Apr
16
2025

Student Loan Forgiveness for Caregivers

By | Fresh Out of School, Student Loans, student_loan | Comments Off on Student Loan Forgiveness for Caregivers

There are approximately 53 million family caregivers in the U.S., according to the latest data. While caregiving is a labor of love, it can also involve some serious financial challenges. You might have to take time away from your job to care for your loved one, for instance, making it hard to pay your bills and student loans.

Fortunately, there are options that can help, including student loan forgiveness for caregivers. Read on to learn about ways to manage your student loans and get some debt relief.

Key Points

•   Caregivers face financial challenges, including managing student loans, due to caregiving responsibilities that may require them to take time off from or leave their jobs.

•   There may be federal student loan forgiveness options for caregivers, including Public Service Loan Forgiveness (PSLF) and forgiveness through income-driven repayment (IDR) plans.

•   State-specific student loan forgiveness programs may also be available for caregivers.

•   While there typically aren’t many options for private student loan forgiveness, some state programs offer forgiveness for private loans that caregivers may be eligible for.

•   Alternatives to student loan forgiveness for caregivers include deferment, forbearance, and refinancing of student loans.

Managing Student Loans as a Caregiver

Juggling student loan payments and other expenses with caregiving responsibilities can be difficult. Nearly two in 10 caregivers had to leave their job to care for a family member, and four in 10 had to reduce their hours, according to a survey from the Rosalynn Carter Institute for Caregivers. On top of a possible loss of income, many family caregivers are spending money to help their loved ones. Three-quarters of caregivers pay more than $7,200 in out-of-pocket expenses annually related to caregiving, according to a study by the AARP.

Caregivers who are struggling to make federal student loan payments can seek out help by contacting their loan servicer and exploring student loan repayment options and forgiveness programs to avoid missing payments and defaulting on their loans. Federal loan default occurs when you fail to make your scheduled loan payments for at least 270 days. If you go into default, you could suffer credit damage, wage garnishment, and have your tax refunds withheld.

For private student loans, you can contact your lender directly to see how they might be able to help. While private student loan forgiveness options are usually not available, there may be other types of loan modifications the lender might be willing to make.

Another option you may want to consider is to refinance your student loans. If you can qualify for more favorable rates and terms, that might make repayment easier.

Recommended: Student Debt Guide

Forgiveness Programs to Explore

Caregivers may be able to qualify for federal or state forgiveness programs that forgive or cancel the remaining balance of their student loans after a certain amount of time and other specific requirements are met. Here are some forgiveness programs to look into.

Public Service Loan Forgiveness (PSLF). PSLF forgives the remaining balance on your federal Direct loans if you’re employed full-time by the government or not-for-profit organization. To qualify, you need to repay your loans under an income-driven repayment plan or a 10-year standard repayment plan. You must make a total of 120 qualifying monthly payments.

In 2021, and again in 2023, a bill was introduced in Congress to make primary family caregivers for military veterans eligible for PSLF by expanding the definition of “public service job.” The bill is still working its way through Congress, but you may want to keep tabs on it if it applies to your caregiving situation.

Income-Driven Repayment (IDR). IDR offers a pathway to forgiveness. These plans base your monthly student loan payment amount on a percentage of your discretionary income and family size. If you repay your loans under an IDR plan, any remaining balance may be forgiven after 20 or 25 years.

State-specific forgiveness programs. A number of states offer student loan forgiveness programs, and yours may be one of them. For instance, your state may offer forgiveness programs to help certain individuals — particularly those in high-need locations and working in high-need occupations like health care and teaching — pay off some or all of their student loans. Some of these programs forgive both federal and private student loans. Check with your state department of education for more information about these opportunities.

Recommended: Student Loan Forgiveness Guide

Application Process and Documentation

To apply for Public Service Loan Forgiveness, you’ll need to submit a PSLF form by taking the following steps:

1. Make sure you qualify. To be eligible for PSLF, you must have federal Direct subsidized or unsubsidized loans, Direct PLUS loans, or Direct consolidated loans. You must also work full-time for a qualifying employer and be on an IDR plan.

2. Sign up for an IDR plan if you are not already on one. You can sign up at StudentAid.gov. You’ll need a Federal Student Aid (FSA) ID, as well as documentation such as financial information, tax forms, your mailing address, phone number, and email address.

3. Verify that your employer qualifies you for PSLF. The easiest way to do this is to use the PSLF Help Tool. This allows you to see if your employer is in the Department of Education’s database. If they aren’t, you can request that your employer’s eligibility be reviewed.

4. Send the PSLF form to your employer to sign and certify.

5. Sign and submit the fully completed PSLF form.

You’ll need to recertify your employment every year and any time you change jobs to continue to qualify for PSLF.

To apply for state-specific student loan forgiveness, follow the application steps outlined by each plan or program.

Alternatives to Forgiveness for Caregivers

Aside from caregiver student loan forgiveness, there are several other ways to get student loan debt relief. Here are three options to consider.

Deferment: In certain circumstances, including financial hardship, student loan deferment allows you to stop or reduce your payments on your federal student loans for up to three years if you qualify. If you have a subsidized federal loan, interest does not accrue during the deferment period. If you have an unsubsidized federal loan, interest will continue to accrue.

You need to apply for deferment. First, identify the type of deferment you’re requesting, such as economic hardship deferment. Next, fill out and submit a request form to your student loan servicer along with documentation to show that you’re eligible.

Private student loans may or may not offer deferment. Check with your lender.

Forbearance: Similar to deferment, student loan forbearance lets you temporarily stop or reduce your payments for your federal loans if you qualify. However, with forbearance, interest always accrues on your loans and forbearance periods are typically no longer than 12 months.

There are two types of federal forbearance, general and mandatory. To apply, you must identify which type you’re requesting. For family caregivers, general forbearance is likely the most applicable; you may be eligible for it due to financial difficulties, medical expenses, employment changes, or other reasons acceptable to your loan servicer. (Mandatory forbearance is for those serving in AmeriCorps or the National Guard, in a medical or dental internship or residency, or working as a teacher and qualifying for teacher loan forgiveness.) To apply for forbearance, fill out the form for the type of forbearance you’re requesting, and submit it along with documentation showing proof of your financial situation to your loan servicer.

Some private student loans may offer forbearance. Contact your lender to find out.

Student loan refinancing: Another option that might help some family caregivers with their student loans is refinancing. When you refinance, you take out a new loan from a private lender and use it to pay off your existing student loans. The new loan will have a new term and interest rate, which could help some borrowers if they can qualify for a lower rate. Keep in mind, however, that if you extend your loan term to help reduce your monthly payment, you may pay more interest over the life of the loan.

Another important consideration is that if you refinance federal loans, you will no longer qualify for federal benefits such as deferment, forbearance, or income-driven repayment programs. You’ll want to carefully weigh the pros and cons of refinancing.

The Takeaway

If you’re a family caregiver struggling to repay your student loans, there are options that may give you some relief. You might be eligible for Public Service Loan Forgiveness, a state-specific forgiveness program, or an income-driven repayment plan. You can also consider student loan deferment or forbearance to temporarily stop or reduce your payments, or refinance your student loans if you could qualify for more favorable rates or terms. Explore all the possibilities to determine which one can give you the help you need.

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

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

FAQ

How long does it take to qualify for loan forgiveness?

It typically takes 10 years to qualify for Public Service Loan Forgiveness (PSLF) because you must make 120 qualifying monthly payments under an income-driven repayment (IDR) plan or the standard repayment plan while working for a qualified employer. At that point, your remaining balance is forgiven. If you instead pursue student loan forgiveness under an IDR plan, it takes 20 to 25 years to qualify for forgiveness, depending on the plan.

Can part-time caregivers qualify?

If you are a part-time caregiver who has federal Direct student loans and works full-time for a qualifying employer, you may be eligible for Public Service Loan Forgiveness. Under PSLF, working “full-time” means at least 30 hours a week or whatever your employer’s definition of a full-time job is. You could also pursue forgiveness under an IDR plan as a part-time caregiver. These plans base your monthly payment amount on a percentage of your discretionary income and family size.

What types of student loans are eligible for forgiveness?

Federal Direct student loans are eligible for Public Service Loan Forgiveness through income-driven repayment plans or the standard repayment plan. Various types of student loans —including, in some cases, private student loans — may be eligible for forgiveness through state forgiveness programs. Check with your state to find out.

About the author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.


Photo credit: iStock/urbazon

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.



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.

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

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.

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Apr
16
2025
Student Loan Forbearance Extension: Can You Get It Extended?

Student Loan Forbearance Extension: Can You Get One?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | Comments Off on Student Loan Forbearance Extension: Can You Get One?

The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance of federal student loans. As a result, student loan interest accrual resumed on Sept. 1, 2023, and payments in October 2023.

Although the pandemic-related pause that began in March 2020 is no longer in effect, the Biden administration has implemented a temporary “on-ramp” protection. Any federal student loan borrower who received the Covid-19 forbearance relief will be eligible for the 12-month on-ramp protection automatically. This means you’ll be protected from having your federal student loans reported as delinquent if you fail to make any required loan payments from October 2023 through September 2024.

Below we highlight how the on-ramp protection works and how federal student loan borrowers may also benefit from the Saving on a Valuable Education (SAVE) Plan.

What Is a Student Loan Forbearance Extension?

Congress authorized the initial Covid-19 student loan forbearance in March 2020 when it passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act suspended federal student loan payments and federal student loan interest accrual through September 30, 2020.

Two presidential administrations — starting with the Trump administration — extended the Covid-19 forbearance through executive action. The Biden administration issued several extensions to the Covid-19 forbearance up until the 2023 debt ceiling bill ended the practice.

Federal student loan borrowers facing financial difficulties may request a general forbearance, and some borrowers may qualify for a mandatory forbearance. A general or mandatory forbearance can temporarily suspend making loan payments during an approved period.

Federal student loan forbearances typically have 12-month durations, but you can request an extension if you meet the requirements. The cumulative limit on a general forbearance is three years.

Recommended: What Is Student Loan Forbearance?

Will Student Loan Forbearance Be Extended?

The passage of the 2023 debt ceiling bill guarantees the Covid-19 forbearance will not be extended. Federal student loan interest accrual resumed Sept. 1, 2023, and borrowers are now expected to make required payments when due.

So the Covid-19 student loan forbearance will not be extended, and the Biden administration’s one-time student loan forgiveness plan under the HEROES Act will not take effect. The Supreme Court rejected Biden’s broad debt relief plan in June 2023, finding the HEROES Act did not authorize the program.

Although the Covid-19 forbearance will not be extended under the HEROES Act, the Biden administration has implemented temporary “on-ramp” protections.

If you’re covered by the on-ramp, you’re protected from having your federal student loans reported as delinquent or placed in default from October 2023 through September 2024. But federal student loan interest will still accrue during the on-ramp, so failing to pay may increase your student debt burden.


💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

How to Extend or Pause Student Loan Payments in General

If you’re concerned about your ability to resume student loan payments beyond the temporary on-ramp protection, consider talking to your student loan servicer about:

•   General student loan forbearance

•   General student loan deferment

•   An income-driven repayment plan

•   Public Service Loan Forgiveness program

Income-Driven Repayment (IDR)

Based on your income and family size, an IDR plan can set your student loan payments at an affordable repayment amount per month for you. There are four plans, which last for a certain number of years and forgive any remaining balance after that:

•   Saving on a Valuable Education (SAVE) Plan

•   Pay As You Earn (PAYE) Plan

•   Income-Based Repayment Plan

•   Income-Contingent Repayment Plan

The SAVE Plan replaced the former REPAYE Plan in July 2023. If you were enrolled in the REPAYE Plan at that time, you’ve been automatically enrolled in the SAVE Plan.

The SAVE Plan can give you a $0 monthly payment if your income is within 225% of the federal poverty guideline (or less than $32,805 for a single borrower and $67,500 for a family of four in 2023).

Another benefit to the SAVE Plan is that your loan balance won’t grow over time if your monthly payment amount is less than the interest accruing.

Refinancing

It’s possible to consolidate both federal and private student loans into one new loan when you refinance your student loans with a private lender. If an applicant qualifies for a lower interest rate and a shorter term, it could reduce the amount of money paid in interest over the life of the loan. You may pay more interest over the life of the loan if you refinance with an extended term.


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

Take control of your student loans.
Ditch student loan debt for good.

Alternative Student Loan Financing Options

As you’re thinking about college funding, keep this in mind: You can choose from a number of college financing options, including scholarships, grants, and private student loans:

•   Scholarships. Scholarships are awarded based on merit or need, and students do not need to repay them. Students can get scholarships through businesses, colleges, and other organizations. There are online scholarship search tools that can help you find opportunities you might be eligible for.

•   Direct PLUS Loans. Direct PLUS Loans can help graduate or professional students pay for college. They can also help parents of dependent undergraduate students pay for their child’s college education. You might want to consider a parent PLUS loan refi to a lower rate if you’re repaying a PLUS loan.

•   Grants. Students can get grants from states, the federal government, a public body, and/or other organizations to pay for college.

•   Private student loans. Private student loans are given by commercial lenders, not the U.S. Department of Education. Unlike most federal student loans, you will undergo a credit check and possibly have to get a cosigner to sign on the loan with you.

The Takeaway

The Covid-19 forbearance is no longer in effect and won’t be extended under the HEROES Act. This means federal student loan borrowers are generally expected to make required loan payments when due. (A temporary on-ramp protection from October 2023 through September 2024 may protect you from typical delinquency impacts, but it won’t stop your interest from accruing.)

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


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

FAQ

How do I know when my student loan payments will resume?

Federal student loan payments resumed in October 2023. You may receive billing statements from your federal loan servicer going forward.

What does student loan forbearance mean?

Forbearance means a borrower can temporarily suspend making loan payments during an approved period. There are two main types of forbearance for federal student loans: general and mandatory. This does not include the former Covid-19 forbearance, which ended as required under the bipartisan Fiscal Responsibility Act of 2023.

What are income-driven repayment plans?

An alternative to forbearance, income-driven repayment plans can set your monthly loan payments at an affordable amount for you. There are four plans. Each lasts a certain number of years and forgives any remaining balance after that. Beginning in July 2024, borrowers with original principal balances of less than $12,000 can have their remaining loan balance forgiven after 10 years of monthly qualifying payments under the SAVE Plan.

About the author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.


Photo credit: iStock/Andrea Migliarini

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. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

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Apr
16
2025
Guide to Student Loan Cash-Out Refinance

Guide to Paying Off Student Loans with a Cash-Out Refinance

By | Fresh Out of School, Student Loans, student_loan | Comments Off on Guide to Paying Off Student Loans with a Cash-Out Refinance

If you are feeling the weight of your student loans, you are not alone. Student debt is currently the second largest kind of debt in the US after mortgages, and it can feel as if it’s taking a very long time to pay it off. Some borrowers find that a cash-out refinance, which allows you to tap into the equity in your home and receive cash back at closing, can be a good move. In some cases, it may allow for payment terms that better suit your budget and needs.

However, a student loan cash-out refinance isn’t the right choice for everyone. It can be helpful to weigh the pros and cons to help you decide if it makes sense for your personal financial situation. Read on to learn the definition of refinancing student loans, what a cash-out refinance is, and what the upsides and downsides are.

Refinancing to Pay Off Student Loans

Before considering a cash-out refinance, let’s review what refinancing is. Typically, student loan refinancing means that a lender pays off your existing loans with a new student loan ideally at a lower interest rate, which can save you money over time.

If you have some type of federal student loans, you can only refinance with a private lender, which means losing certain federal student loan benefits and protections, such as income-driven repayment and forgiveness plans.
Also, it’s important to note that if you refinance for an extended term, you may well pay more interest over the life of the loan, even if your monthly payment is lower.

Calculate paying off your student loan before you decide whether this method makes sense for you.

Next, consider a different option. If you are a homeowner, you might look into a cash-out home refinance. This is a very different financial arrangement than a student loan refinance. When you complete a cash-out refinance, you are refinancing a home loan to tap the equity in your home and then use the funds to pay down or off your student loans.


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

What Is a Student Loan Cash-Out Refinance?

Here’s a closer look at the last option mentioned above, which can be a good path for some borrowers. If you own a home and have student loan debt, you can roll your student loan into your mortgage using a student loan cash-out refinance.

Here’s how cash-out refinance works: You get a mortgage loan that allows you to tap into your home’s equity to pay off your student loan debt. You consolidate your mortgage loan and your student debt. You also get a lump sum of money upon closing, which comes out of your home’s equity, and can be put toward your student loan debt.

If your home is valued at $450,000 and you have a $300,000 mortgage and over $50,000 in student loan debt, you might take out a cash-out refinance loan for $350,000 and get $50,000 to pay off your student loans. You would then have eliminated that educational debt, but now owe more against the value of your home.

Some notes:

•   To qualify, you typically must have a credit score (a number that indicates how likely you are to pay back a loan on time) of at least 620 to get a mortgage that isn’t from a government agency.

•   You also generally need to have a debt-to-income ratio (DTI) of under 43%, which refers to your monthly debt payment compared to your monthly gross income.

•   You’ll also need at least 20% of equity in your home in order to take advantage of a cash-out refinance.
Your lender pays off your first mortgage, which results in a new mortgage loan, which probably has different terms than your original loan (a different type of loan and/or a different interest rate).

How Cash-Out Refinance Works for Student Loans

Typically, you can borrow up to 80% of your home’s equity. Equity refers to the difference between the current value of your home and the amount of money you owe on your mortgage.

To get a student loan cash-out refinance, you can prequalify and choose the right mortgage refinancing option for you. Your lender will detail the interest rate and monthly payments that fit your goals.

Once your application has been approved, you’ll sign your paperwork. Your lender will pay off your student loan at closing by sending the cash to your student loan servicer to take care of your student loan debt.

Taking out money for a cash-out refinance means you just move debt from one location to another. Ultimately, you still have to pay off that debt — it just takes a different form.

Recommended: Cash-Out Refinance vs HELOC

Pros of Cash-Out Refinance for Student Loans

Why might you want to use a cash-out refinance to pay off student loans? Here are some of the reasons why it might be a good choice.

•   You could get a better interest rate. Before you refinance, you want to make sure you’re getting a lower interest rate than your current student loan interest rate and your current mortgage interest rate.

Calculating the new interest amount will tell you whether you’ll save money. (You’ll also want to figure in any fees.) If you lengthen your loan term along with your cash-out refinance, you may lower your monthly payments but pay more interest over the long run.

•   You may tap into tax deductions. The interest you pay on student loans and your mortgage are both typically tax-deductible. However, you’ll have to itemize deductions if you choose a cash-out refinance with your mortgage.

You can take either the standard deduction or itemize deductions on your taxes. If your allowable itemized deductions are greater than your standard deduction or you cannot use the standard deduction, you can itemize. However, it’s important to note that the new larger standard deduction means you may want to consider whether it makes sense to itemize.

In tax year 2023 (meaning taxes filed by April 2024), the standard deduction for married couples filing jointly is $27,700. For single taxpayers and married individuals filing separately, the standard deduction is $13,850. For heads of households, the standard deduction is $20,800.

•   You no longer have to make two payments. Instead of making both a mortgage payment and a student loan payment, you would make one payment. This can simplify your financial life and help you stay on top of your payments.


💡 Quick Tip: If you have student loans with variable rates, you may want to consider refinancing to lock in a fixed rate before rates rise. But if you’re willing to take a risk to potentially save on interest — and will be able to pay off your student loans quickly — you might consider a variable rate.

Cons of Cash-Out Refinance for Student Loans

It’s important to consider the downsides of cash-out refinancing for student loans as well.

•   You give up certain borrower protections. Refinancing a federal student loan via a cash-out refinance means you forfeit certain borrower protections that come with federal loans, such as income-based repayment plans, loan forgiveness, and other options through the Department of Education.

•   You turn unsecured debt into secured debt. Student loans don’t require any collateral. However, your mortgage does, which means that you turn what was once unsecured debt into secured debt. If you stop making your mortgage payments, you could lose your home to foreclosure.

•   You’ll pay closing fees. You’ll pay closing costs to refinance a mortgage, which can include title fees, appraisal fees, settlement fees, recording fees, land surveys, and transfer tax. The amount you’ll pay depends on your mortgage, the terms, and your state. They can be 3% to 5% of the loan’s value. You’ll want to consider whether these fees are worth what you’ll gain by refinancing.

When to Execute a Student Loan Cash-Out Refinance

It can be hard to decide when to refinance your student loans. This option may make sense for you if you:

•   Know you’ll save money in the long run: It’s important to fully understand how a student loan cash-out refinance works. If you’ve calculated your new loan amount and know you’ll save money after streamlining your debt, you could be a good candidate for a student loan cash-out refinance.

A new repayment term over a longer period may seem like a great deal because you’re lowering your monthly payments, but you’ll pay more in interest over your loan term. You may also pay more in interest due to the higher loan amount which might give you higher potential fees and expenses.

•   Have a plan to tackle your debt after refinancing: It’s important to be sure that you’ll be able to make your mortgage payments every month.

•   Want just one payment: Having just one loan with a longer repayment term means you simplify your debt. This way, you don’t have to keep track of multiple payments every month.

Finally, you may want to go through with a student loan cash-out refinance if you know for sure that you won’t need or be eligible for federal student loan repayment programs, forgiveness options, or other benefits, and have a plan to tackle debt. It’s a good idea to envision your top priorities — whether you want to save money, prefer just one payment, or would like to lower your monthly payments — or prefer all three benefits!

There are other reasons you may consider getting a cash-out refinance to pay off student loans, but this list gives you a jump start.

Refinancing Your Student Loans With SoFi

Considering cash-out refinancing or student-loan refinancing. SoFi offers both.

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

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

FAQ

How long does underwriting take for cash-out refinance?

Refinancing a mortgage typically takes 30 to 45 days but can take up to 90 days, depending on how quickly you provide information to your lender, the complexity of the loan, and your lender or broker. Often, the faster you provide documentation, the quicker your lender can underwrite and process your loan.

How do you get your money from a cash-out refinance?

Upon closing, you get a lump sum from your lender when you get a cash-out refinance. The loan proceeds pay off your existing mortgage(s), including closing costs and any prepaid items. You can do what you want with the remaining funds.

Do you pay closing costs on a cash-out refinance?

Yes, you’ll pay closing costs to refinance a mortgage. The amount you’ll pay depends on a variety of factors but is typically 3% to 5% of the loan amount. It’s a good idea to consider how long it’ll take you to recoup your closing costs after refinancing.

About the author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.


Photo credit: iStock/FatCamera

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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


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

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.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Apr
16
2025

Will I Lose My Tax Refund to Student Loans?

By | Fresh Out of School, Student Loans, student_loan | Comments Off on Will I Lose My Tax Refund to Student Loans?

If you’re delinquent on your student loans, you may experience garnishment if your student loan debt is with a state or federal government or part of a federally insured student loan program. (Garnishment means withholding a tax refund by automatically sending it to your loan servicer to repay a defaulted loan.) Private creditors may also collect your tax refund to repay your student loan debt.

Obviously, garnishment is a difficult situation. Read on to learn more about your alternatives if you are potentially dealing with this scenario.

Can Student Loans Garnish My Tax Refund?

If your loans came from a state or federal student loan program, the federal government may garnish up to 100% of your tax refund if you’re in default repaying your loans. Default is defined as the failure to repay a student loan according to the terms of your promissory note.

You’re considered to be in default if you haven’t made a payment in more than 270 days. You may also experience legal consequences and will lose eligibility for more federal student aid.

However, it’s worth noting that if you are just 90 days or more behind on your payments, you are still considered to be delinquent in your payments. The three major credit bureaus (Equifax®, Experian®, TransUnion®) will likely be alerted. This information may possibly lower your credit score.

Also, only federal loans in default can result in tax refund garnishment, not private student loans, though your servicer might take other steps to get the funds they are owed.



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

Options for Managing Student Loans

Fortunately, you may be able to avoid default and avoid worrying about the government garnishing your refund. You can head off tax refund garnishment using a few different methods.

It can be wise to talk with your student loan servicer about all your available options. They can help you identify the right repayment strategy for your unique situation. If you have private student loans, you can also talk to your provider to determine the right course of action.

That said, here are a few options to consider:

SAVE Plan

The Saving on a Valuable Education (SAVE) Plan, which replaced the Revised Pay As You Earn (REPAYE) Plan, offers a potential alternative to tax refund garnishment of federal student loans. The SAVE Plan is an income-driven payment plan that lowers your federal student loan payments, taking your income and family size into account to determine your monthly payment.

The plan determines your payment based on your discretionary income, or the difference between your adjusted gross income and 225% of the U.S. Department of Health and Human Services Poverty Guideline amount for your family size.

The SAVE Plan eliminates monthly interest for both subsidized and unsubsidized federal student loans if you make your full monthly payment due. The government covers your monthly interest, meaning your loan balance won’t grow due to accrued unpaid interest.

Under the original SAVE Plan, if you initially borrowed $12,000 or less, after as few as 10 years, your loans would be forgiven (meaning you wouldn’t have to continue to repay your loans after you satisfy all the requirements and guidelines of the plan).

However, it’s important to note that two U.S. district judges (one in Kansas, the other in Missouri) recently placed an injunction on the next phase of the SAVE program and blocked it from providing additional loan forgiveness. The next phase of the SAVE program was scheduled to take effect on July 1, 2024. This is a still evolving situation as of this article’s publication date and one to monitor carefully.

Recommended: Can Student Loans Be Discharged?

Offer in Compromise

You can also take a different tack and work directly with the IRS (Internal Revenue Service) to avoid wage garnishment instead of approaching your student loan servicer. An Offer in Compromise (OIC) may also help your situation.

In an OIC, you pay the IRS less than your total tax debt if you owe the IRS more back taxes than you can afford to repay. If the IRS accepts your OIC, you must meet all the terms of your offer agreement — the IRS will only release your federal tax liens and levies once you fulfill those obligations.

You can fill out the OIC prequalifier tool to learn about your eligibility for an OIC.

Federal Student Loan On-Ramp

Most federal student loan borrowers began federal student loan repayment in October 2023 after the payment pause ended.

To ease borrowers into repayment, the Department of Education created an “on-ramp” period through Sept. 30, 2024, which prevents borrowers from suffering the worst consequences of missed, late, or partial payments, such as:

•   Being considered delinquent (meaning your loan payments are 90 days or more late)

•   Reports of delinquency to credit scoring companies

•   Loans going into default

Note that interest will still accrue, and not making payments means you’ll owe more money on your student loans over time. Your loan servicer may eventually have to increase your monthly payment to ensure you pay your loans off on time.

Also be aware that you can only qualify for the on-ramp if your loans were eligible for the payment pause. You don’t have to do anything to enroll in the on-ramp period.

The Takeaway

If you are not up to date on repaying your student loans, you could be in a situation in which your loan servicer can garnish, or directly take, a tax refund that was heading your way. If this could happen to you, it may be time to consider other options, such as the SAVE Plan, an “offer in compromise” with the IRS, the federal student loan on-ramp option, or another alternative. Talking to your loan servicer can be a smart move, whether you have federal or private loans.

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


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

FAQ

Will student loans affect my tax refund?

If you continue to repay your federal student loans on time and in full, you won’t suffer any consequences to your tax refund. It’s only when your federal loans go into default (meaning they are 270 days or more late in terms of payment) that the government may garnish your tax refund to satisfy student loan debt repayment.

Can my spouse’s tax refund be garnished for my student loans?

A refund from a joint tax return with your spouse may be subject to tax refund garnishment, even though your spouse isn’t liable for your loan default. Your spouse may qualify to reclaim their portion of the refund by filing IRS Form 8379. Check with your tax preparer or search online for more information and details.

What happens if my student loans are in default?

Your federal student loans are considered in default if you don’t make your scheduled payments for at least 270 days. “Default” for private loans may be longer or shorter than the 270 days — ask your service provider for details. The consequences of defaulting on federal loans can include the entire unpaid loan balance and interest becoming due in a process called “acceleration,” lost eligibility for more federal student aid, no eligibility for deferment or forbearance, and lost ability to choose a repayment plan. Your credit score could be negatively impacted, and your wages or tax refund could be garnished.

About the author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.


Photo credit: iStock/MTStock Studio

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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


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

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.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.


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.

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Apr
16
2025
Refinancing Associate Degree Student Loans

How to Pay for an Associate Degree

By | Fresh Out of School, Student Loans | Comments Off on How to Pay for an Associate Degree

An associate degree is a two-year course of study often offered by a community college or junior college. You can get one of four types of associate degrees: AA (associate of arts), AS (associate of science), AAA (associate of applied arts), and AAS (associate of applied science).

Paying for an associate degree doesn’t have to be complicated. Here’s what to know about the options.

What Is an Associate Degree?

Associate degree programs can include a wide variety of course degrees, including general education coursework and job training. Many associate degrees require students to complete about 60 credits.

Based on the Bureau of Labor Statistics (BLS), workers with an associate degree had median weekly earnings of $1,002 in 2023 compared with $905 for workers with a high school diploma.

Recommended: Can You Refinance Student Loans Without a Degree?

How to Pay for an Associate Degree

There are several ways to pay for an associate degree. Many students use a combination of job income, savings, and federal financial aid. You must file the Free Application for Federal Student Aid (FAFSA) in order to qualify for federal aid and many scholarships and grants. Keep in mind that if you’re working while going to school, you must maintain at least half-time status (about 6 credit hours per semester) to be eligible for federal aid.

Scholarships and grants are award money that you don’t have to repay. Grants are usually need-based, while scholarships are awarded based on academics, extracurricular activities, major, and other merit factors.

You can apply for both federal and private student loans for associate degrees. Federal student loans are loans that come from the federal government. You do have to repay student loans after you leave school, even if you don’t finish your degree.

You may also want to apply for private student loans if the aid you receive won’t be enough to cover your expenses for the semester or for the year. It’s generally recommended that you exhaust all of your federal loan options before looking into private student loans, which aren’t backed by the federal government. Here’s an overview of applying for both federal aid and private student loans for associate degrees.

Step 1: File the Free Application for Federal Student Aid (FAFSA).

In order to qualify for federal student aid (aid from the federal government), you must file the FAFSA and fill in the school code for the school or schools on your list. You’ll have to fill out the FAFSA every year prior to the start of a new school year.

Recommended: FAFSA Guide

Step 2: Review your Student Aid Report (SAR).

The financial aid office at the school you’re considering will receive your FAFSA information to determine your eligibility for federal and state aid. You and the college will both receive a Student Aid Report (SAR), which is a paper or electronic document that offers basic information about your eligibility for federal student aid. It also lists your answers on the FAFSA.

Step 3: Look over your financial aid award.

You’ll receive a financial aid package after you provide the college with all the necessary documentation. You will likely receive a financial aid award package via email, which will detail the scholarships, grants, work-study, and loans that your school will give you. You’ll then have to accept or decline the aid you receive from the college. If you’re awarded federal student loans, you can decline all or part of those loans.

You’ll also need to complete entrance counseling and the Master Promissory Note at the Federal Student Aid website.

Step 4: Evaluate your need for private student loans.

Do you need more coverage? You may need to apply for private student loans to cover the costs of your degree. This means shopping around for a private student loan lender that fits your needs. Find out if your school offers a lender list, and be sure to compare:

•  Interest rates

•  Student loan fees (like origination fees)

•  Repayment options

•  Whether you’ll need a cosigner. You may require a cosigner if you don’t have a credit history. A parent, relative, or any other creditworthy individual can cosign with you to boost your chances of getting a student loan.

Paying Off Student Loans for an Associate Degree

What are your options for paying off student loans? Here are some of the repayment paths to consider.

Job Income

Ideally, you’ll find a job directly related to your associate degree. You can set up automatic deductions from your bank account so you won’t need to worry about missing a payment. Contact your student loan servicer if you’d like to set up automatic deductions.

One way to pay off your loans faster is to pay more than the minimum monthly amount. This will also help you save on the interest that will accrue on your loans, because you’re paying them down faster. You can also save up and pay off a lump sum.

Start Early

You don’t need to wait to graduate to start paying off your student loans. You can start paying off your student loans early, while you’re still in school. This is a great way to save on the interest that could accrue on your loans in the future and help you pay your loans off faster.

It’s a good idea to have a plan in place if you want to start paying them off early (an online budgeting tool may help). Even little amounts can make a difference over the long run.

Use Tax Deductions

Some tax deductions can often be a big help and student loan tax deductions are no exception. You can get a student loan interest deduction when filing your taxes when you pay at least $600 in qualified student loan interest. Your lender will send you IRS Form 1098-E, the Student Loan Interest Statement. You’ll be able to save money on your taxes as long as you have student loan interest to deduct.

Apply for Loan Forgiveness

It’s important to note that you can only qualify for student loan forgiveness through federal student loans. For example, you may want to qualify for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program. If you work for a government or not-for-profit organization, PSLF forgives the remaining balance on your Direct Loans after you have made 120 monthly payments under a repayment plan as a full-time employee.

If you have Direct Loans or FFEL Program loans, you may be able to take advantage of the Teacher Loan Forgiveness program. In this case, you must teach full-time for five complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency. You can qualify for up to $17,500 on your Direct Loan or FFEL Program loans.

Contact your loan servicer if you think you qualify for one of these programs and take a look at other cancellation or discharge programs you might qualify for.

Refinancing Student Loans

When refinancing associate degree loans, a lender pays off your current loan or loans and gives you a new loan with new terms, ideally at a lower interest rate. Refinancing can help you save money over the life of your loan.

Note that having a good credit score is key to refinancing your student loans. Your credit score is a three-digit number that summarizes how well you pay back your debts. A private lender will also take your credit utilization into account, which reveals how much of your available credit you actually use. Having a high credit score and low utilization ratio can help you get the best rates possible.

If you’re thinking about refinancing associate degree loans, it’s important to understand that you can’t refinance a federal student loan into a new federal student loan — all refinances become private student loans. This also means that you give up the possibility of qualifying for forgiveness, cancellation, and discharge through the federal government, as well as deferment or forbearance options.

Refinancing Student Loans With SoFi

Refinancing student loans can be a great way to save money over the life of the loan if you’re able to refinance at a lower interest rate and you don’t plan to use federal programs. As a reminder, if you refinance a federal loan, you’ll lose access to federal benefits and protections.

If you’re considering refinancing, SoFi offers competitive rates, no origination fee, and unemployment protection. You can also talk to a representative who can walk you through the process.

Find out if SoFi student loan refinancing is right for you.

FAQ

How much are student loans for an associate degree?

Federal and private student loan lenders may charge a variety of fees for associate degree student loans, including origination fees, late payment fees, and returned check fees. However, some lenders don’t charge any of these fees at all. It’s a good idea to do a side-by-side comparison of all costs before you choose one lender over another.

Does FAFSA cover associate degrees?

Yes, you can tap into federal student aid options to pay for associate degrees. You must file the FAFSA and send the information to the schools on your list that you’re considering to complete your associate degree. You may qualify for a combination of federal student loans, grants, and work-study for student loans for an associate degree. One of the best things you can do is to talk through the details with a financial aid professional at the college you plan to attend.

Can you refinance after your associate degree?

Yes, you can refinance associate degree student loans after you obtain your associate degree. You’ll want to determine whether you can get a better interest rate and/or pay your loans off faster with a refinance. However, note that you’ll lose access to federal loan benefits and protections when you refinance. Federal programs such as forgiveness and income-driven repayment do not apply to private student loans.

About the author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.


Photo credit: iStock/SolStock

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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