SoFi

Student loan repayment often begins after a six-month grace period. In that time, you’ve (ideally) settled into a job and a new, post-school routine. That means you’re ready to take on all your financial responsibilities—including building up a savings account—right?

If that sounds daunting, you’re not alone. One in five Americans report that they save less than 5% of their yearly earnings, and another 20% save no part of their annual income.

Building up an emergency fund is an important step toward financial stability, but paying your student loans is required, too.

Is it better to pay off student loans than to save? When both feel important, what do you choose?

Unfortunately, there may not be one right answer—but it is possible to do both. Here are some moves to help make both student loan repayment and saving more manageable.

Considering Refinancing Your Student Loans

In the last decade, interest rates on federal student loans have ranged between 3.4% and 8.5% . Rates on private loans—those provided by private institutions such as banks, credit unions, or schools themselves—can be even higher.

Refinancing your student loans is an opportunity to lower your interest rate. If you can refinance at a rate lower than your existing one, you may pay less on interest throughout the life of your loan.

Alternately, you could elect to lengthen your loan term in refinancing, which could lower your monthly payment and may allow more wiggle room in your budget to pay down other debts or save more. That said, lengthening your loan term can mean you’ll pay more interest over the life of the loan.

Considering Consolidating Your Student Loan Debt

Another reason to consider refinancing student loans is that doing so can simplify the repayment process. If your initial loans are with multiple institutions, you are keeping track of several due dates and recipients. Refinancing gathers all of those loans into one place—with one lender—leaving you with a single bill to pay each month.

Refinancing can consolidate both private and federal loans. However, if you only have federal loans, you can also consolidate them with the government through a Direct Consolidation Loan.

This may not reduce your interest rate, but it would combine all of your loans into one. And with a Direct Consolidation Loan, you’re able to keep your federal student loan benefits. On the other hand, refinancing means you’ll no longer be able to take advantage of federal loan benefits.

Paying Student Loans On Time Can Help Build Your Credit Score

A silver lining to student loan debt is diligently paying your student loans on time may help build your credit score, which is a number that reflects your credit risk at a
given time. On-time student loan payments in the long term are an opportunity to show a long history of consistent payment, which may positively affect your credit score.

Consider setting up automatic payments or an electronic calendar reminder to avoid missing student loan payments. If you do miss a payment, you may want to call your lender immediately to ask how you can rectify the situation.

In some cases, a lender may be willing to waive the fee on a missed payment if it’s your first one, and if you pay it before 30 days have passed, you may be able to avoid getting the missed payment reported to the credit bureaus.

Trying Increasing Your Student Loan Payment Each Month

Paying more than the minimum on your monthly student loan bill can lessen the amount of interest paid over the life of your loan, and may help you pay off loans earlier than your original loan term.

If you get a windfall of extra cash—from a holiday gift or professional bonus, for example—consider using a portion of it to send in one extra payment on your student loan. There are no prepayment penalties for federal or private student loans. Manage to do this every year and you can help reduce the interest you pay and therefore the total cost of your loan.

Finding a Way to Save In Addition To Your Payment Plan

Even if it feels like a negligible amount in the moment, you can try to prioritize putting some money in a savings account each month.

None of us is exempt from the unpredictability of the future, so growing an emergency fund can help you weather an unexpected financial strain, such as a medical bill or car repair.

Saving between three to six months’ worth of expenses is a common goal suggestion. But if that sounds overwhelming on an entry-level salary, remember that even a small start is just that—a start.

Trying to Paying Your Savings Account Like a Bill

There is urgency in the word “bill,” so trick yourself a little by thinking of your monthly savings as a bill to be paid. Or you can consider setting up automated monthly payments, so that you don’t need to lift a finger to save.

Considering a Side Hustle

If you’re already working a full-time job, chances are you’d want a side hustle that requires minimal effort or that brings you a good deal of joy. If you’re social and happy to meet new people regularly, renting out a room in your home via Airbnb is one way to earn extra cash.

If you have a car, you can rent that, too, via companies like Turo and Getaround . Or use your wheels and join the ride-sharing economy, offering transport via Lyft .

It isn’t necessary to try all of the above strategies at once. But the more ideas you have, the more likely you are to find the ones that work for your life and financial situation.

And striking a balance between saving, spending, and paying down debt is a win in itself.

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.

SOSL19018

We all know paying student loans on time is important, but sometimes life gets in the way. Perhaps you’ve been laid off or are having trouble finding a job. Maybe you’ve run into an unexpected expense, like car repairs or medical bills. Or maybe you got so busy with work and personal commitments that you just forgot.

If you’re behind on student loans, you’re not alone. As the cost of college and total student loan debt continues to rise, it is naturally becoming increasingly more difficult to keep up. In fact, over 10% of borrowers are more than 90 days behind on their student loans. And recent research suggests that nearly 40% of borrowers may default of borrowers may default on their student debt by 2023.

If you are falling behind on your student loan payments, just about the worst thing you can do is … nothing. Letting your loan payments lapse can have serious consequences for your financial future.

The good news is there are options for getting back on track with your loans and choosing a repayment plan that works for you.

Student loans can feel like a burden, but they don’t have to hold you back. By taking the right steps for you, you can help make your student debt manageable.

Why You Shouldn’t Ignore Missed Payments

Denial is a normal response when you’re feeling overwhelmed. But avoiding your late payments isn’t going to solve the problem and could potentially make things worse for you down the line.

Once you miss a payment, your loan is technically delinquent. With federal loans, if you make the payment within 90 days, everything will go back to normal. If more time passes, your loan servicer will likely report the delinquency to the major credit reporting agencies, and your credit score will suffer.

If you continue to be behind in payments, usually for 270 days, your loan may go into default. This is serious: Your entire loan amount may become due right away, and you won’t be able to take advantage of deferment, forbearance, or other options for relief until you get out of default.

This could harm your credit score, and the government may eventually be able to garnish your tax refund and more. If you miss a private student loan payment, the lender can usually take action more quickly by adding on late fees, referring your loan to a debt collection agency, or more.

Unlike other types of debt, student loans generally can’t be discharged during bankruptcy except in cases of undue hardship. As you can see, the consequences of ignoring an overdue loan are serious. Luckily, there are things you can do to avoid that.

Review Your Spending by Making a Budget

It sounds simple, but many of us don’t have a clear idea of how much money we have coming in and going out—or what we’re spending it on. If you’re having trouble keeping up with any of your bills, including student loans, making a budget is a good first step towards seeing your whole financial picture.

The total of your after-tax salary or wages, any income from a side hustle, and any help you might regularly get from family will be the starting point at which you can see how much money is coming in.

Next, tally up your expenses—how much money is going out. This includes fixed expenses, which typically stay about the same every month, such as rent, insurance, utilities, transportation, and groceries. Include your minimum loan payment in this calculation. This tally might also include variable expenses, which may fluctuate month to month, such as money spent on shopping or eating out.

If your spending exceeds your income, that could be a contributing factor if you’re unable to afford your loan payment. To address this, you might consider thinking about ways to increase your income or to reduce your expenses.

Can you ask for a raise or get a supplemental gig? Can you cancel that gym membership and jog outdoors instead? Or propose low-cost activities, like a picnic, instead of going out to bars and restaurants with friends?

Making a workable budget—and sticking to it—can go a long way to ensuring you have money in your account to make payments on time. And setting up auto-billing (sometimes called autopay) with a bank account or loan servicer may also help ensure payments are made automatically.

Looking into Deferment or Forbearance

Sometimes, making a budget isn’t enough. If you’re going back to school or encountering an economic hardship, it might not be feasible to pay your loans for a certain time period.

In cases like this, if you have federal loans, you can apply for a deferment or forbearance with your loan servicer. Both of these options could allow you to temporarily stop payment or reduce the amount you pay.

Borrowers may qualify for federal student loan deferment if they’re in school at least half-time, are on active military duty, or while you’re in certain graduate fellowships. You may also be eligible for up to three years of relief if you’re unemployed, in the Peace Corps, or facing economic hardship.

If granted deferment status, a borrower won’t be responsible for the interest that accrues on certain types of federal student loans, including Direct Subsidized Loans, Federal Perkins Loans, and other subsidized loans; however, borrowers will likely need to pay interest on Direct PLUS loans and other unsubsidized federal loans.

Borrowers could be eligible for federal student loan forbearance if unable to pay their loans because of medical bills, changes in employment (such as reduced hours, reduced pay, or job loss), or other financial difficulties. In these situations, it’s up to the loan servicer to decide whether to grant a borrower forbearance.

In other selective situations, on certain qualifying loans they must grant it. These include if a borrower is completing a medical or dental internship or residency, serving in AmeriCorps, or using 20% or more of their gross income each month for student loan payments.

It’s important to note that with forbearance, borrowers are responsible for interest that accrues regardless of the type of loan they have. And all that unpaid interest will be added back onto the principal of the loan—which could make the total amount you’ll eventually have to repay substantially higher.

Private lenders, on the other hand, aren’t required to offer relief if you’re struggling financially, but some are willing to temporarily reduce your payments if you’re unemployed or have another short-term setback. It could be worth reviewing your contract terms or reaching out to your provider about options.

Considering an Income-Driven Repayment Plan

If your financial situation doesn’t seem like it’ll improve anytime soon, and you can’t make ends meet while paying your student loans, there are federal repayment programs that may be able to help.

With federal loans, you may have the option of switching to a repayment plan that ties your monthly payment to your discretionary income in order to make it more affordable. The plan you may qualify for depends on the types of loans you have, your financial situation, and when you took them out.

All income-driven repayment plans limit monthly payments to between 10% and 20% of discretionary income. If the loan is not fully repaid at the end of the repayment period, the loan balance may be forgiven. However, a number of factors will determine if there will be a balance to be forgiven, such as income increase over the life of the loan and debt-to-income ratio.

The downside to going with an income-driven repayment plan is that you may end up owing more in interest compared to some other plans, since the term is longer.

If the monthly payment is not enough to cover the monthly interest charge, all or a portion of the difference will be paid by the government, depending on the type of income-driven repayment plan you have. There may be some instances in that the unpaid interest is capitalized, meaning added back to the principal balance of the loan.

Either way, making the minimum payment on time every month can be an important factor in having strong credit and avoiding negative consequences.

Refinancing Your Student Loans

Another potential solution to unaffordable payments can be student loan refinancing. Federal or private student loans may be able to be refinanced by taking out a new loan with a private lender, which will pay off your existing student debt.

The new loan may come with a lower interest rate or a lower monthly payment than the existing loans, especially if the borrower has a strong credit and employment history. Refinancing with SoFi means there won’t be any origination fees or prepayment penalties.

It is important to remember that if you refinance your student loans with a private lender you will lose access to federal benefits such as deferment, income-driven repayment plans, and public student loan forgiveness.

Getting Your Loans Back on Track

Missing student loan payments is a sign that you need to take action. Ignoring the problem and letting late notices pile up won’t make the issue go away and could open you up to serious consequences.

But if you face the problem head on, you have options for catching up and getting back on track.

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.

SOSL18217

Does the thought of possibly shelling out tens of thousands of dollars to sit in a classroom for four more years after graduating from high school make you groan? While college is a good option for many people, it isn’t for everyone—and not going to a four year college doesn’t mean you can’t have a meaningful career.

More people than ever before have a college degree, but a four-year program isn’t the only way to be successful. The truth is that college may not be the right path for all high school grads.

There are many colleges you can consider, but for some people, sitting in class for another four years to get an expensive degree doesn’t hold interest. And for many, family or work obligations make it difficult to pursue full-time education.

There are certain jobs for which you need a college degree, like engineering or counseling, but there are plenty of careers out there that might be a better fit for you. And, as we mentioned, college degrees can be pricey.

In the 2019–20 school year, the average in-state college tuition and fees was just over $10,000 , and for private school, it was about $36,000. The cost of college has actually grown eight times more quickly than wages from 1989 to 2016. That means that an expensive college degree may not be a strong return on investment for certain career paths.

Alternatives to a College Degree

Just because you aren’t interested in a four-year degree doesn’t mean you need to forgo higher education entirely. The popularity of alternative educational models, like trade schools, is rising, and community colleges offer many practical certification and two year associate degree programs that can help you get ahead.

It is important to know that even if you’re not planning to pursue a four-year degree, you still have options when it comes to creating a career that is right for you.

Trade School

Sometimes known as technical or vocational schools, trade schools can prepare you for a specific job, such as truck driving, nursing, or medical assistance. These programs are normally much shorter than four years, and certain programs may allow you to finish in only a few months. There are both public and private trade schools, with some operating on a for-profit basis.

Trade schools don’t award bachelor’s degrees. Instead, when you graduate from a trade school, you typically receive a diploma or certificate indicating that you are trained and certified to perform a specific job. Some trade school programs do offer associate degrees, which are the same type of degrees offered by many community colleges.

Community College

And that brings us to community colleges, which, as we mentioned above, usually offer two-year degrees called associate degrees. These degrees can either stand alone or be a stepping stone to obtaining a bachelor’s degree at a four-year school. But many community colleges offer career preparation programs that are designed to help students jump into the workforce without the need for a bachelor’s degree.

Community college could also be a great way to test out college life and see if you want to continue pursuing higher education. They tend to be much less expensive than four-year universities, which means it won’t cost you an arm and a leg before you decide if higher education is right for you.

Apprenticeships

Though you may not have realized it, apprenticeships are not just something you read about in a history book on the Middle Ages. Currently, the U.S. has a robust network of training programs and apprenticeships that are designed so you can learn a trade while working a paid job.

Apprenticeships can be a win-win for employers and employees because they allow those starting out to begin working immediately—that way, employers can fill vacant jobs and you can receive a paycheck right away.

Described as “learn while you earn,” they can help you learn how to use industry-specific tools and technologies and help you develop your skills over a period of time. According to the U.S. government, workers who train in apprenticeships earn about $300,000 more in earnings over their careers than workers who don’t go through or complete an apprenticeship program.

Starting a Business

Another option for those who aren’t interested in all-night cram sessions and dorm rooms is starting your own business. In fact, a 2017 study showed that more than half of business owners don’t have a four-year college degree.

If you are already passionate about—and have a lot of knowledge about—a specific field or industry, you might consider skipping college altogether and jumping into that business.

Starting your own business takes a lot of hard work, but it could mean that you get to be your own boss and work in an industry you love. And because you could quickly become an expert on the products or services you provide, you aren’t necessarily at a disadvantage because you lack a degree.

If You Do Go the College Route

There are plenty of options if you choose not to attend a four-year college. However, there are also options within the world of college: the type of college you choose, the major you decide to pursue, and how you pay for college.

There’s no denying it: Higher education is expensive. If you go that route, and you take out student loans, there are ways to help you manage the debt you are paying on. For some grads, loan refinancing can be a big help.

Refinancing your student loans with a private lender, like SoFi, may help you snag better repayment terms that can help facilitate a quicker payoff, such as a shorter term—or you could qualify for a lower interest rate.

One important thing to note is that refinancing federal loans with a private lender could make you ineligible for some federal loan benefits, like Public Service Loan Forgiveness (PSLF), so it’s important to do your research when deciding what the best program fit is for you.

Got that four-year degree and looking to pay off those loans? With SoFi, refinancing is fast and easy, and there are no hidden fees. Learn more and find your rate today.

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.

SOSL18248

Student loan protection for borrowers has been a long time coming.

Luckily, there’s a new bill making its way through California’s state legislature that, if passed, would establish new student loan protections for borrowers in the Golden State.

This would be welcome news to the students who have found themselves with high loan balances and unclear guidance on how to pay them back. (According to the bill , over 1 million borrowers in California defaulted on their student loans in 2017—three times the number who lost homes to foreclosure in the same period.)

The gravity of the student loan situation is reflected on both the national and the state level. Borrowers hold $1.49 trillion in student loan debt in the United States, with $125 billion of that debt in the hands of 3.7 million California residents, netting out to around $33,000 per borrower, on average.

$125 billion

And as if paying back a student loan isn’t hard enough, the student loan market has dealt with its fair share of predatory practices. California is hoping to lead the charge on student loan protections, setting a standard that other states can follow.

The Student Borrower Bill of Rights, Assembly Bill 376, aims to tighten protections for California borrowers from servicing abuses that could end up costing them. Here’s what you need to know.

What Is the California Student Loan Borrower Bill of Rights?

Brought to the California State Assembly by Assemblymember Mark Stone, this legislation would establish consumer protections against predatory practices within the student loan industry.

The bill is being co-sponsored by Consumer Reports and other advocacy groups such as NextGen California, Student Borrower Protection Center, Student Debt Crisis, and Young Invincibles. The bill passed through the Assembly and Senate and is currently in committee.

The Student Borrower Bill of Rights focuses on private loan servicers, who act as the primary point of contact for most borrowers.

If a borrower has a question about their loan, wants to make an additional payment to their loan, or wants to change their repayment plan as is allowed by federal plans, they contact their servicer. The service provider acts as a recordkeeper for the loan and as a result, is where borrowers go for information on their loans.

According to the bill, the Consumer Financial Protection Bureau (CFPB) has continued to find that borrowers encounter servicers that engage in practices such as discouraging borrower-friendly alternative payment plans, failing to respond to questions about loans, overturning known payment processing errors, and generally failing to provide sufficient information to borrowers regarding their loans.

In recent years, these companies have been the target of lawsuits for abusive practices and mismanagement. Says Suzanne Martindale for Consumer Reports : “Multiple investigations have shown that loan servicers routinely lose paperwork, misapply payments, provide borrowers inaccurate information, and even steer them into more costly repayment options with virtually no accountability.

“At a time when the U.S. Department of Education has refused to set loan servicing standards to help borrowers, it’s critical for states like California to lead the way and address these longstanding abuses.”

This won’t be the first student loan-related bill in California in recent history—in 2016, California passed the Student Loan Servicing Act , requiring all student loan servicers to obtain licenses to operate in California.

Servicers in the state are also subject to routine oversight by the Department of Financial Protection and Innovation. The current bill looks to build on the 2016 bill, establishing a standard of practice for student loan servicers.

AB 376 states that “the State of California has an opportunity and an obligation to act” and that “with the increasingly uncertain federal landscape, it is now more important than ever to ensure that California student loan borrowers will be given meaningful access to federal affordable repayment options and loan forgiveness benefits, reliable information, and quality customer service and fair treatment.”

What Does the Student Borrower Bill of Rights Hope to Accomplish?

Behind the legislation is the desire to promote meaningful access to the services promised by federal student loans: affordable repayment and loan forgiveness benefits for student loan borrowers, and the ability to rely on information about their loans from service reps.

One goal of AB 376 is to build upon the Student Loan Servicing Act of 2016. The bill would strengthen the state’s ability to protect borrowers by creating minimum standards for student loan servicing companies and helping to improve oversight within the industry for California residents. Here is an overview of key points outlined by the bill, according to Consumer Reports :

•  Ban “abusive” student loan servicing practices that take unreasonable advantage of borrowers’ confusion over loan repayment options

•  Create minimum loan servicing standards to ensure fair application of payments, improved record-keeping on borrower accounts, and proper staff training so borrowers are informed of more affordable payment options

•  Establish a Student Loan Advocate to review borrower complaints, gather data, and issue reports to the state legislature

•  Grant the Department of Financial Protection and Innovation additional “market monitoring” authorities to collect better data about the student loan servicing industry.

Ultimately, the bill’s creators hope it will be a guide for other states—or federal law. The text of the bill points to the lack of action by federal legislatures to combat widespread abuse, even though the Office of Inspector General at the United States Department of Education reported improper practices at each of the largest student loan servicers.

What Can Borrowers Do Now?

While the bill seems to be taking the necessary steps to protect borrowers from unscrupulous loan servicers, it does not solve the problem of nefarious loan servicing practices. Additionally, this bill does not seek to relieve any of the existing student debt burden held by borrowers, which is currently a topic of national conversation.

But that doesn’t mean there aren’t steps that borrowers can take to help make sure they’re set up for success. First, borrowers may find the simple act of identifying and organizing student loans could bring clarity.

You could list out each loan along with the student loan servicer, the interest rate, and the balance. It might be a good idea to learn as much as you can about your loans, including (and especially) the terms of your repayment.

If you have federal loans, you could make sure that you are using an appropriate repayment plan. If you don’t select another plan, most federal loans will be placed into the standard 10-year repayment plan, but there are other options.

For those borrowers struggling to make their monthly payments, moving to a more affordable income-driven repayment plan is generally a better option than missing loan payments.

If you do find yourself in a position where you need to miss a loan payment, you could contact your servicer to discuss your options as well.

If you have private loans, you are unlikely to have as many options for managing your student loan payments, such as income-driven repayment plans or options for deferment or forbearance.

Because the interest rates on student loans vary, borrowers who are looking to pay off their debt might want to focus on paying off the loans with the higher interest rates first, while also making minimum payments on any other debt.

It may also be possible to reduce the overall interest rate on student loans and consolidate loans through student loan refinancing. Refinancing is the process of paying off your old loans with a new loan through a private loan refinancing company like SoFi.

You can check your rates with SoFi in just a few minutes. There’s no obligation to sign up, and checking won’t affect your credit score1. For many borrowers, SoFi has been a breath of fresh air in an industry that hasn’t always felt friendly.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

SOSL19087