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In late August 2022, President Joe Biden announced a federal student loan forgiveness program, which will cancel up to $20,000 in student loan debt for qualifying borrowers. While many details need to be fleshed out by the administration, the plan will cancel $10,000 in debt for individuals earning less than $125,000 per year ($250,000 for married couples who file taxes jointly or heads of households) and $20,000 for those who had received Pell grants for low-income families.

Prior to President Biden’s announcement, there was fierce debate among politicians, lawyers, and other stakeholders on whether the president could actually cancel student loan debt. Proponents claim that the president has the authority to cancel federal student loan debt without input from Congress, while opponents argue that the program is an executive overreach and illegal. The debate will rage on, even after the student loan forgiveness announcement; the move will likely be challenged in court in subsequent months to determine if the president can cancel student loan debt.

Can the President Forgive Student Loan Debt by Executive Order?

On the 2020 presidential campaign trail, Biden ran in part on a student loan reform platform. On top of suggesting potential changes to existing federal student loan forgiveness programs, he floated the possibility — both in Tweets and in campaign speeches — that he supported a proposal to forgive $10,000 in federal student loan debt.

Recommended: Student Debt Relief: Biden Cancels Up to $20K for Qualifying Borrowers

However, as mentioned above, it was unclear whether the president had the legal authority to cancel federal student debt by executive order and without any legislative action. Even some top aides argued that the president should work with Congress to pass legislation that would cancel student loan debt.

So, as part of the federal student loan forgiveness announcement, the Department of Education released a memo laying out the legal justification that would allow the president and the executive branch to cancel student loan debt.

The memo states that the HEROES Act, which was enacted following the Sep. 11, 2001, terrorist attacks, gives the Secretary of Education the power “to grant relief from student loan requirements during specific periods (a war, other military operation, or national emergency, such as the present COVID-19 pandemic) and for specific purposes (including to address the financial harms of such a war, other military operation, or emergency).”

The Biden administration determined it could cancel federal student loan debt with this justification. And thus, President Biden announced the federal student loan relief plan .

Nonetheless, opponents of the plan will likely challenge the move in the courts, so there is a chance that the widespread cancellation of federal student loans will not be carried out.

Could Student Loan Relief Affect Private Student Loans?

The widespread cancellation of up to $20,000 in student debt will only apply to borrowers with different types of federal student loans, including PLUS Loans.

If you’re looking for private student loan relief, namely to lower your payments, you may want to consider refinancing.

Recommended: The Advantages and Disadvantages of Student Loan Refinancing

Student Loan Debt That the President Has Forgiven So Far

Before the recent announcement, the Biden administration forgave nearly $32 billion in student loan debt as part of various initiatives.

In mid-August 2022, the administration said it would cancel $3.9 billion in student loan debt for 208,000 students who attended ITT Technical Institute, a now-closed for-profit school. Additionally, the Biden administration erased $5.8 billion of educational debt for all former students of Corinthian Colleges, another now-closed for-profit school. This latter cancellation was the largest single student-debt cancellation ever by the United States government.

Another $7.3 billion in student loans were obliterated for 127,000 borrowers through amendments to the Public Service Loan Forgiveness Program. This allows non-profit and government employees to have their remaining debt forgiven after 10 years or 120 payments.

And more than $8.5 billion in student loans have been forgiven for 400,000 borrowers with a total and permanent disability.

Additionally, $7.9 billion of student loans was forgiven for 690,000 borrowers through borrower defense to repayment. People can apply for borrower defense if their education provider deceived them “or engaged in other misconduct in violation of certain state laws,” according to the ED’s Federal Student Aid office.

Identifying Existing Repayment Options

Borrowers have been in limbo, waiting to know if and how much student loan debt the Biden administration will cancel. But even with a little more clarity, many details still need to be worked out, like how borrowers can apply for forgiveness.

With student loan interest rates climbing, it could be a good idea to focus on the aspects of your educational debt that you can control.

One place federal borrowers can start is to determine if they qualify for existing federal student loan repayment programs — including income-driven repayment, deferment, and public service student loan forgiveness.

As part of the federal student loan forgiveness plan, the Biden administration also announced that borrowers with undergraduate loans in an income-driven repayment plan would be able to cap their payments at 5% of their monthly income — a change that could reduce bills for millions of borrowers. The government’s current income-driven plans generally cap payments at 10% to 15% of a borrower’s discretionary income. Additionally, loan balances would be forgiven after 10 years of payments, instead of the current 20 years under many income-driven repayment plans, for borrowers with original loan balances of $12,000 or less.

Another place, as mentioned earlier, is to look into student loan refinancing. It’s important to understand the refinancing process. When borrowers refinance federal student loans through a private lender, the borrower forfeits eligibility for federal repayment programs and federal protections like forbearance and deferment. (With private loan refinancing, a new private loan replaces the borrower’s existing educational debt — generally including new loan terms and rates).

Certain private lenders offer hardship programs to provide a cushion for the unexpected — like being laid off for no fault of your own. (Not all lenders offer these programs, so it’s key to read the lender’s terms and fine print). For example, SoFi offers unemployment protection to eligible borrowers.

When weighing whether to pursue student loan refinancing, some borrowers find it useful to research the rates and terms offered by lenders, including any fees or penalties.

The Takeaway

President Biden has announced transformative changes to federal student loans, canceling up to $20,000 in student debt for qualifying borrowers. However, questions about whether the president has the authority to cancel this debt remain. Opponents of the executive order will likely challenge the plan in the courts, and it may be some time until there is a definitive answer to the question of can the president cancel student debt.

Even with the federal student loan forgiveness announcement, many borrowers may not qualify for this debt relief. If this sounds like you and you are considering refinancing your student loans, it may be best to act now. After all, interest rates are on the rise from their historic lows. Instead, you could refinance your student loans and lock in today’s low rate.

FAQ

When will student loans be forgiven?

The Biden administration announced that up to $20,000 of federal student loans will be forgiven for qualifying borrowers. However, details around the plan still need to be fleshed out, like how borrowers can apply for forgiveness and when the debt will be discharged.

Do student loans go away after seven years?

Sorry, there is no program currently in place for that. This belief stems from the fact people see student loans disappear from their credit reports after this amount of time. Seven years after the first missed payment that led to a loan either defaulting or being charged off, the main three credit bureaus (Equifax, Experian, and TransUnion) erase the default status and late payments from reports.

Are student loans forgiven after 25 years?

The answer to this is a “yes, but.” Yes, you can have your student loans forgiven after 25 years, but only if you pay them under an income-driven repayment plan, which only applies to federal loans. The U.S. government offers four income-driven repayment plans.

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.

When debt accumulates on a high-interest card, interest starts to add up as well, making it harder to pay off the total debt — which, in turn, can become a credit card debt spiral. If you end up with mounting debt on a high-interest credit card, a balance transfer is one possible way to get out from under the interest payments.

A balance transfer credit card allows you to transfer your existing credit card debt to a card that temporarily offers a lower interest rate, or even no interest. This can provide an opportunity to start paying down your debt and get out of the red zone. But before you make a balance transfer, it’s important that you fully understand what a balance transfer credit card is and have carefully read the fine print.

How Balance Transfers Work


The basics of balance transfer credit cards are fairly straightforward: First, you must open a new lower-interest or no-interest credit card. Then, you’ll transfer your credit card balance from the high-interest card to the new card. Once the transfer goes through, you’ll start paying down the balance on your new card.

Generally, when selecting to do a balance transfer to a new credit card, consumers will apply for a card that offers a lower interest rate than they currently have, or a card with an introductory 0% annual percentage rate (APR). Generally, you need a solid credit history to qualify for a balance transfer credit card.

This introductory period on a balance transfer credit card can last anywhere from six to 21 months, with the exact length varying by lender. By opening a new card that temporarily charges no interest, and then transferring your high-interest credit card debt to that card, you can save money because your balance temporarily will not accrue interest charges as you pay it down.

But you need to hear one crucial warning: After the introductory interest-free or low-APR period ends, the interest rate generally jumps up. That means if you don’t pay your balance off during the introductory period, it will start to accrue interest charges again, and your balance will grow.

Recommended: How to Avoid Interest On a Credit Card

What to Look For in a Balance Transfer Card


There are a number of different balance transfer credit cards out there. They vary in terms of the length of no-interest introductory periods, credit limits, rewards, transfer fees, and APRs after the introductory period. You’ll want to shop around to see which card makes sense for you.

When researching balance transfer credit cards, try to find a card that offers a 0% introductory APR for balance transfers. Ideally, the promotional period will be on the longer side to give you more breathing room to pay off your debts before the standard APR kicks in — one of the key credit card rules to follow with a balance transfer card.

You’ll also want to keep in mind fees when comparing your options. Balance transfer fees can seriously eat into your savings, so see if you qualify for any cards with $0 balance transfer fees. If that’s not available, at least do the math to ensure your savings on interest will offset the fees you pay. Also watch out for annual fees.

Last but certainly not least, you’ll want to take the time to read the fine print and fully understand how a credit card works before moving forward. Sometimes, the 0% clause only applies when you’re purchasing something new, not when transferring balances. Plus, if you make a late payment, your promotional rate could get instantly revoked — perhaps raising your rate to a higher penalty APR.

Should I Do a Balance Transfer?

Sometimes, transferring your outstanding credit card balances to a no-interest or low-interest card makes good sense. For example, let’s say that you know you’re getting a bonus or tax refund soon, so you feel confident that you can pay off that debt within the introductory period on a balance transfer credit card.

Or, maybe you know that you need to use a credit card to cover a larger purchase or repair, but you’ve included those payments in your budget in a way that should ensure you can pay off that debt within the no-interest period on your balance transfer card. Again, depending upon the card terms and your personal goals, this move could prove to be logical and budget-savvy.

Having said that, plans don’t always work out as anticipated. Bonuses and refund checks can get delayed, and unexpected expenses can throw off your budget. If that happens, and you don’t pay off your outstanding balance on the balance transfer card within the introductory period, the credit card will shift to its regular interest rate, which could be even higher than the credit card you transferred from in the first place.

Plus, most balance transfer credit cards charge a balance transfer fee, typically around 3% — and sometimes as high as 5%. This can add up if you’re transferring a large amount of debt. Be sure to do the math on how much you’d be saving in interest payments compared to how much the balance transfer fee will cost.

Recommended: When Are Credit Card Payments Due

Balance Transfer Card vs Debt Consolidation Loan

Both a personal loan and a balance transfer credit card essentially help you pay off existing credit card debt by consolidating what you owe into one place — ideally at a better interest rate. The difference comes in how each works and how much you’ll ultimately end up paying (and saving).

A debt consolidation loan is an unsecured personal loan that allows you to consolidate a wider range of existing personal debt, including credit card debt and other types of debt. Basically, you use the personal loan to pay off your credit cards, and then you just have to pay back your personal loan in monthly installments.

Personal loans will have one monthly payment. Plus, they offer fixed interest rates and fixed terms (usually anywhere from one to seven years depending on the lender), which means they have a predetermined payoff date. Credit cards, on the other hand, typically come with variable rates, which can fluctuate based on a variety of factors.

Just like balance transfer fees with a credit card, you’ll want to look out for fees with personal loans, too. Personal loans can come with origination fees and prepayment penalties, so it’s a good idea to do your research.

How to Make a Balance Transfer

If, after weighing the pros and cons and considering your other options, you decide a balance transfer credit card is the right approach for you, here’s how you can go about initiating a balance transfer. Keep in mind that you’ll need to have applied for and gotten approved for the card before taking this step.

Balance-Transfer Checks


In some cases, your new card issuer will provide you with balance-transfer checks in order to request a transfer. You’ll need to make the check out to the credit card company you’d like to pay (i.e., your old card). Information that you’ll need to provide includes your account information and the amount of the debt, which you can determine by checking your credit card balance.

Online or Phone Transfers

Another way to initiate a balance transfer is to contact the new credit card company to which you’re transferring the balance either online or over the phone. You’ll need to provide your account information and specify the amount you’d like to transfer to the card. The credit card company will then handle transferring the funds to pay off the old account.

The Takeaway

Whether you should consider a balance transfer credit card largely depends on whether the math checks out. If you can secure a better interest rate, feel confident you can pay off the balance before the promotional period ends, and have checked that the balance transfer fees won’t cancel out your savings, then it may be worth it to make a balance transfer.

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.

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.

SOCC0722024

Packing up and heading off to college is an absolutely thrilling time in a young person’s life. However, with all the fun comes a lot of responsibility. One of the first, and perhaps most important, choices a college student must make is exactly where they want to live.

Students may choose between living on- or off-campus, though some schools require freshmen to live on-campus. On-campus housing is generally a convenient option for students because they will be close to their classes. Off-campus housing can potentially be less expensive than living on-campus.

Here are a few things to consider on your journey to finding college housing.

1. Start With a Budget

College student housing can get expensive very quickly, especially if a student decides to live in off-campus housing.

It’s important to begin any college housing search by first determining a budget. How much rent can the student actually afford month-to-month while also maintaining enough funds to pay for tuition, food, and other living expenses? Figuring out a personal housing budget is a wholly unique process for each student.

Budgeting Considerations for College Students

Students should sit down and map out all monthly expenses either alone or with a loved one to figure out just how much they can afford and go from there. While developing your budget, consider things such as:

•   Transportation costs to get to and from campus

•   Utilities and internet

•   Whether the apartment will be furnished or will require you to bring (or buy) furniture

•   How you’ll split these costs with roommates

•   Grocery costs vs. relying on the college dining plan

Some considerations and costs may vary depending on whether you choose to live on- or off-campus. If you are still debating between on- or off-campus housing, it may help to map out two budgets to capture the difference in cost and expenses between the two options. SoFi’s Ca$h Course: A Student’s Guide to Money has more information on setting up your college budget.

Paying for Housing Expenses

In addition to costs, evaluate sources of income so you have an idea of how you will pay for your tuition and housing expenses. Have an honest discussion with your parents or guardians about how much they are able to contribute toward housing and tuition expenses.

In addition to savings, undergraduate loans can be used to pay for housing expenses. Students may apply for both federal or private student loans. Federal student loans have certain benefits like deferment options and income-driven repayment options that aren’t necessarily afforded to private student loans. Therefore, federal student loans are typically prioritized over private student loan options. Learn more about the differences between private and federal student loans in SoFi’s private student loan guide.

Students who qualify for a need-based Pell Grant can also use these funds toward their housing expenses. Some scholarships may have restrictions on how the funding can be used, but others will be flexible and can be used for any qualifying education expense including housing costs. When doing your scholarship search, be sure to read the fine print so you understand if there are any restrictions up front.

Recommended: Guide to Unclaimed Scholarships

2. Decide on On-Campus or Off-Campus Housing

After outlining your budget it’s time to answer another big question: On-campus housing or off? This is a major consideration for many students and can be budget-dependent.

It can also be dependent on what year the student is as many colleges require students to live on campus during their freshman year. But, after that, it’s likely up to students.

Each choice has its merits and its pitfalls so weigh the pros and cons of on-campus vs. off-campus housing before deciding.

Recommended: Budgeting Tips for High School Students and Those Entering College

On-campus Housing

For those who want to live on-campus, there are likely a number of options available at their school. This can include residence or dorm halls. Think of these as apartment buildings, but smaller. Some dorms require students to share rooms with other students, and often only come with one bathroom per floor (though there are a lucky few who may be able to snag a private bath).

Dorms often do not come with private kitchens, though they may have a shared space. This often means students will likely also purchase a meal plan, so factor that in when budgeting.

Beyond dorms, students may also be able to live in on-campus apartments or in fraternity or sorority housing. These homes are typically maintained by private Greek organizations and admittance to the frat or sorority is usually required in order to live in the house. Room styles in Greek housing can vary greatly, along with availability, even as a member.

Note that some fraternity or sorority housing options are considered off-campus housing so you may need to check the housing program at your university.

Older students may also want to look into graduate housing, family housing, or co-op living on their university or college campus.

Off-Campus Housing

Off-campus housing may vary depending on where you go to school. The first option may be to just remain living at home with parents or guardians. Though this may not be the college dream for many, it can be one way to cut expenses in both housing and food.

If a student chooses to remain home he or she should sit down with their parents or guardians prior to the start of the school year to go over expectations on both sides. Have the tough conversations about curfews, chores, and anything else one would typically discuss with any other roommate.

Of course, college students may also look for off-campus housing by renting a nearby apartment or home either alone or with friends. Renting alone could be an option for those who like their space and quiet time for studying, but, this could also become prohibitively expensive as that person would also have to pay all the bills on their own.

By renting with friends a college student may gain a bit more independence while still being able to rely on others to split the cost of rent and other bills.

Note that student loans can be used to pay for both on- and off-campus living expenses.

Recommended: Using Student Loans for Living Expenses and Housing

3. Figure Out the Right Timeline

No matter which option a student chooses — on-campus or off — they must also follow the right timeline. Many colleges and universities have deadlines to declare the need for on-campus housing, while many college town rentals also follow a specific timeline for rentals.

Areas surrounding college campuses may be competitive for rentals. Some schools offer off-campus guides to get students started with their search. It may also help to do a bit of digging on your college community and ask friends who have moved off-campus in the past to see what the timeline is there.

4. Where to Look for Housing

For off-campus students, there are a plethora of options for looking for housing online. This includes websites like Zillow, Trulia, Apartments.com, Craigslist, and more. Each of these websites allows users to filter their searches by location, price, number of bedrooms and bathrooms, or any other specific needs.

A student and their potential roommates may want to sit down together to list out their wants vs. needs in housing (for example, a big kitchen, study area, outdoor space, or pet-friendly) and begin their search from there.

5. Tour Housing Options

Prior to committing to housing, take a bit of time and tour the homes in person. This can help you get a feel for a place, open up the cabinets, test the water pressure, see if the street noise is too much, or anything else that may bother someone. On the tour, a student may find items not to their liking or may find things that will allow them to negotiate the rent down. Go in and take plenty of notes.

6. Look at the Fine Print

Don’t sign a lease (or anything for that matter) without reading the fine print. Before putting a name on the dotted line make sure to read each and every section in a lease and ask questions of the landlord.

Also, it’s important to note it’s not a one-way street — you too can add things to the lease. However, a landlord will have to agree before making any changes. But, if there’s something you want in there for your own legal protection, it doesn’t hurt to ask for it.

7. Consider Renter’s Insurance

Students living off-campus may want to consider renters insurance. Those living in a dorm may be covered by their parents’ home or renter insurance policy if you are listed as a dependent. Renters insurance may protect a person’s things if they are lost, damaged, or stolen from the home.

For example, if a pipe bursts while a student is in class and their home is flooded, renters insurance could cover the cost of replacing their damaged items. And, renters insurance could even cover temporary living expenses if their home becomes unlivable.

The Takeaway

No matter where a student lives, things can most certainly get expensive. But, rather than stress about how they’ll pay for their newfound freedom, students should plan instead. And that begins by looking into all their financial options, including a SoFi private student loan.

Students, along with their parents or guardians, can apply for a private student loan with SoFi in minutes and get on their way to finding the perfect housing option for them. SoFi student loans have no origination fees, no late fees, and no insufficient fund fees.

Note that private student loans aren’t appropriate for every student, and are generally relied on after a student has explored other options including federal student aid and scholarships. Upon graduation, students can choose one of SoFi’s repayment options, paying back the loan on a timeline that works for them.

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 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.

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.

SOPS0722005

On Aug. 24, 2022, President Joe Biden ended months of speculation by announcing that each American who earns $125,000 or less per year ($250,000 for married couples) will be eligible for $10,000 in federal student loan cancellation.

He also announced that Pell Grant recipients can receive up to $20,000 in debt cancellation. Federal Pell Grants usually are awarded to undergraduate students who display exceptional financial need.

Additionally, the pause on federal student loan payments for all borrowers has been extended yet again. Repayment is now set to resume in January 2023.

“In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023,” Biden tweeted on Aug. 24th.

In addition, Biden said those with undergraduate loans on income-driven repayment plans would be able to cap their payments at 5% of their monthly income — a change that could reduce bills for millions of borrowers. The government’s current income-driven plans generally cap payments at 10% of a borrower’s discretionary income.

Also, many of the government’s income-driven forgiveness programs will be affected by a 5% cap on monthly income. Loan balances would be forgiven after 10 years of payments, instead of the current 20 years under many income-driven repayment plans for borrowers with original loan balances of $12,000 or less.

What Loans Are Eligible and How Can Borrowers Claim This Relief?

The $10,000 or $20,000 in student debt canceling is available only to people paying down federal loans, not private loans.

The White House said, “The Department will be announcing further details on how borrowers can claim this relief in the weeks ahead. The application will be available no later than when the pause on federal student loan repayments terminates at the end of the year. Nearly 8 million borrowers may be eligible to receive relief automatically because relevant income data is already available to the Department.”

Biden’s plans could face legal challenges, “making the timing of any relief uncertain,” according to the New York Times.

Are the Loan Servicers Ready?

A deadline postponement until Dec. 31st gives the loan servicers more time to prepare for payments to resume.

The companies that handle federal student loans have undergone considerable turmoil in the last two years. FedLoan Servicing, Granite State Management and Resources, and Navient have all withdrawn from student loan servicing. The student loans were transferred to other companies.

In late July of this year, with the Aug. 31st deadline approaching, the existing federal student loan servicers were told to hold off on sending out payment reminders to borrowers, but the White House provided no further direction in the weeks that followed. Rumors swirled about Biden’s next move on student loans.

Scott Buchanan, the executive director of the Student Loan Servicing Alliance — a group that represents companies servicing over 95% of all federal student loans and the vast majority of private loans — wrote a letter to Education Secretary Miguel Cardona on August 22nd to inform him “that any announcement at this late date, less than ten days before the scheduled resumption of September 1, risks operational disruptions.”

“We are now 10 days out from the scheduled resumption for 35 million borrowers, and – as servicers have warned for weeks would be the case – it may not be possible to ensure that a full and complete delay in resumption could be effectuated systemically by September 1 for every borrower without incident,” Buchanan wrote.

After Biden made his August 24th announcement on Twitter, the Student Loan Servicing Alliance tweeted, “ATTENTION: #studentloan servicers have been provided no specific information re: the President’s loan cancellation proposal and await detailed guidance from @usedgov Please understand servicers have no more information for you yet. There is no action for you to take now.”

Recommended: Who is my Student Loan Servicer?

Reactions Split on Loan Canceling

U.S. Secretary of Education Miguel Cardona released a statement saying, “Earning a college degree or certificate should give every person in America a leg up in securing a bright future. But for too many people, student loan debt has hindered their ability to achieve their dreams — including buying a home, starting a business, or providing for their family. Getting an education should set us free; not strap us down! That’s why, since Day One, the Biden-Harris administration has worked to fix broken federal student aid programs and deliver unprecedented relief to borrowers.”

Student loans are a hot topic for debate.

Since he took office, Biden has been under mounting pressure to cancel student debt. While campaigning for the presidency, Biden said he would forgive $10,000 in student loans, but he sought counsel from Department of Education experts on the legal aspects to a write-off and declined to release a decision, despite requests that he do so.

Some prominent Democrats have urged Biden to cancel more than $10,000 in debt.

Senate Majority Leader Chuck Schumer and some Democratic colleagues have pushed for $50,000 in student-loan forgiveness. During an AFL-CIO roundtable in June, Schumer vowed to continue fighting until $50,000 in relief is achieved, according to Business Insider.

The NAACP released a statement in late August saying, “As time continues, the needs of the American people have not — and will not — change without substantial cancellation. If student debt repayments can be paused over and over and over again, there’s no reason why the President cannot cancel a minimum of $50,000. Do it to reduce the racial wealth gap, do it to capture the interest of many who will participate in the November election, do it for the future of American families and communities.”

At the same time, critics of student loan cancellation and payment postponement say that these measures could make inflation worse in America.

“On its face, the move could cost taxpayers about $300 billion or more in money they effectively lent out that will never be repaid,” the New York Times reported.

“Student loan debt relief is spending that raises demand and increases inflation,” former Treasury Secretary Larry Summers said on Twitter. “It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college.”

Sumners added that student loan relief “will also tend to be inflationary by raising tuitions … Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college.”

The Takeaway

President Biden has announced transformative changes to federal student loans: a plan to cancel $10,000 in federal student loan debt for individuals earning $125,000 or less annually ($250,000 for married couples) and up to $20,000 if you went to college on Pell Grants.

Moreover, people with undergraduate loans would be able to cap their payments at 5% of their monthly income in income-driven forgiveness plans — a change that could reduce bills significantly since these plans usually cap payments at 10% or 15% of a borrower’s discretionary income.

Student loan refinancing will allow you to seek a lower interest rate and desirable terms for the amount of your federal loan debt not affected by Biden’s cancellation plans. Interest rates are on the rise from historic lows and could see further increases in the coming months. Refinancing, however, means losing access to federal protections and programs, including the payment pause that has been extended until the end of the year.

Photo credit: iStock/TriggerPhoto
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.

More than half to two-thirds of people who attend college take on debt — most often in the tens of thousands of dollars. According to the Federal Reserve, in 2021 the median amount of outstanding education debt was between $20,000 to $24,999 .

Federal student loans are one option for students looking to borrow to help pay for their education. In the case that federal loans aren’t enough, private student loans could be considered. Finding a reputable lender is essential when entering a long financial relationship.

Student loans are often the first major debt a young adult signs their name to, so evaluating potential lenders is a good first step when considering a private student loan.

There are some general considerations to keep in mind when evaluating private student loan lenders. Keep in mind these are general considerations when deciding between private student loan providers and not an exhaustive list.

Each potential borrower will need to consider her or his own financial situation to help make an informed decision.

1. First Things First: Reputation Before Rate

Before even considering the interest rates, savvy students look for indicators that a loan company is legitimate. Bottom-of-the-barrel interest rates might seem attractive, but if the bargain comes at the price of doing business with a dubious company, potential borrowers may want to steer clear.

Several options are available for researching a lender’s reputation. The Better Business Bureau or the local chamber of commerce are good first places to check.

Look up the name of the lender and the parent company, if there is one, to find any reviews that might be available. If nothing is found on these channels, a general search online often yields news stories or first-hand accounts pulled from multiple sources that can help paint a picture of how the lender treats customers.

Other ways to verify reputation and legitimacy are by checking any accreditations, endorsements by other credible entities, and backing by established institutions.

It’s also worth talking to recent grads and trusted colleagues. What lender do they use? What has their experience been? While anecdotal advice adds color, though, it shouldn’t be the bulk of research.

2. What Rates Are Offered?

Another factor to consider is a lender’s interest rate. The higher the interest rate, the more money the borrower will pay on top of the loan amount — it’s how the lender makes money. For example, private student loans can be fixed vs. variable and have a wide range of interest rates.

Variable Rate

A loan with a variable interest rate — also known as a floating rate — changes interest rates over time. When and how the interest rate changes depend on the terms of the loan and will vary from lender to lender. Typically, the rate is tied to a specific index and will impact monthly loan payment amounts. A rate cap is generally outlined in the terms of your loan. This is the highest the interest rate may rise.

Fixed Rate

A fixed-interest-rate loan carries an interest percentage that does not change over the life of the loan. The interest rate at the start of the loan stays the same until the loan is repaid.

Choosing Between Variable or Fixed Interest

Variable rate loans may seem attractive because the initial rates are often lower than fixed-rate loans. However, since rates will fluctuate, variable rate loans can be more costly in the long run, especially if a borrower has the loan for a lengthy period of time.

Borrowers who wish to lock in one rate and the same monthly payment each month are generally better served with fixed-rate loans. Because the interest rate doesn’t change, monthly payments will stay the same, which can help with budget planning and financial management.

3. What Are the Loan Terms?

The term refers to the length of time a borrower has to repay the loan. In general, the longer the loan term, the more interest a borrower will pay.

Shorter term lengths usually have higher monthly payments than longer term loans, as the loan has to be repaid at an accelerated schedule. Some lenders may offer flexible repayment options. Other lenders may have fixed term lengths and monthly payments.

When deciding between lenders, verifying available term lengths and options can help borrowers select a lender that offers terms that fit their budget and repayment timeline.

4. In-School Repayment Options

Will you be required to make payments on the loan while you are actively enrolled in school? Be sure to find out what the lender’s policies are. Some private lenders will allow borrowers to defer their payments while they are enrolled in school. Using in-school deferment can be helpful if you are tight on money as a college student. But, during this time interest will likely continue to accrue on the loan, which may increase the cost of borrowing over the life of the loan.

Other in-school payment options include making interest-only payments or making flat-fee payments each month. Understanding whether or not you’ll be required to make payments while you are in school is important as it can have an impact on how you manage your money as a student. Review the options offered by your chosen lender closely. For more information on college budgeting ideas and more, check out SoFi’s Ca$h Course: A Student’s Guide to Money.

5. Have You Exhausted Your Federal Loan Options?

A quick check before applying for private student loans: Did you take advantage of any available federal student loans? They offer several benefits not found with private student loans. Here’s a brief overview of some of the benefits and protections offered for federal student loans, but not private student loans:

•   Interest Rates. Federal student loans generally have a lower interest rate than private student loans. Interest rates on federal student loans are fixed and are set annually by Congress.

•   Repayment Plans. Federal student loan borrowers have a few different repayment options to choose from, including income-driven repayment plans that can help make loan payments more manageable.

•   Loan Forgiveness. Borrowers who work in public service or other qualified professions may qualify for loan forgiveness through programs like Public Service Loan forgiveness or Teacher Loan Forgiveness.

•   Loan Deferment and Forbearance Options. Loan deferment and forbearance options may be available as a temporary relief if a borrower is having trouble making payments.

•   Subsidized Loans. Undergraduate students who exhibit financial need may qualify for Direct Subsidized Loans. The government covers interest charges on this type of loan while the borrower is enrolled in school, during the loan’s grace period and during other qualified periods of deferment.

For these reasons, borrowers are encouraged to consider federal student loan options before opting for a private student loan. But, as mentioned, there are borrowing limits associated with federal student loans. And in some situations, private student loans can be a helpful tool to help borrowers pay for their college education.

6. What Fees Are Associated with the Loan?

No one likes additional fees, especially when they’re associated with a loan. Unfortunately, lender fees are not uncommon. Reading the fine print and speaking with loan representatives to understand the fees each lender charges is an important part of the search process.

Charges may include application fees, late fees, insufficient fund fees, and origination fees. Understanding which lenders charge fees can help if you are interested in avoiding student loan fees. When comparing loans from different lenders, be sure to review the APR, or annual percentage rate, associated with the loan. The APR is a reflection of the interest rate and any additional fees, so it is more representative of the total cost of the loan than comparing interest rates alone.

7. What Happens if Your Financial Situation Changes?

Unpredictable circumstances happen all the time. In recent years, recessions, pandemics, and natural disasters count among the various catastrophes impacting people all over the world. Circumstances like these — along with many others — can put a dent in your finances.

For borrowers, a change such as a job loss might mean the difference between paying their student loan bill for the month — or not. Because financial circumstances are prone to change, a borrower may want to compare private student loan lenders.

How flexible are the lenders with monthly payments? Do steep late fees pile on if a borrower can’t make a monthly payment? What happens if a borrower needs to refinance or decrease monthly payments? These are all questions to consider and discuss with potential lenders.

Lenders that lack flexibility can mean the difference between thousands of extra dollars of debt if unforeseen circumstances change your finances and you’re unable to make your payments.

8. Does the Lender Offer any Incentives or Perks?

Once the serious stuff is considered, such as reputation, interest rates, term, and fees, there’s room to evaluate lenders on what else they can offer. Some lenders, like SoFi, offer career services and rate discounts.

Others may offer bundled banking so borrowers can have all financial services in one place. There also may be referral fees a borrower can earn for recommending the lender to others.

While the perk factor probably shouldn’t carry the heaviest weight in your comparison, it still might be worthwhile to evaluate.

9. Customer Service Quality

Finally, consider the company’s customer service quality and reputation. Should you run into any issues during repayment, a company with excellent customer service can make a difference.

The Consumer Financial Protection Bureau operates an online complaint database. Here, you’re able to read any online complaints associated with a particular company in order to make a more educated decision concerning their customer service reputation.

The Takeaway

Once you complete your research and comparison shopping, you may be ready to apply for a loan to pay for your education. With SoFi private student loans, undergrads and grad students can apply for a no-fee loan. That includes no application fee, no origination fees, no insufficient fund fees, or late fees.

For further savings, SoFi also offers an interest rate deduction if you enroll in automated payments from your checking or savings account.

FAQ

What are typical private student loan interest rates?

As of August 2022, interest rates on private student loans may range from 3.22% to 13.95% fixed and 0.94% to 12.99% variable. Keep in mind that interest rates can vary from lender to lender and are based on the individual applicant’s financial history, income, and credit score, among other factors.

Can you start repaying student loans while still enrolled in school?

Yes, you can start repaying student loans while you are enrolled in school. For most federal student loans, students enrolled in school at least half-time are not required to make payments on their loan but have the option to do so.

For private student loans, the policy will depend on the loan terms and conditions. Some private lenders offer in-school deferment options while others may require in-school loan payments.

Do student loans have prepayment penalties?

Do student loans have prepayment penalties?

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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.

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