan rehabilitation for federal loans (see more about this below). Don’t let your fear stop you from reaching out to your lender or the collection agency.
How to Avoid Defaulting on Student Loans
Of course, even if you can get yourself out of student loan default, the default can still impact your credit score and loan forgiveness options. That’s why it’s generally best to take action before falling into default. If the student loan payments are difficult for you to make each month, there are things you can do to change your situation before your loans go into default.
First, consider talking to your lender directly. The lender should be able to explain any alternate student loan repayment plans available to you.
For federal loans, borrowers may be able to enroll in an income-driven repayment (IDR) plan. These repayment plans aim to make student loan payments more manageable by basing them on the borrower’s discretionary income and family size. This can make the loans more costly over the life of the loan, but the ability to make payments on time each month and avoid going into default are valuable.
There are currently, as of August 2025, several options for income-driven repayment. Depending on the plan you enroll in, the repayment term is extended to 20 to 25 years and payments are capped at 10% to 20% of your income. However, the U.S. domestic policy bill that was passed in July 2025 eliminates a number of student loan repayment plans. For borrowers taking out their first loans on or after July 1, 2026, there will be only two repayment options: the Standard Repayment Plan, which is a 10- to 25-year repayment plan, and the Repayment Assistance Program (RAP).
RAP is similar to previous income-driven plans that tied payments to income level and family size. On RAP, payments range from 1% to 10% of adjusted gross income for up to 30 years. At that point, any remaining debt will be forgiven. If your monthly payment doesn’t cover the interest owed, the interest will be cancelled.
One thing to be aware of is that while an income-driven repayment plan might help make monthly payments more manageable, extending the length of the loan means you could end up paying more interest than you would on the Standard Repayment Plan. The good news is that if you still have a balance at the end of the repayment term, your remaining debt is discharged (although it may be taxed).
Is Refinancing an Option?
Student loan refinancing could potentially help you avoid defaulting on your student loans by combining all your student loans into one new loan. When you refinance student loans, you might be able to secure a lower interest rate or loan terms that work better for your situation.
However, if a borrower is already in default, refinancing defaulted student loans could be difficult. When a student loan is refinanced, a new loan is taken out with a private lender. As a part of the application and approval process, lenders will review factors including the borrower’s credit score and financial history among other factors.
Borrowers who are already in default may have already felt an impact on their credit score, which can influence their ability to get approved for a new loan. In some cases, adding a cosigner to the refinancing application could help improve a borrower’s chances of getting approved for a refinancing loan. But know that if federal student loans are refinanced they are no longer eligible for federal repayment plans or protections.
Help on Defaulted Student Loans
If you default on a federal student loan, here are some programs that can help you get them out of default.
Loan Rehabilitation
To apply for student loan rehabilitation, contact your loan servicer. In order to rehabilitate your federal student loan you must agree to make nine voluntary, reasonable, and affordable monthly payments within 20 days of the payment due date. This agreement must be completed in writing. All nine payments must be made within 10 consecutive months.
Private student loans do not qualify for federal student loan rehabilitation. Federal Direct Loans or loans made through the Federal Family Education Loan (FFEL) program qualify for student loan rehabilitation.
Loan Consolidation
Consolidating your federal student loans into a Direct Consolidation Loan is another option to get your defaulted federal student loans out of default. To consolidate defaulted federal student loans into a new Direct Consolidation Loan you have two options, which are:
• Repaying the consolidated loan on an income-driven repayment plan.
• Making three monthly payments on the defaulted loan before consolidating. These payments must be consecutive, voluntary, on-time, and account for the full monthly payment amount.
Again, private student loans are not eligible for consolidation through a Direct Consolidation Loan.
Consumer Credit Counseling Services (CCCS) are usually non-profit organizations that offer free or low-cost counseling, education, and debt repayment services to help people facing financial difficulties.
If you’ve defaulted on a student loan, a credit counselor may be able to help by looking at your entire financial situation along with your student debt, laying out your options, then working with you to come up with the best option for student loan debt relief.
If you’re struggling with multiple debts, a credit counselor may be able to set up a debt management plan in which you make one monthly payment to the credit counseling organization, and they then make all of the individual monthly payments to your creditors.
While counselors usually don’t negotiate down your debts, they may be able to lower your monthly payments by working with your creditors to increase your loan terms or lower interest rates.
Just keep in mind: Credit counseling agencies are not the same thing as debt settlement companies. Debt settlement companies are profit-driven businesses that often charge steep fees for results that are rarely guaranteed. Debt settlement can also do long-term damage to your credit.
To avoid debt settlement scams and ensure you find a reputable credit counselor, you might start your search using the U.S. Department of Justice’s list of approved credit counseling agencies.
Legal Aid or Financial Hardship Support Services
For borrowers who need legal help with defaulted student loans, there are some legal aid resources available. Legal aid is typically free of charge to those below a certain level of income or who meet other requirements. To find legal aid in your state (if it is available), check LawHelp.org, a national nonprofit that provides referrals to legal aid.
Another resource is the American Bar Association’s Legal Help Finder, which can help low-income borrowers locate free legal help.
If you don’t qualify for free legal help with your student loans, the National Association of Consumer Advocates may be able to assist you in finding a lawyer in your area who handles student loan issues.
The Takeaway
Student loan default can have serious negative effects on your credit score and financial stability. If you’re worried about defaulting on your student loans, or you have already defaulted, consider taking immediate steps to remedy the situation before it gets worse. Contact your lender or loan servicer to learn about options available, such as loan rehabilitation, loan consolidation, and refinancing your loans.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
Does a defaulted student loan ever go away?
It is possible to rehabilitate or consolidate a defaulted federal student loan to get it out of default so that it “goes away.” Some private lenders may offer programs or assistance to borrowers facing default, but they are not required to do so.
Will my student loans come out of default if I go back to school?
No, if you have student loans already in default, going back to school will not remove them from default. Students who have student loans in default will need to get the loans out of default before they can qualify to borrow any additional federal student loans.
Are defaulted student loans forgiven after 20 years?
Defaulted loans are not forgiven after 20 years. Students in default may consolidate or rehabilitate their loan and then enroll in an income-driven repayment plan, which could potentially qualify them for loan forgiveness at the end of their loan term, up to 25 years.
Can defaulted student loans affect my taxes or wages?
Yes, if you default on federal student loans, the government may garnish your wages — which means your employer may be required to withhold a portion (typically up to 15%) of your pay and send it to the loan servicer to repay your loan. In addition, your tax refunds may be withheld and the money applied to repayment of your defaulted loan.
What are the fastest ways to recover from student loan default?
Loan consolidation is generally one of the fastest ways to recover from student loan default. To do it, a borrower consolidates their defaulted loans into a new Direct Consolidation Loan, which immediately ends the default status of the loans. The borrower must agree to repay the consolidation loan on an income-driven repayment (IDR) plan or they must make three consecutive on-time full monthly payments before consolidating.
Just be aware that when you consolidate a defaulted loan or loans, the default remains on your credit report for seven years.
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