SoFi

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

If your bills are piling up, you might be considering bankruptcy. But can you declare bankruptcy on student loans? While it has been technically possible for bankruptcy to clear student loans, it was difficult and rare. But in 2022 the Biden administration created a streamlined process for borrowers with “undue hardship” which allows debtors to navigate the bankruptcy application system easier than previous years.Read on to learn about the key requirements to have student loans released in bankruptcy.

What Is Student Loan Bankruptcy?

There is no targeted “student loan bankruptcy” process, but borrowers sometimes use the term when referring to being released from student loans after filing for bankruptcy. Although it’s possible to be absolved of student loan debt this way, the process has been complex and bankruptcy has serious consequences for your financial future.

If you’re still considering student loan bankruptcy, read on to find out when you can and can’t discharge student loans through bankruptcy, different types of bankruptcy, and the requirements needed to prove “undue hardship.”

Don’t miss our comprehensive Student Loan Forgiveness Guide.

When Can Student Loans Be Discharged Through Bankruptcy?

In bankruptcy, “discharge” is the legal term for clearing or releasing your debts. Student loan discharge requires that the debtor prove to the court that they will suffer from “undue hardship” if forced to repay. Until now, the burden of proof was typically greater for federal student loans than private loans.

The specific qualifications of undue hardship vary by state, but may include:

•   You have become physically or mentally disabled.

•   You have dependents that you support.

•   You have a disabled dependent — such as a spouse or child — who requires 24-hour care.

•   You are under- or unemployed, and can show a “foreclosure of job prospects” in your industry.

•   You have made a good-faith effort to repay your loans over time.

•   You have previously attempted to address your student loans through deferment or other protections.

•   Your disposable income is not used for nonessential purchases, such as restaurant meals, brand-name clothes, and vacations.

•   Your situation is unlikely to improve in the future.

When Can’t Student Loans Be Discharged Through Bankruptcy?

Historically, it has been extremely difficult to get out of federal student loans through bankruptcy. If that kind of legal loophole existed, the argument went, there would be nothing to stop people from completing college or grad school and then immediately declaring bankruptcy.

However, it will be nigh impossible when:

•   The debtor cannot prove any undue hardship from the above list.

•   The individual’s only debt is student loans. (In fact, you won’t even be allowed to file for bankruptcy.)

•   Someone is a recent grad. Not enough time may have elapsed to prove a history of hardship and a good-faith effort to repay loans.


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

Changes to the Student Loan Bankruptcy Process

In November 2022, the Department of Justice announced changes to the way student loans are handled in bankruptcy court. Currently, the Department of Education is directed to oppose all attempts to discharge student loan debt, even appealing cases where the court decided in favor of the student loan holder.

Under the new process, debtors will complete a 15-page attestation form confirming that they meet the definition of undue hardship. The bankruptcy judge, under guidance from the Justice Department and Department of Education, will assess the request and make a decision to fully or partially discharge the debt.

Recommendations will be guided by a new set of clearer, fairer, and more practical standards for “undue hardship”:

•   Present ability to pay. Meaning the debtor’s expenses equal or exceed their income.

•   Future ability to pay. Based on retirement age, disability or chronic injury, protracted unemployment, or similar facts.

•   Good faith efforts. Referring to the debtor’s reasonable efforts to earn income, manage expenses, and repay their loan.

Debtors will no longer be disqualified based on not enrolling in income-driven repayment.

Understanding Bankruptcy

Bankruptcy is a way of clearing your debts through the court system. Before granting bankruptcy, the court will sort through an individual’s assets and determine which debts to forgive. Some debts are more difficult to discharge than others, such as taxes, alimony, child support, criminal fines — and student loans.

People looking to discharge student loans are required to file either Chapter 7 or Chapter 13 bankruptcy before taking additional steps. If you file for bankruptcy but lose your student loan case, the rest of the bankruptcy will stand — you can’t undo it.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, sometimes referred to as liquidation bankruptcy, is generally filed as a last resort. In this process, assets of the person filing for bankruptcy are “liquidated,” or sold, by the bankruptcy trustee. Some property is exempt — such as a primary residence and vehicle — but everything else will be unloaded. Generally, people who consider Chapter 7 are those with minimal assets and a lower income.

Recommended: Chapter 7 vs Chapter 13 Bankruptcy: Which Is Best for Loans?

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is sometimes referred to as a “wage earner’s plan.” In this case, people filing bankruptcy can create a repayment plan to pay off their debts. Depending on someone’s financial situation, repayment may take place over three or five years.

Chapter 13 bankruptcy is more suited to individuals with valuable assets or who are earning considerable income. In order to file Chapter 13, total secured and unsecured debts must be $2,750,000 or less.

See the table for the main differences between Chapter 7 and Chapter 13 at a glance.

	Chapter 7	Chapter 13
Timeframe	Several months	3 to 5 years
Cost	Court filing fees, lawyer fees, plus assets given up	Court filing fees, lawyer fees, plus assets given up
Income requirement	Must be below the state median (the national median is about $71K)	Must have enough disposable income to pay down debts over 5 years
Credit consequences	Negative impact on credit report for 10 years	Negative impact on credit report for 7 years after discharge
Benefits	The court wipes select debts. Collections stopped.	Upon completion of payment plan, remaining balance may be discharged. Foreclosure and collections stopped.

Private Student Loans and Bankruptcy

In the few cases when a court approved the discharge of student loans, they were likely to be private student loans. Private loans do not have the same protections as federal loans in cases of financial hardship, and so borrowers were more inclined to file for bankruptcy. However, private student loans are still exempt from bankruptcy discharge (much like taxes and child support). A borrower must file a kind of sub-lawsuit to have their student loan documents reviewed by the court.

If you have private student loans, you may be interested in this look at private student loan forgiveness options.

Federal Student Loans and Bankruptcy

Up to now, federal student loans were especially hard to discharge through bankruptcy. Even if you made it that far (and a good student loan attorney would discourage you), the burden of proof was greater for federal student loans than private loans. The new process described above should remedy this situation by helping “ensure transparent and consistent expectations for the discharge of student loan debt in bankruptcy,” according to the Office of Public Affairs for the Department of Justice.

Federal student loans do come with built-in protections for struggling borrowers, like deferment, forbearance, and income-driven repayment plans. These options can provide relief to most borrowers experiencing temporary financial setbacks. See below for details on these programs.

You might also be interested in this deep dive into the differences between federal vs. private student loans.

Filing Bankruptcy on Student Loans

While bankruptcy can provide some relief to individuals who are overwhelmed by immense debts, doing so has serious consequences. Bankruptcy is generally a last resort and can have lasting impact on an individual’s credit score.

A low credit score can make it almost impossible to qualify for credit cards, a mortgage, or a car loan. It can also lower the chances of qualifying for a rental apartment and utilities.

To have a shot at a student loan bankruptcy discharge, an individual must first file for bankruptcy. They must then initiate a separate court filing, known as an “adversary proceeding.” This is essentially a request that the court find that repaying the student loans is an undue hardship to both the individual and their dependents.

Here is a brief overview of the process and its challenges:

Cost of Filing for Bankruptcy

The first step is to file for bankruptcy — likely Chapter 7. The cost of filing is fixed at $338, but the cost of an attorney varies depending on where you live, the attorney’s reputation and experience, and the complexity of your case.

The average cost of an attorney in Chapter 7 bankruptcy is $1,450. Because of the complexity and challenges of getting student loan debt discharged, it’s recommended that you retain a student loan attorney to help you through the process.

If you are filing Chapter 13, the filing fee is $313, and the average attorney fee is $3,000.

Adversary Proceedings

While your bankruptcy case is still open, you’ll need to file a separate but related complaint, which will begin an additional lawsuit known as an “adversary proceeding,” or AP. (Essentially, you’re suing your student loan lender or servicing company.) The court will review the complaint and the circumstances of your undue hardship and make a decision.

There is a $350 AP filing fee, which may be waived in bankruptcy cases.

Undue Hardship

The last step is to prove in your AP lawsuit that repaying your student loans have and will continue to cause undue hardship. While this may feel like an accurate assessment of your situation, proving undue hardship means meeting the specific standards described above.

In the event that the court finds in your favor, there are a few different things that can happen:

•   The loans might be fully discharged. This means that the borrower will not need to make any more loan payments. All activity from collections agencies will stop too.

•   The loans may be partially discharged. In this case, the borrower will still be required to repay the portion of the debt that is not discharged.

•   The loan terms may change. The borrower will still be required to repay the debt, but there will be new terms on the loan, such as a lower interest rate.

Alternatives to Declaring Bankruptcy

Fortunately, there are alternative options to declaring bankruptcy. To help you decide which path to take, you may want to consult with a credit counseling agency or a student loan attorney who can provide more personalized advice.

Note that some of the options below apply to either federal student loans or private student loans, but not both.

Student Loan Deferment and Forbearance

For short-term solutions for federal student loans, consider student loan deferment or forbearance. These options allow borrowers to temporarily pause their loan payments. Unlike declaring bankruptcy, federal student loans in deferment or forbearance generally don’t have a negative effect on your credit.

Additionally, while the debt ceiling bill officially ended the payment pause, requiring interest accrual to resume Sept. 1 and payments to resume Oct 1, borrowers can take advantage of a transitional on-ramp period. The latter will protect borrowers from having a delinquency reported to credit reporting agencies until Sept. 30, 2024.

Income-Driven Repayment Plans

Another option for federal student loans is switching to an income-driven repayment plan, which ties your monthly payments to your discretionary income. If your income is low enough to meet the thresholds for these plans, this could bring payments down significantly — even to $0 — though interest will still continue to accrue.

Special Circumstances

In some cases, someone may qualify for automatic or administrative discharge of your federal student loans. In this case, the borrower isn’t required to appear in bankruptcy court.

Some circumstances that might necessitate an administrative discharge include:

•   If the borrower is “totally and permanently disabled.”

•   Death of the borrower.

•   If the school closed while the borrower was enrolled or shortly thereafter.

•   If the borrower was the victim of identity theft, and the loans are not really theirs.

•   If the borrower withdrew and the school failed to properly reimburse their tuition.

•   If the borrower was misled by the school — about certification, job prospects, etc.

Negotiating With Your Lender

Private student loan lenders may offer temporary assistance programs that can help borrowers who are struggling to make payments on a short-term basis.

It may also be worth negotiating: You may want to contact the loan servicer or lender and ask for additional repayment options. In general, servicers or lenders would rather receive a smaller sum of money from you than nothing, so it’s typically in their best interest to work with you.

Is Refinancing an Option?

If you’re looking for a long-term solution, refinancing your student loans is worth looking into. Refinancing your student loans means transferring the debt to another lender, with new terms and new (ideally lower) interest rates.

Some borrowers may be able to qualify for a lower interest rate than the federal rate depending on their financial standing. But keep in mind that when federal student loans are refinanced, they lose eligibility for federal student loan borrower protections — like the deferment, forbearance, and income-driven repayment plans mentioned above.

If you’re looking to refinance, make sure you do your research and see if you can find competitive rates with a lender you trust.


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

Starting the Bankruptcy Process

If you are struggling with your student loan payments, they may be the least of your problems next to high-interest credit card debt. Your first step is to consult a debt counselor or financial advisor, who can lay out all your options. If they agree that bankruptcy is your best, or only, path forward, it’s time to find a bankruptcy attorney who has experience with student loans.

The Takeaway

Until the new process that was announced by the Department of Justice in mid-November 2022, the process of seeking federal student loan discharge in bankruptcy was extremely challenging, and success was unlikely. Borrowers generally needed to prove that continuing to repay the loan would place an undue hardship on them and their dependents. But the bar for “undue hardship” was not clearly defined and as a result, hard to prove.

Now Department of Justice lawyers will assist debtors by doing an undue-hardship analysis using three factors — present ability to pay, future ability to pay, and good faith efforts. They will then send their recommendation to the bankruptcy judge, who has the final say. The aim is to help debtors who may not know that they meet the criteria for discharge.

Aside from bankruptcy, federal student loan borrowers who are struggling with their monthly payments (or expect to struggle once the Covid-related payment pause ends) may want to consider deferment, forbearance, or an income-driven repayment plan. The Biden administration has proposed many changes to help borrowers, including forgiveness of up to $20K for qualifying borrowers and a new repayment plan that limits debt payments to 5% of discretionary income.

In some cases, however, refinancing may make sense. Getting a lower interest rate and/or extending the term of your loan can lower your monthly payments, though a longer loan term can mean paying more in interest over the life of the loan. Also, when you refinance federal loans, you lose access to federal protections and benefits.

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

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

FAQ

Can you declare bankruptcy on student loans?

Historically, it was only in rare circumstances that someone could have their federal student loans discharged in bankruptcy. But in mid-November 2022, the Department ofJustice announced a new process where, at the outset of bankruptcy proceedings, it will identify appropriate cases and support discharge. The aim is to help people who meet the requirements for discharge but did not know it.

What happens if you file for bankruptcy on student loans?

Once the new process is in place, you will be able to fill out an attestation form that the Department of Justice will use to determine if it will recommend that your debt or part of your debt be discharged. It’s ultimately up to the bankruptcy judge, but a recommendation from Department of Justice attorneys can go a long way.

Can private loans be discharged through bankruptcy?

Private student loans have on occasion been discharged through a complex process that starts with filing for bankruptcy. Your best bet is to contact a debt counselor or student loan attorney who can assess your situation and determine your odds of success.

How are Chapter 7 and 13 different for student loans?

Chapter 7 bankruptcy is generally for people with few assets and low incomes. Although getting student loan debt discharged through the bankruptcy process has been rare, you had a better chance with Chapter 7. If you file Chapter 13 in order to preserve your assets, you may end up just paying off your student loans on a different schedule. That said, the new process is expected to help more people who can’t pay their debts.

---

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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.

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

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

SOSL0923045

Read more

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

What happens if I miss a student loan payment? That’s the question on many borrowers’ minds as federal student loan payments resume after more than three years of emergency forbearance.

Missing payments on student loans can have a variety of negative consequences, including damage to your credit score and wage garnishment. However, the Biden administration is offering a temporary “on-ramp” to ease the transition back into repayment. Until the end of September 2024, borrowers will not have to worry about their student loans falling into default or damage to their credit score if they miss payments.

Interest will continue to accrue during this time, though, and any missed student loan payments will be due eventually. Rather than ignoring your student loan bills, take some time to review your options for making them more affordable. The Department of Education offers various plans to help struggling borrowers get back on track.

What Happens if I Miss a Federal Student Loan Payment?

Missing federal student loan payments typically leads to delinquency and default, but from October 2023 through September 2024, borrowers who miss a payment will avoid these consequences. Here’s a closer look at what this student loan on-ramp entails, followed by what typically happens when you miss payments.

Understanding the Student Loan On-Ramp

Federal student loan borrowers have been exempt from student loan payments and interest since March of 2020. With the end of this emergency forbearance, the Biden administration is offering a one-year on-ramp for borrowers to adjust to the new reality. Until Sep. 30, 2024, borrowers won’t face the usual consequences if they miss payments.

For example, your loans won’t fall into delinquency or default, and missed payments won’t be reported to the credit bureaus. Your loans won’t go into collections, and you won’t have to worry about garnishment of your wages, tax refund, or Social Security benefits.

What’s more, the interest that accrues during this year won’t be capitalized, or added onto, your principal balance when the on-ramp expires. This on-ramp gives borrowers time to start making payments again after the lengthy pause.

However, interest will still accrue during this time, and you’ll still have to pay back your loan eventually. Instead of skipping payments over the next year, you may be better off applying for an income-driven repayment plan for more affordable monthly bills.

What Normally Happens When You Miss a Student Loan Payment

Normally, your student loan is considered delinquent the day after you miss a payment. Even if you start making the next payments, your account will remain delinquent until you make up for the missed payment or receive deferment or forbearance.

Once 90 days pass, your loan servicer will let the major credit reporting agencies know that your loan is delinquent. Your credit score will take a hit, making it more difficult to qualify for good terms on loans or credit cards or to rent an apartment.

If you continue not paying, your loan will go into default. For federal loans, the government will wait 270 days. Defaulting on your student loan has serious consequences. The entire amount you owe on your loan, including interest, becomes due immediately.

You won’t be able to take out any other student loans, and you’ll no longer qualify for deferment or forbearance or be able to choose your own mortgage, car loan, or other forms of credit. The government may take your tax refund or federal benefits to pay off your loan. You may also have your wages garnished, meaning your employer will take part of your paycheck and send it to the government to be applied toward the loan.

It’s rare, but the government can also sue you at any time — there’s no statute of limitations. You may also be responsible for collection fees, attorney’s fees, and other costs. In other words, you do not want to default on your student loans. (If you do, options exist for getting out of default, such as the Fresh Start program.)


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

What Happens if I Miss a Private Student Loan Payment?

Private lenders usually give you much less leeway than the federal government. Exactly what happens if you miss a payment depends on the company’s policies and your loan terms. A private lender can tack on late fees and transfer your loan to a debt collection agency.

Also, private lenders can sue you if you stop paying your student loans. If they win, a court can sign a judgment allowing them to garnish your wages. States set the statute of limitations for lawsuits about payment of private loans; the time period usually ranges from three years to a decade. But the lender can continue trying to collect the debt for as long as they want. Plus, certain actions can reset the statute of limitations, such as making a payment or even acknowledging that the debt belongs to you.

Will My Loans Eventually Go Away if I Can’t Pay?

If you stop paying your student loans, they will not go away. However, it may be possible to discharge student loans in bankruptcy or qualify for student loan forgiveness or discharge.

For example, federal student loans can be discharged if you suffer from a total permanent disability or your school closes while you’re attending or soon after you leave. You can also pursue student loan forgiveness programs, such as Public Service Loan Forgiveness or Teacher Loan Forgiveness.

Student loan cancellation from an income-driven repayment plan may also be an option. Income-driven plans will discharge your remaining student loan balance at the end of your term. While the term is 20 or 25 years for some plans, the new SAVE plan will offer forgiveness after 10 years if your original principal balance was $12,000 or less. On all the income-driven plans, it’s possible that your monthly payment could be $0, depending on your discretionary income.

For instance, borrowers who earn less than $32,800 as individuals or $67,500 as a family of four in most states could have $0 monthly payments on the SAVE plan. If this describes you, you could essentially stop paying your student loans and see them go away after anywhere from 10 to 25 years on the plan, depending on how much you borrowed and whether you took out the loans for undergraduate or graduate school.

However, you’ll have to apply for income-driven repayment and recertify your income annually to stay on the plan and keep making progress toward loan cancellation. If you give the Department of Education permission to access your tax information, it can recertify your plan automatically each year.

What if I’m Experiencing Financial Hardship?

If you are having a tough time with your finances or are putting off making a late student loan payment, don’t just ignore your loans; instead, approach your lender or loan servicer to discuss your options.

For federal loans, an income-driven repayment plan could help. Income-driven plans, which include SAVE, PAYE, Income-Based Repayment, and Income-Contingent Repayment, adjust your monthly payments based on a percentage of your discretionary income. Most also extend your loan terms and offer loan forgiveness if you still owe a balance at the end. The new SAVE plan particularly has the most generous terms for borrowers.

You might also be able to qualify for a deferment or student loan forbearance, allowing you to temporarily stop or reduce payments. If you’re in deferment, depending on the type of loan you have, you may not be responsible for paying the interest that accrues during the deferment period. Among other reasons, you can apply for deferment if you’re in school, in the military, unemployed, or not working full-time.

You can apply for forbearance if your student loan payments represent 20% or more of your gross monthly income, if you’ve lost your job or seen your pay reduced, if you can’t pay because of medical bills, or if you’re facing another financial hardship, among other things. Private lenders are not required to offer relief if you’re facing hardship, but some, including SoFi, do.

Will I Be Sent to Collections if I Do Not Pay My Student Loans?

It is possible that if your student loan is in default it may be sent to a collections agency. Federal student loans in default are managed by the Department of Education’s Default Resolution Group. The Default Resolution Group oversees collections for all federal student loans that are in default, so they are not sent to a private collections agency.

The Department of Education is temporarily offering a Fresh Start program for student loans in default. By calling your loan servicer or logging into myeddebt.ed.gov, you can get your loans back into active repayment, enroll in a new repayment plan, and have the record of default removed from your credit report. You’ll also regain access to federal financial aid.

Private student loans may be sent to a collection agency as soon as the loan enters default, which is generally after 90 days of non-payment.

What if I Don’t Expect My Situation to Change Anytime Soon?

Deferment, forbearance, and relief offered by private lenders are temporary solutions. If your financial hardship looks like a long-term issue, you’ll need a permanent fix.

With federal loans, you may be eligible for an income-driven repayment plan. The government currently offers four plans that aim to make payments affordable by tying them to your monthly income.

On most plans, the payments range between 10% and 20% of your discretionary income, and if you make them on time, the balance is eligible to be forgiven in 20 or 25 years.. As mentioned, though, the new SAVE plan may offer loan forgiveness after just 10 years, depending on your original loan balance. Plus, starting in July 2024 it will cut monthly payments on undergraduate loans in half. For most borrowers, the SAVE plan will likely offer the most affordable monthly payments. However, parent loans are not eligible for SAVE. If you’re a parent borrower, your only option for an income-driven plan is Income-Contingent Repayment.

Private student loans are also not eligible for income-driven repayment, and most private lenders don’t offer this option. If you’re struggling to afford your private student loan bills, though, it’s worth explaining your situation to the lender and seeing if they can work with you on a feasible repayment plan. It’s in their interest to continue collecting even partial payments from you, rather than seeing payments stop altogether and having to go through the trouble of lawsuits or referrals to collection agencies.

Why You May Want to Consider Refinancing

Another potential long-term solution to unaffordable payments is student loan refinancing. With a private lender like SoFi, you can refinance federal student loans, private loans, or both. Refinancing involves obtaining a new loan to pay off all of your old ones and committing to the new terms and interest rate.

Refinancing your student loans can make sense if you qualify for a lower interest rate, which, depending on the term you choose, may be able to cut down the money you spend in interest over the life of your loan. Or, if you choose a longer term than you originally had when refinancing, you could lower your monthly payments, which can make the loan more affordable for you now. You may pay more interest over the life of the loan if you refinance with an extended term.

When you refinance with SoFi, you won’t pay any origination fees to refinance, and if your financial situation improves down the line and you want to pay off your loan faster, you won’t face prepayment penalties. It takes just two minutes online to figure out whether you qualify and the potential rates you can obtain.

The Takeaway

Missing student loan payments can have serious consequences, including entering default and damaging your credit score. Fortunately, borrowers have some leeway through September 2024 as they adjust to making payments on their federal loans again. However, private student loans offer no such benefit.

Refinancing could be an option to consider for borrowers looking to secure a lower interest rate. Consider SoFi — where there are zero fees for refinancing student loans and qualifying borrowers can secure a competitive interest rate.

Hoping to get a handle on your student debt? Look into whether refinancing your student loans with SoFi could help you lower your payments or save money in the long term.

FAQ

What happens if I’m late on a student loan payment?

If you are late on a student loan payment, the loan may be considered delinquent. The loan will remain delinquent until a payment is made, or other arrangements — such as deferment or forbearance — are made. Through Sep. 30, 2024, missing payments on your federal loan payments won’t cause them to go into delinquency or default thanks to the student loan on-ramp.

Does a late payment on a student loan affect credit?

A late payment may have a negative impact on your credit score. With the exception of the student loan on-ramp through the fall of 2024, federal loans are normally reported to the credit bureau if they remain delinquent for 90 days. Private student lenders may report a late payment to credit bureaus after 30 days.

What happens if you miss a student loan payment by 270 days?

If you fail to make payments on your federal student loan for 270 days, the student loan will enter default (again, with the exception of the temporary student loan on-ramp). Consequences of default can be serious, such as the total balance of the loan becoming due immediately.

Private student loans may be considered in default after 90 days.

---

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

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

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

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

SOSL0923018

Read more

Whether you’ve just graduated from college or you’ve been making payments for years, your student loan debt can seem endless. When you take out a federal student loan, the Standard Repayment Plan is 10 years. According to the Education Data Initiative, the average student borrower takes 20 years to pay off their loans. However, this timeline can vary based on factors such as the type of repayment plan and interest.

And, not all loans are treated equally. Your major, amount borrowed, loan type, and chosen career path can all influence how much you could end up paying back. Continue reading to discover steps you can take to help reduce your student loan debt.

How Long Are Student Loan Terms?

How long it takes to pay off student loans can vary based on a few different factors. There is a specific selection of student loan terms available for federal student loan borrowers. The Standard Repayment Plan spans 10 years but borrowers can change their repayment plan at any time, without incurring any fees.

The terms on private student loans are set by the individual lender. Terms are set at the time the loan is borrowed. To adjust the terms of a private student loan, the borrower will generally need to refinance the loan. Check in directly with the private student loan lender.

Federal Student Loan Terms

While most federal student loans use the standard, 10-year repayment plan, other loans have different options. (And both Direct Consolidation Loans and FFEL Consolidation Loans offer 10- to 30-year repayment terms.)

Here are the repayment plans that the U.S. The Department of Education has set up for federal loans.

•   Standard Repayment Plan: up to 10 years

•   Graduated Repayment Plan: up to 10 years

•   Extended Repayment Plan: up to 25 years

•   Income-Driven Repayment Plans, including:

◦   Pay As You Earn (PAYE) Plan: up to 20 years

◦   Saving on a Valuable Education (SAVE) Plan: 10 or 25 years

◦   Income-Based Repayment (IBR) Plan: 20 or 25 years

◦   Income-Contingent Repayment (ICR) Plan: 25 years

Income-driven repayment plans — PAYE, SAVE, IBR, and ICR — forgive any outstanding balances if they aren’t completed by the end of the term. (Though you may have to pay taxes on the forgiven balance.)


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

Private Student Loan Terms

For those who’ve taken out private student loans to pay for school, the payment plan may differ from those with federal loans. Some private lenders have terms that are 10 years like their federal counterparts. Other lenders cap terms at 20 or 25 years.

The repayment timeline for private loans varies — for some private loans, you might have to start paying it back while you’re still in school. And they might have fixed or variable interest rates. Because of this, it’s hard to specifically gauge how long it takes the average person to pay off their private student loans.

Paying Off Your Student Loans Sooner

There are plenty of smart ways to pay off student loans. Most important is that you make your payments on-time each month. But, strategies like making overpayments can help you accelerate your pay-off timeline. Regardless of the type of loan you have, there are steps you can take to help get rid of your student debt sooner than you originally thought.

Paying More Than the Minimum

Paying the minimum might be what you can afford right now. But if you come into some extra cash — whether through a bonus at work, a gift from a relative, or your tax refund — you can use this money toward your student loan balance.

Cutting away at your debt when possible may help shorten the length of your repayment.

Refinancing your Loans

While consolidating your federal student loans with a Direct Consolidation Loan is an option for some, those with private student loans may want to consider refinancing instead.

Refinancing your student loans means a private lender pays off your student loans for you and then you pay back your lender with a new loan, new interest rate, and new terms. Ideally, your interest rate would be lower, which could save you money on interest over the life of the loan.

Refinancing allows you to combine all your loans, private and federal, into one for more streamlined payments. But if the interest rate offered isn’t lower than what you’re currently paying, or there are more fees, you might want to keep your options open.

And keep in mind that when you refinance, you’ll lose your federal loan benefits like income-based repayment plans or forbearance. If you’d like to continue taking advantage of those benefits, refinancing might not be for you right now. Ultimately, refinancing should be helpful, not cause more stress or create more debt.


💡 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.

Choosing Another Payment Plan

As mentioned, federal student loan borrowers can change their repayment plan at any time. Calculating your student loan payment is easy with tools like SoFi’s student loan calculator. These calculators can help estimate how much you’ll be paying each month on your student loans. Once you get an estimate, you can more easily decide if you want to choose a new payment plan or stick with your current payment plan or switch to another.

Income-driven repayment plans are one option that allows borrowers to lower their monthly payments, though generally, this results in an extended loan term with increased interest costs. Continue reading for more details on the income-driven repayment plans available for federal student loans.

Income-Driven Repayment Plans

Income-driven repayment plans use your discretionary income and family size to determine how much you pay on a monthly basis. This can be helpful for those in entry-level, lower-paying positions, as they could pay less monthly early on.

As your financial situation improves, your monthly payment minimum increases in turn (and vice versa). Remember that income-based repayment plans often have longer terms, which could mean you end up paying more interest over the life of your loans. Three types of income-driven repayments include PAYE, SAVE, and ICR plans.

Pay As You Earn (PAYE) Plan

On the PAYE Plan, loan repayment takes place over 20 years. Payments are 10% of your discretionary income, but never more than what you would pay on the standard 10-year repayment plan.

SAVE (SAVE) Plan

Borrowers on the SAVE Plan will pay 10% of their discretionary income toward student loan payments. Repayment terms are 20 years for students paying off loans exclusively from undergraduate studies. Borrowers with graduate degrees will repay over a period of 25 years. Any outstanding balance remaining after the aforementioned time periods will be forgiven.

Recommended: Details about the new repayment plan, SAVE

Income-Contingent Repayment (ICR) Plan

The loan repayment terms for the ICR Plans is 25 years. Loan payments can be either 20% of your discretionary income or the value of what you’d pay on a fixed payment repayment plan over 12 years — whichever is lesser in value.

Exploring Your Employee Benefits

Your job might be able to help you with your student loan debt. Under the CARES Act, employers may pay up to $5,250 as tax-free student loan payments for employees through Dec. 31, 2025. Here are some employers who might help you pay your loans.

Refinance Your Student Loans With SoFi

You can refinance student loans to ideally secure a lower interest rate which could reduce the amount of money you’ll owe over the life of the loan. It’s also possible to adjust your repayment term — though keep in mind that extending your term may result in lower payments but may increase your interest costs over the life of the loan.

Refinancing at SoFi is easy — it takes a few minutes to fill out a simple, online application. Qualifying borrowers can secure competitive interest rates and there are no fees. Plus, as a SoFi member you’ll gain access to other benefits like career coaching.

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

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

---

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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

SOSL0923047

Read more