SoFi

Ever have a friend complain about how the payments they’re making towards their loans aren’t actually going to pay off…well, the freakin’ loans? Your friend is onto something.

At the beginning stages of a loan, a big proportion of the loan payments that a borrower makes are applied towards the loan’s interest as opposed to the principal balance. Especially if the loan is spread out over a long time-frame such as many years, most early payments are applied almost totally to interest.

Due to a method of calculation called amortization, loan payments are split between interest and principal, heavy on the interest in the beginning stages. Towards the end, the effect usually reverses. When an amortization calculation is displayed visually, it is called an amortization schedule and graph.

We’re going to get into some of the nitty-gritty amortization info, but before we go there, we just want to be straight with you: This is an incredibly complex topic. We’re going to try to break it down the best we can, but please understand that this info is general in nature and does not take into account your specific objectives, financial situation, and needs; it should not be considered advice. SoFi always recommends that you speak to a professional about your unique situation. Okay, and we’re back in.

Amortization is calculated on all installment loans, which are loans that have regular, predetermined monthly payments, such as mortgages and student loans. Below, we will discuss how amortization is calculated, take a closer look at student loan amortization and a student loan amortization schedule, and explore some ideas for borrowers who want to lessen the amount they’ll pay in interest over time.

Understanding Amortization

Before we dive into a student loan amortization calculation and schedule, it is helpful to first understand the basics of calculating the cost of a loan. You’ll need to know these three variables:

1. The value of the loan, also known as the principal
2. The interest rate on the loan (and whether it is fixed or variable)
3. The duration, or length, of the loan (usually given in months or years)

With this information, it is possible to determine both the monthly payment on the loan and the total interest paid during the life of the loan, assuming all payments are made. Although the math itself is difficult, it is easy to plug the information into an online student loan interest calculator.

The next step is to determine how much of each monthly payment is going towards both interest and principal. This is where the amortization calculation and the amortization schedule come in. As mentioned, amortization happens only on “installment” loans, and all student loans are installment loans.

There are two types of loans: installment loans and revolving credit. A mortgage, student loan, or car loan are all examples of installment loans. With an installment loan, the borrower is loaned an amount of money (called the principal) to be paid back over a designated amount of time, with interest.

Revolving credit, on the other hand, is not a loan disbursed in one lump sum, but is a certain amount of credit to be used as the borrower pleases, up to a designated limit. A credit card and a line of credit are forms of revolving credit.

A borrower’s monthly payment on revolving credit is determined by how much of the available credit they are using at any given time; therefore, minimum payments change from month to month.

Student Loan Amortization Examples

Because student loans are a form of installment loan—a specific amount of money is disbursed to the borrower—student loans are amortized. Parts of each payment are spent on both the loan’s principal and its interest.

At the front-end of the loan, a much larger proportion will be allocated to interest. Due to the way compounding returns work, the effect is more dramatic the longer the length of the loan.

Take, for example, a $30,000 loan at 7% fixed interest rate amortized over a 10-year repayment period. The borrower’s monthly payment is $348.33 total (rounded down to $348 for simplicity in the grid below). Each year, the hypothetical borrower will pay $4,180 total towards their loan.

This never changes, although the proportion that is paid both towards principal and interest will. Here’s how that hypothetical borrower’s hypothetical loan amortization might look. (All examples calculated using this student loan interest calculator, by Bankrate .)

Amortization Schedule Student Loan $30,000, 7% interest over 10 years starting January 2019

So, during the first year, the example borrower’s monthly payments are made up of about half interest and half principal. At the end of that first year, the borrower has paid $4,180 total towards their student loan. $2,032 of that went to interest, while $2,148 went to paying down the principal.

At the end of the first year, the loan is not reduced by the total amount the borrower had paid, but only the amount paid towards the principal—the $2,148. The $30,000 loan is therefore valued at $27,852 at the end of the year.

That’s the whole thing with amortization—because only a small proportion of payments is applied to the loan’s principal at the early stages, the interest rate charges continue to be calculated off a relatively high loan balance figure. Eventually, this swings in the other direction as the loan’s principal is reduced.

With each passing month and year paying down debt, more of each payment is allocated towards the principal. By the ninth and final year, the borrower pays only $154 to interest and $4,026 to principal.

Let’s look at another example of a hypothetical student loan amortization schedule, but along a longer timeline, such as twenty years. It should be noted that a twenty-year payback period isn’t “standard” for federal student loans, but the important takeaway here is the impact of time on amortization calculations.

Here’s a table with the results of a hypothetical $60,000 student loan at a 7% fixed rate, paid back over 20 years.

Amortization Schedule Student Loan $60,000, 7% interest over 20 years:

In this example, each monthly payment for the 20-year duration is $465.18 (again, rounded down to $465 for simplicity’s sake above). In January 2019, the first month of the first year of the loan, $350 is paid towards interest, and just $115 is paid towards the principal. That’s less than 25% of the total payment, compared to 50% in the previous example.

By the end of the hypothetical loan, hardly any of the payment is allocated towards interest, and the majority is applied to the principal. In the very last monthly payment in the last year, only $3 goes towards interest and $462 to principal. In the last year, only $206 total goes towards interest versus $4,155 in the first year.

To calculate your student loan amortization schedule, you too can use an online calculator . It can also be really helpful to see the numbers in graph form, and to see each amortized payment listed out—so you know how much of your money is going to both interest and principal in each monthly payment.

Can You Pay Less Interest on Your Loans?

If amortized payments are frustrating to you, you’re not alone. One way to possibly alleviate the pain is to pay your loan back faster than the stated term. Especially at the beginning of the loan’s repayment term, making additional payments towards the principal might lower what you’ll owe in interest.

If you go this route, consider letting your lender know that the additional payment is to be applied to the principal of the loan, not the interest. If you are mailing a check, you could include a note. If you’re making a payment online, you may want to call your loan servicer to make sure that they apply the money correctly.

For borrowers with multiple loans that want to expedite their debt payment, it’s hard to know where to start. If your goal is really to nip loan amortization in the bud, you might want to consider the “debt avalanche” method of debt repayment.

Using this method, you would choose the source of debt with the highest interest rate and work on “attacking” it first, while making the minimum payment on all other loans. After the highest interest rate loan is paid off, you would move to the next highest interest rate loan, and so on.

Graduates can also consider refinancing their student loans. When you refinance, you’re essentially paying off your old loan or loans with a new loan from a private lender, like SoFi. Ideally, you refinance in order to get a lower rate on your loans than you currently have.

No matter your current financial standing, it’s usually worth checking to see if you qualify for a lower rate than you’re currently paying. With refinancing, you’re also usually able to adjust other terms to your loans, such as the repayment schedule. You can extend it, if you’re looking for lower monthly payments, or shorten it, if you want to pay less in interest—and outsmart amortization—on your loan.

Borrowers shouldn’t refinance their loans if they’re currently using one of the special federal loan repayment plans such as income-driven repayment or Public Service Loan Forgiveness. When you refinance, you will lose access to these programs. Otherwise, it’s usually worth looking into.

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.

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.

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.

SOSL18211

Back to school, and back into student loan debt? Not so fast. Pursuing a graduate degree can have an excellent return on investment and enrich your educational experience, but it doesn’t necessarily have to send you into a student loan debt spiral. Getting money for graduate school doesn’t have to be as challenging as getting the degree itself.

You can try supplementing the cost of graduate school with scholarships. Turning to scholarships to help fund grad school can be a smart way to subsidize your education. The tricky part can be tracking the right scholarship down and applying. It’s back to the books and back to scholarship applications. In this article, we’ll discuss finding and applying to graduate school scholarships.

Scholarships are available through many different avenues, including states, organizations, nonprofits, companies, and more. Scholarships are typically merit-based and typically don’t need to be paid back. But to get one, you’d need to first apply.

Graduate School Scholarships & Grants

Federal and state governments offer a lot of grants and scholarships for graduate students. While scholarships and grants are similar in that they are often considered “gift aid”, many grants can come with need-based stipulations. When applying for any scholarship or grant, it’s important to read the fine print to make sure to qualify and can hold up your end of the bargain if you are indeed awarded the money.

State Scholarships & Grants

To find scholarships and grants at the state level, you can try contacting your state’s Department of Education for assistance and resources. Scholarships and grants vary state by state.

Federal Scholarships & Grants

The federal scholarship and grant application process is a little more streamlined than the state process. However, only some of these grants are available for graduate school programs.

For example, graduate students do not qualify for Pell grants, except for post-baccalaureate certification programs. Again, paying close attention to the qualifications for a grant before applying is crucial.

There are several types of federal grants available:

•  Teacher Education Assistance for College and Higher Education (TEACH) Grants
TEACH grants are available to graduate students at many universities (make sure your school is involved in the program before applying). The grant offers up to $4,000 a year for students who intend to teach after their studies. However, if you have a TEACH grant, you’ll be required to teach in a high-need field in a low-income area for a certain amount of time after your degree.

•  Iraq and Afghanistan Service Grants
You may be eligible for this grant if your parent or guardian died as a result of military service in Afghanistan or Iraq.

•  Fulbright Grants
Fulbright grants can be very competitive and have specific eligibility requirements. The application process can be rigorous, so pay special attention to deadlines and directions.

There are even more grants offered by other federal institutions and departments. For a comprehensive search, you can look through Grants.gov or the U.S. Department of Labor’s database. On these sites, you can search for your program, field of study, or other qualifiers.

Both federal and state scholarships will require you to complete the Free Application for Federal Student Aid (FAFSA®) to apply. Before you take any additional steps, you may want to start by filling out the FAFSA, which is used to determine federal aid, scholarships, and grants.

Private Graduate Scholarships

When it comes to finding money for grad school, there are plenty of organizations, companies, and nonprofits that offer scholarship opportunities. The scholarships could be merit-based, need-based, or simply granted based on your affiliation or application.

Some scholarships are on the smaller side, others much larger, but any amount of aid can help. You may want to consider these elements while you’re on the hunt for private scholarships for graduate school:

•  Your College or University
Your school might offer merit-based scholarship or grant opportunities. Possible action item: connecting with your department, as well as the office of financial aid to see if you qualify for some scholarship from the school and what additional steps you may need to take to apply.

•  Your Course of Study
You may be able to find scholarships related to your field of study . Possible action item: searching national foundations, or even companies that might provide a scholarship. This might be especially helpful in STEM fields, or other careers where there’s a high need for employees in the workforce.

•  Your Neighborhood
Are you involved in any community organizations? Possible action item: seeing if your religious organizations, local civic groups, and other community organizations you belong to offer scholarships. You could reach out to see what may be available and perhaps complete the necessary applications.

•  Your Background
Based on your ethnicity or cultural heritage, you may be able to qualify for several grants. Possible action item: reaching out to national foundations or local community groups to see what they offer.

These are only a few avenues to consider when looking for private graduate school scholarships. Databases and search engines can help, but don’t be afraid to get creative.

Fellowships

Fellowships are also great ways to find money for graduate school. Unlike a grant or scholarship, fellowships are money typically tied to an opportunity. If you get a fellowship , it’s likely you’ll be required to study, research, or work in a field for a short period. Not only will fellowships help you pay for graduate school, but they can also be an opportunity to gain valuable experience in your field.

Finding a fellowship will be specific to your field of study. You can start your search process by talking to your academic department for assistance, or finding a nonprofit institution specializing in your field of study. Applicants should be aware that fellowships typically require a fairly rigorous application process.

Using Student Loans to Cover Grad School

If scholarships, grants, and fellowships just aren’t cutting it, it may be time to consider student loans as well as alternative funding.

If you’re applying for federal or private loans, it’s worth noting that the process is different than applying for undergraduate loans. You can borrow more as a graduate student, but you might be looking at higher interest rates.

Other than taking on student loans, there are several alternatives to funding your graduate degree. If you’re able to work while attending school, you can save and budget to cover a portion or all of your tuition. If you are working, you can speak with your employer to see if they offer a tuition reimbursement program. Employee tuition reimbursement might require you to stay at the company for a number of years, or pursue a specific degree. Program requirements will vary by company.

It could also be worth exploring student loan forgiveness programs. While a loan forgiveness program doesn’t mean cash upfront for grad school, it could help lower or eliminate monthly payments after you finish your studies. Depending on where you land after grad school, you might qualify for Public Service Loan
Forgiveness . Also, hundreds of companies now offer student loan assistance as a perk for employees, which might be something to consider down the line.

Refinancing Your Graduate School Debt

If you do end up borrowing student loans to complete your graduate degree, you could consider refinancing them when you’ve completed your program of study. With a graduate degree, you may have increased your earning potential and secured a new job.

Depending on your credit history, you could qualify for a lower interest rate when you refinance. If you borrowed federal student loans, know that refinancing means you’ll no longer be eligible for federal protections or forgiveness programs.

With SoFi student loan refinancing, you can find out what rate you qualify for in just a few minutes. There are no origination fees or prepayment penalties. And when you refinance with SoFi you’ll have access to member benefits like unemployment protection and exclusive member events.

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.

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.

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.

SOSL19033

When you go to the gym, you might bring your significant other along to hold you accountable in your workout. Or maybe you have a co-worker you always want to collaborate with because they push you to produce your best work.

Whether it’s at home or work, we could all use accountability partners. Having a friend to keep you in check while you’re repaying your student loans could help you pay off your loans in the best way for you.

What Is an Accountability Partner?

While a boss or a parent is a hierarchical relationship, an accountability partner is an equal relationship. You keep tabs on each other to ensure you’re both hitting the goals you set.

When it comes to paying off your student loans, your accountability partner could help you make sure you’re setting goals and achieving them. They might check in often to see how you’re doing and, if you need to reset, they could help you re-evaluate your vision. Having an accountability buddy keeping an eye on you might help motivate you to work toward your goals.

Why Would Someone Need an Accountability Partner?

It’s easy to say you’ll independently hold yourself accountable, but if you fail to follow through, there may not be any consequences. And if you keep putting something off, you might have a hard time achieving your goals.

If you’re a self-starter, or you hit the goals you make for yourself, then you might not need an accountability partner. But if you’re struggling to finish what you start and you want someone to keep an eye on you, having a buddy could be helpful.

Finding a partner or buddy who’s there to talk out your issues with could be an excellent step to reviewing and revising your current strategy for hitting your goals.

Finding an Accountability Partner

Your partner should be your equal—you’ll both be setting yourselves up to stay in line and crush your goals. If you aren’t sure who your accountability partner should be, you could look for the people you’re closest to, like a spouse, friend, co-worker, or even a relative. If you’re okay with your parents keeping tabs on your repayment goals, you could consider them as an option, too.

Author Susan Cain has a few suggestions on how to find an accountability partner, no matter your goals; we just applied them to student loan repayment here:

  1. Finding someone you trust. They don’t have to be your best friend, but they can be a good friend, relative, or significant other. Different personalities might be better, too.

  2. Reviewing your goals. When it comes to your student loans, it can be helpful to have a clear target in mind, like increasing your monthly payments by a certain dollar amount, or paying the full balance off by a set month or year.

  3. Being specific about your action plan. Share your student loan repayment plan and what consequences might occur if you don’t meet that goal.

  4. Setting up regular check-ins. Once a month or every few months, you could have a date set to meet up for coffee or a phone call to catch up on your progress. This could be a good way to set little goals — by achieving them before your check-in.

  5. Revisiting goals. Remember, your goals can be fluid. It’s okay to shift and change as your strategy evolves. Maybe you get a raise and can tweak your contributions. Maybe you get a side hustle, and you could meet your original goal sooner. Don’t be afraid to make changes if what you’re doing isn’t working.

Will an Accountability Partner Help You Repay Your Student Loans?

While you wouldn’t expect your financial accountability partner to gift you money to repay your student loans, you can expect them to give you a figurative kick in the butt to keep your repayment goals on track.

If your goal is to increase your monthly student loan payments, you could set an amount you’re comfortable with paying. If you find after a few months that your goal is easily attainable and want to contribute more, that’s when you could revise your goal and increase your amount.

You might want to talk with your accountability partner about this change, too. They might be able to offer a different perspective.

Are you taking that money away from something important, like a credit card bill or your future retirement? Your accountability partner could help shift your thinking. The change might not be as good as you thought.

Having someone to help you along the way to student loan repayment success might get you to hit your goals you wouldn’t otherwise have managed. A person who has your best interest in mind but also treats you as an equal instead of a subordinate could be a great way to stay on top of your student loan payments.

Refinancing Student Loans

One thing you and your accountability buddy might discuss is the possibility of refinancing your student loans. You could potentially end up paying lower interest over the life of the loan and save money in the long run.

Refinancing with SoFi could mean serious savings, with low interest rates, no hidden fees and no pre-payment penalties.

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.

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.

SOSL18249

When you applied to college, you knew it was going to be expensive. For many students, paying for the cost of their college education out of pocket just isn’t an option.

Many turn to financial aid to fill the gap between what they can afford and the cost of tuition—the U.S. Department of Education awarded more than $120 billion in grants, work-study, federal student loans in 2018. So, you fill out the Free Application for Federal Student Aid (FAFSAⓇ) every year and plan on receiving a financial aid package that might help you make ends meet as you work your way to your degree.

Have you ever thought about what would happen if you lost your financial aid? Losing financial aid in college might be a stressful experience, but it doesn’t mean you have to give up your dream of getting a degree.

Federal student loans and grants aren’t the only way to pay for college, and knowing what options are out there could help you continue your college education without skipping a beat.

Losing Your Financial Aid

To qualify for federal student aid, you must meet specific eligibility requirements outlined by the U.S. Department of Education. While most college students don’t have a problem meeting them, there’s no guarantee you’ll maintain eligibility through the entirety of your college career. Requirements include:

•  Demonstrating financial need

•  Being a U.S. citizen or eligible noncitizen

•  A valid Social Security number

•  Enrollment as a regular student in an eligible degree or certificate program

•  Demonstrating that you’re eligible to pursue higher education by showing a high school diploma or completion of other qualifying schooling

If you don’t meet one or more of these requirements at any time, you may potentially lose your financial aid. While it could be possible to gain that eligibility back, you may need to find other ways to pay for school in the meantime.

How to Pay for College After Losing Financial Aid

Whether you’re no longer eligible for financial aid or you weren’t eligible to begin with, there are several options that could help cover your education costs.

1. Applying for Scholarships

Most universities offer academic scholarships to students who meet certain minimum GPA requirements. If you’ve done well in school so far, you may qualify. If you’re already in a program, you may also have access to scholarships available only to students in your major.

You could speak with a financial aid counselor at your school or visit the college’s scholarship page on its website to find out what’s available.

Also, many private companies and organizations offer scholarships to diligent students. Websites like Scholarships.com , Fastweb , and College Board allow you to search for scholarships and even provide tips on how to improve your chances of getting one.

2. Getting a Job

Working even part-time while taking classes might sound like a surefire way to kill your social life or induce sleep deprivation. But after losing financial aid, it may be essential to staying in school.

Many colleges have on-campus jobs that allow you to work without needing to stray too far away. And in fact, some financial aid packages include work-study, which is often an on-campus job that can help you earn money toward your tuition and other school fees.

Being awarded work-study doesn’t guarantee you a job through your school or local community, but it typically helps you secure placement and a specific number of working hours consistent with your award. But if your school has thousands of students, the competition can be fierce. If you have a car or access to public transportation, you could consider looking off-campus. As you expand your search, you might want to compare wages, hours, and other benefits.

3. Seeking Help From Family

If you have a supportive family situation and your parents can help you without putting their own financial situation in jeopardy, it may be worth asking for assistance. They don’t necessarily need to cover your tuition costs for you.

Instead, they may be able to provide you with a place to live rent-free, or you could ask for a loan with clear terms for repayment. Whatever you do, you might want to be mindful of your parents’ or other family members’ needs and don’t assume you’ll receive help.

4. Considering Transferring

Depending on the cost of tuition and the amount of financial aid you lost, it might be worth transferring to a less expensive college to save on costs. While that won’t pay for your tuition on its own, it may give you access to more scholarship and grant opportunities.

5. Applying for Private Student Loans

While federal loans often carry lower interest rates and more benefits than private student loans, the latter can still be an option if you fall short with the alternatives, whether you’re an undergraduate or graduate student.

Several banks, credit unions, and online lenders offer private student loans. As a result, you might want to shop around to make sure you get the best terms for your needs.

Also, unlike most federal student loans, private student loans typically require a credit check. And unless you have a strong credit history, a reliable source of income, and can meet other lender requirements, you may have a hard time getting approved. Again, if you have supportive parents, another option is to ask them to co-sign a private student loan with you.

Getting Financial Aid Back After Suspension

If you’ve lost your eligibility , the decision isn’t necessarily final. For example, if you’ve defaulted on a federal loan, you may be able to regain your eligibility once you get the loan out of default.

Whatever the reason, you could talk with your school’s financial aid office and find out what you need to do to get it back. It may take some time, but it can be well worth it, especially if you have a few years left in school.

Practicing Smart Student Loan Habits

If you’ve taken out student loans or you’re planning to use student loans in the future to finance your education, you might want to use them wisely.

Before you borrow, for instance, you could make sure you’ve exhausted all of your other options to get money to pay for school, including getting a job and applying for scholarships and grants. Also, you could avoid borrowing more than you need to limit how much you’ll owe in the long run.

As you get closer to graduation, you might consider refinancing your student loans once your credit and income are in good shape. Refinancing could potentially help you score a lower monthly payment, a lower interest rate, or both.

Know that if you refinance federal loans, you’ll no longer be eligible for programs like Public Service Loan Forgiveness, income-driven repayment plans or other federal benefits. To see what your new refinanced student loan could look like, take a look at our student loan refinance calculator.

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.

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.

SOSL18247

Scary, but true. The amount of student debt in the United States is approximately $1.5 trillion , about one-and-a-half times what Americans currently owe on their credit cards. People use credit cards for home repairs, to go on vacation, to buy groceries, to eat out at restaurants—and for just about any other expense you can think of. Yet, all of these purchases combined are dwarfed by our country’s total student loan debt.

Student loan debt is now the second biggest form of debt in our country, only behind mortgage loans—and the debt balance and its accompanying crisis continues to grow. In this post, we’ll delve into what impact this situation is having on the millennial generation (and other borrowers). We’ll also reverse engineer the reasons why this debt crisis is taking place and share strategies to help whittle down student loan debt, maybe even paying it off more quickly.

National Student Loan Debt and Its Impact on Borrowers

A recent study shows that millennials who have student debt have a net worth, on average, that’s 75% less than those without student debt (an average of $29,087, compared to $114,376 for those who are loan-free).

Students with loan debt also tend to have, when compared to their peers with no student loan debt:

•  about half as much money in the bank ($5,500 versus $10,180 )

•  approximately $19,000 less in their retirement accounts ($21,160 versus $39,905 )

•  larger mortgages—and on homes with less value

In short, financial wellness of millennials with student loan debt is clearly substandard, overall, when compared to others in their demographic without this debt. And, although people with college degrees tend to get higher-paying jobs, overall, the weight of the student debt that often accompanies it can drag down a person’s ability to gain financial wellness.

Here’s another statistic to consider: in an era when total student loan debt has surpassed total credit card debt, millennials with student loans also have more credit card debt.

•  55% of those with student loans also have credit card debt ; only 32% without education-related debt do.

•  Their average balance is $2,888 compared to $1,476 for graduates without student loan debt.

A Forbes article looks at the “disastrous domino effect” created by student debt, with one couple sharing how their debt is forcing them to “put their lives on hold year after year.” It’s had a negative impact on their marriage as they focus on paying down debt, and as they’re waiting to have children and buy a home. This debt has been a “huge burden and point of contention.”

Related: Will There Ever Be a Student Loan Bailout?

The borrower being quoted was a participant in a 50-state survey, Buried in Debt , of student loan debt and its impact on borrowers.

This report examines how the unrelenting stress of student debt can strain borrowers financially as well as emotionally. One of the participants shares how she regularly thinks about selling everything she owns to live in her car so she can put more money towards her debt.

Conclusions from the report include:

•  Nearly 90% of borrowers surveyed struggle to make payments.

•  The majority have less than $1,000 in their bank account.

•  6% of them have even had Social Security payments or wages garnished.

•  Nearly one third of them say their student loan bill is higher than their rent or mortgage payment.

•  65% say it’s higher than their entire monthly food budget.

More About the National Student Loan Debt Crisis

The amount of U.S. student loan debt continues to grow, increasing by 170% in just 10 years’ time . You read that right: over the last 10 years or so, the amount of student debt (in real dollars!) nearly tripled, which may lead people to believe we’re in the midst of a student loan bubble, similar to the subprime real estate bubble from a decade ago.

In June 2018, NASDAQ.com published Safehaven’s prediction that the student loan bubble is about to pop, and the article also shares how, earlier in 2018, the chairman of the Federal Reserve stated that this student loan increase could “slow down economic growth.”

Why this Debt is Growing

In part, the total student loan debt is growing because the costs of getting an education are still rising beyond the rate of inflation. In fact, over the last 10 years, the published costs of in-state tuition and fees at public universities increased at an average of 3.1% beyond the rate of inflation.

And, as long as the cost of attending college outpaces the cost of living, problems will continue for borrowers. Plus, the housing market crash of 2008 has also fed into today’s student loan debt crisis. That’s because some parents who’d planned to borrow against their homes’ equity to help their children attend college often couldn’t do so, post-2008. So, these students needed to take on debt of their own. More specifically, some economists suggest that, for every $1 drop in home equity loans, there has been an increase of 40 to 60 cents in student loans.

Even more alarming, analysis by The Brookings Institution estimates that, by 2023 (just a few short years away!), nearly 40% of student borrowers may default on their loans.

Paying Down Student Debt More Quickly

If possible, you could consider making an extra payment annually toward your loans’ principal balance. Can you do this twice a year? Every quarter? Paying extra toward your loans can help you get them paid off more quickly.

If that strategy is too much for your cash flow situation, you could always try figuring out how much you could increase your monthly payment beyond the minimum. Even if that doesn’t seem like an option right now, you can continue monitoring your financial situation and taking advantage of when you can pay more to your debt balance.

It can also help to create or review your monthly budget to see where you can cut back on expenses. For example:

•  How many paid apps, monthly subscriptions, and so forth do you have automatically deducted from a bank account or put on a credit card? Do you use them enough to justify their prices? There are even apps that help you can cancel unnecessary subscriptions and more.

•  When is the last time you shopped around to make sure you’re getting a good deal on your car insurance, enter’s insurance, or cell phone plan? How much could you save if you switched to a less expensive plan, and would the coverage still be as good?

•  What discretionary spending can you reasonably live without?

What would happen if you put those “found” dollars onto your student loan balance?

Refinancing Student Loan Debt with SoFi

If you’ve ever consolidated, say, balances from multiple credit cards into a personal loan, then you already know how much more convenient it can be to have one monthly payment. And, if you can get a lower rate on your new loan, you could also pay less interest over the life of the loan—depending on your repayment term.

The same is true when you refinance your student loans. It isn’t unusual for students to have taken out multiple loans for their education, and consolidating them into one loan with one monthly payment and a potentially lower interest rate might help them manage their repayment.

At SoFi, we allow you to refinance federal and private loans. We do, however, recommend that you explore the repayment benefits you can receive with federal loans, such as forgiveness programs or income-driven repayment plans, before refinancing. You’ll lose out on those benefits when you refinance with a private lender, so it’s important to be sure you won’t want to take advantage of any federal loan benefits either now or in the future.

When you refinance, you can opt for a fixed or variable loan and potentially select a more favorable loan term. If you are currently struggling to make your monthly student loan payments, it might make more sense to choose a longer term—though this can mean paying more interest over the life of the loan. Alternately, if you refinance to a shorter term, you could pay your loans off earlier, potentially paying less in interest.

In just two minutes, you can find your rate online and see if you qualify for SoFi student loan refinancing.

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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.

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