SoFi

If you’re juggling a car loan and student loans, you might be wondering which debt to prioritize. While it’s important to keep up with minimum payments on all your loans, making extra payments on one of these types may help you save money on interest.

The decision of whether to pay off car or student loans first ultimately depends on your personal financial situation, but the considerations in this guide can help you determine which path is best for you.

Understanding Your Debt Types

First, it’s important to understand the difference between student loans and car loans. Student loans may be federal or private, and they might come with fixed or variable interest rates. They’re unsecured loans, meaning they’re not backed by collateral.

Federal student loans qualify for various benefits and plans that can help lower student loan payments, such as income-driven repayment, as well as programs to temporarily pause payments if needed, like deferment and forbearance. Federal student loans are also eligible for forgiveness programs such as Public Service Loan Forgiveness.

Private student loans don’t have as many benefits as federal loans, but some private lenders will let you modify or postpone payments if you run into financial hardship. You might also explore refinancing student loans to see if you can qualify for a lower interest rate or more favorable terms that might help make your payments more manageable.

Car loans, on the other hand, typically have fixed interest rates and they are secured by your vehicle. If you fall behind on car loan payments, a lender can repossess your car. Car loans commonly have repayment terms of 36 to 84 months.

Unlike student loans, auto loans don’t usually offer much flexibility if you’re having trouble making payments. And car loan payments can be costly — the average car payment in 2024 is $734 a month. By comparison, the average student loan payment is estimated to be about $500 when adjusted for inflation in 2024, according to the Education Data Initiative.

Factors to Consider When Prioritizing Debt

There are several things to think about when deciding whether to pay car or student loans first. Some of the main considerations include your loan’s interest rate, tax implications, and repayment terms.

Interest Rates and Total Costs

It typically makes sense to pay off the loan with the highest cost of borrowing first. This usually means the loan with the highest interest rate. If your student loan has a rate of 5.00%, and your car loan has a rate of 10.00%, paying off the car loan would save you more money in the long run.

Along with the interest rate, consider whether the loan carries any other fees, such as a prepayment penalty. Student loans don’t charge penalties for prepayment, but a car loan might. Compare each loan’s annual percentage rate (APR), as this figure takes both interest and fees into account.

Tax Implications and Deductions

Another factor has to do with tax deductions. The student loan interest deduction allows you to deduct up to $2,500 a year in student loan interest from your taxable income, depending on your modified adjusted gross income (MAGI). At certain income limits, student loan tax deduction phase-outs begin. In 2024, if your MAGI is less than $80,000 a year if you’re a single filer, and $165,000 if you’re married and filing jointly, you can qualify for the full deduction. If you earn between $80,000 and $95,000 ($165,000 and $195,000 if married filing jointly), you can make a partial deduction.

Car loans don’t qualify for a tax deduction on interest unless you are self-employed or a business owner and use the vehicle for business.

Loan Terms and Repayment Periods

Student loans tend to have more flexible repayment terms than car loans. Federal student loan borrowers are eligible for various repayment plans, including the Standard plan, which spans 10 years, and the Extended plan, which is 25 years.

Federal loans are also eligible for income-driven repayment (IDR), which adjusts your monthly payments in accordance with your income and might eventually lead to loan forgiveness. Plus, you may qualify to postpone payments through deferment or forbearance if you go back to school or lose your job.

Car loans don’t qualify for many options. You’ll often choose a repayment term of three to seven years and be expected to pay monthly on your agreed-upon rates and terms. If you can’t make payments, the lender can repossess your vehicle.

Benefits of Paying Off Car Loans First

Paying off a car loan before your student loan can have several advantages, especially since car loans don’t have as much repayment flexibility or offer any tax benefits for vehicles that are strictly for personal use. Here are some reasons to consider prioritizing your car loan over your student loans.

Eliminating Secured Debt

Defaulting on a car loan could lead to losing your car. The sooner you can pay off your secured car loan, the sooner you’ll own your car outright and you won’t have to worry about the possibility of car repossession.

Potential Savings on Interest

Car loans may come with higher interest rates than student loans, so paying off the auto loan first could lead to more savings. Let’s say, for example, that you owe $15,000 on a car loan at a 10.00% rate and a $15,000 student loan at a 5.00% rate, and that both loans have five years left on their repayment.

If you put an extra $100 per month toward your car loan, you’d save $1,232 on interest and get out of debt nearly a year and a half sooner. If you put that extra $100 toward your student loans, you’d also get out of debt about a year and a half sooner but you would save just $574 in interest charges. Our student loan payoff calculator can help you crunch the numbers on your student debt.

You could also consider refinancing your car loan for a better rate to help save on interest. This option might be worth exploring if interest rates are lower now than when you originally took out the loan.

Building Equity in Your Vehicle

The faster you pay down your car loan, the more equity you’ll hold in your vehicle. That means you’ll own more of your car outright, which could come in handy if you ever want to sell it. Plus, you’ll be less likely to end up underwater on your car loan, which can happen when the debt you owe on your vehicle exceeds what the vehicle is worth.

Advantages of Prioritizing Student Loans

Although it often makes sense to prepay a car loan before a student loan, there are certain advantages to paying off student loans first. Here are some scenarios where you could benefit from prepaying your education debt:

•   Your student loans have a variable rate: Some private student loans have a variable rate that can increase and make your borrowing costs unpredictable. If you’ve been dealing with a rising variable rate, you may want to pay off those loans as quickly as you can. You might also explore refinancing those loans, which could allow you to switch to a fixed (and potentially lower) interest rate.

•   You’re not using income-driven repayment or loan forgiveness: Federal student loans come with a variety of borrower protections, but you may not require any of them for managing your student loan debt. If you don’t need an IDR plan and you aren’t pursuing loan forgiveness, for instance, you might focus on paying off your federal loan debt.

•   You’re considering filing for bankruptcy: If you’re in dire financial straits, you might be looking into potentially erasing or restructuring your debts through bankruptcy. Although it’s possible to discharge student loans in bankruptcy, the process is notoriously difficult. It may be easier to discharge a car loan through bankruptcy than a student loan.

Develop a Debt Repayment Strategy

Once you’ve decided which loans to pay off first, it’s important to develop a strategy for repayment. Here are some steps to take.

Create a Budget and Debt Snowball

Start with making a budget so you have a clear sense of your income and expenses. Track your spending, and look for areas where you could cut back. By reducing your spending, you might find room in your budget to direct extra payments toward your debt.

There are debt pay-off strategies that can help. For example, with the debt snowball method, you pay off the loan with the smallest balance first. Then you work on paying off the next smallest loan and so on. The debt avalanche, in contrast, targets the loan with the highest interest rate first, and then the loan with the next highest interest rate, and it can save you the most money in the long run.

The debt snowball may not save you as much money as the debt avalanche, but it can be psychologically rewarding to pay off a debt in full before moving onto the next one.

Seek Additional Income Sources

After budgeting and cutting down on spending, you might explore ways to increase your income. This could mean going for a promotion and raise at work or finding a new job. You could also consider taking on a side hustle, such as driving for a ride-sharing service or doing freelance tutoring.

By setting up additional income streams, you’ll have more cash to put toward your loans and get out of debt faster.

Negotiate with Lenders

If you’re looking to modify payments or adjust your interest rate, try negotiating directly with your lender. Notify the lender that you’re having difficulty repaying the loan and see if they might be willing to work with you. Depending on the type of loan it is, the lender might offer a repayment plan or reduce the loan interest rate, for instance. Although there’s no guarantee of success, it’s worth a try.

The Takeaway

While there’s no one-size-fits-all answer to whether you should pay off a car loan or a student loan first, paying off the loan with the highest interest rate can generally save you the most money. For many borrowers that may be their car loan.

If your student loans have high interest rates, you might consider student loan refinance. If you’re eligible for a lower rate, it may help make your payments more manageable. However, refinancing federal student loans makes them ineligible for federal benefits like income-driven repayment, so you’ll want to keep that in mind as you weigh your options.

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.

FAQ

Is it better to pay off higher interest debt first?

Paying off high-interest debt first usually makes the most financial sense, since it will save you more money in the long run. However, it’s important to keep up with the minimum payments on all your debts so you don’t end up in delinquency or default.

Can I deduct student loan interest on my taxes?

It depends on your income. The student loan interest deduction lets you deduct the interest you pay on student loans, up to $2,500 a year if your modified adjusted gross income (MAGI) is less than $80,000 for single filers and $165,000 if you’re married and filing jointly. If you earn between $80,000 and $95,000 ($165,000 and $195,000 if married filing jointly), you can make a partial deduction. Anything more than that and you cannot take the student loan interest deduction.

What happens if I default on my car loan or student loans?

A car loan is secured by your vehicle, and if you default on the loan, the lender can repossess your car. Student loans are unsecured, so a lender can’t take your personal property. However, the government can garnish your wages, tax refunds, and Social Security benefits if you default on a federal student loan. Defaulting on private and federal student loans can also damage your credit, and a private lender could potentially take you to court to try to collect the money.

Photo credit: iStock/damircudic

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.

SOSLR-Q324-022

The Health Education Assistance Loan (HEAL) program was created in 1978 to help medical students finance their degrees. The HEAL program worked by insuring loans made by participating lenders to help graduate students in various health care fields — including medicine, dentistry, and clinical psychology — cover the costs of their schooling.

HEAL loans are no longer available; the program was discontinued in 1998. However, there are a number of other ways medical students can finance a degree. In this guide, learn about options that can help borrowers cover the cost of medical school now, as well as what you should know if you’re still paying off HEAL student loan debt from years ago.

Overview of HEAL Student Loans

Getting a medical degree, which typically takes more than 10 years to earn, can be very expensive. The total average medical school debt of graduates is $243,483, according to the Education Data Initiative.

The cost of medical school continues to rise each year. For the class of 2024, four years of attendance at a public school is $276,006, while private school costs $374,476, according to the American Association of Medical Colleges.

Through the HEAL program, from 1978 to 1998, the U.S. Department of Health and Human Services insured loans made by lenders to graduate students in the health care field to help them pay for medical school. The loans were insured by the federal government against loss due to borrowers’ death, disability, bankruptcy, or default. The program was meant to ensure that funds would be available to future students who needed them.

Key Features of HEAL Student Loans

With HEAL loans, eligible students could borrow up to $80,000 to help pay their medical education costs. Interest accrued and compounded on the loans while the student was in school and during the nine-month grace period allowed by these loans afterward.

HEAL loans typically had variable compounding interest rates, though lenders could offer fixed rates if they chose. With compounding interest, interest is added to the loan balance, and future interest is calculated on the new higher balance.

Borrowers could take up to 33 years to repay their HEAL loans. Because of the long repayment term, HEAL borrowers may still be paying off their loans.

End of the HEAL Program and Current Status

The HEAL program ended on September 30, 1998. In 2014, outstanding HEAL loans were transferred from the U.S. Department of Health and Human Services to the Department of Education. Even though the program ended, borrowers who have outstanding HEAL loans must still repay them.

To simplify the payment process, borrowers who have more than one HEAL loan can consider consolidating their loans into a federal Direct Consolidation loan. Through this process, you pay off your old loans with one new Direct Consolidation loan. Under the new loan, you have one monthly payment. You may also qualify for federal benefits, like income-driven repayment.

If you’re struggling to make your HEAL payments, contact your student loan servicer. Defaulting on HEAL loans has serious repercussions. A borrower’s account can be sent to collections or they can be taken to court, among other consequences. HEAL loans are exempt from statute of limitation laws, so theoretically, a lender can indefinitely pursue a borrower who is in default to try to collect on the loans.

If you’re currently in default on your HEAL loans, contact the Department of Education’s HEAL Program Team at [email protected].

HEAL Loans vs. Current Federal Student Loans

While HEAL loans are no longer available, there are other types of student loans for health professionals, including federal student loans and private student loans.

Medical students can apply for federal financial aid by filling out the Free Application for Federal Student Aid (FAFSA). Although graduate students are not eligible for Direct subsidized loans, they may qualify for other types of federal loans. They can also apply for private student loans. Here’s more information on each loan type.

Direct unsubsidized loans. With these federal loans, medical students can borrow money unsubsidized. This means the borrower is responsible for paying all of the interest on the loan. The interest begins accruing immediately and continues to accrue while they’re in school. Certain medical graduates may take out up to $40,500 per academic year in Direct unsubsidized loans with an aggregate limit of up to $224,000.

Direct PLUS loans. Often called a graduate PLUS loan, the federal Direct PLUS loan covers the difference between the cost of attending school and any other sources of funding, including Direct unsubsidized loans. A credit check is required to get a Direct PLUS loan. These loans are also unsubsidized and they tend to have higher interest rates than Direct unsubsidized loans.

HRSA loans. The Health Resources and Services Administration (HRSA), an agency of the U.S. Department of Health and Human Services, offers loan programs to some schools; these institutions then offer several different types of low-interest loans to qualifying students in need who are pursuing certain health care degrees. Check with your school to see if they offer HRSA loans and whether you are eligible.

Private student loans. Students can supplement federal student loans with private loans to help pay for medical school. These loans are available from banks, credit unions, and online lenders. Private loans may have fixed or variable interest rates, and the interest rate you’re offered will depend in part on your credit history. If the rate you end up with is higher than you hoped for, you could choose to refinance medical school loans later on if you can qualify for a lower rate or more favorable terms.

Private loans typically don’t offer the same benefits as federal student loans, such as income-driven repayment plans and Public Service Loan Forgiveness. For that reason, students may wish to explore other forms of funding first.

The Takeaway

The HEAL Loan Program ended in 1998, but some medical professionals may still be repaying their HEAL loans. If you have outstanding HEAL loans, you might be able to consolidate them into a federal Direct Consolidation loan and potentially qualify for an income-driven repayment plan, which could make repayment easier. Check with your loan servicer for more information.

Current medical students have a variety of funding options today that could help cover the cost of school, including federal loans and private loans. Explore the different alternatives to decide which type of financing is best for you, and remember that it’s possible to refinance student loans in the future once your medical career is underway.

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.

FAQ

Can I still apply for a HEAL loan?

The HEAL program ended in 1998, and these loans are no longer available. However, there are other federal student loans for medical students, including Direct unsubsidized loans, Direct PLUS loans, and HRSA loans through the Health Resources and Services Administration. In addition, there are private student loans for those studying to become medical professionals.

Can HEAL loans be consolidated with other student loans?

Yes, you can consolidate HEAL loans with other federal student loans, including Direct unsubsidized loans, Direct PLUS loans, and Federal Family Education Loans (FFEL), into a Direct consolidation loan. This may allow you to take advantage of income-driven repayment plans and potentially, student loan forgiveness.

What should I do if I’m struggling to repay my HEAL loan?

Contact your loan servicer right away if you’re having trouble repaying your HEAL loan. The servicer can explain your payment options. Whatever you do, avoid missing payments. If you default on HEAL loans, the consequences can be serious. Your account can be sent to collections or you can be taken to court, among other repercussions. If you’re already in default, contact the Department of Education’s HEAL Program Team at [email protected].

Photo credit: iStock/FatCamera

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.

SOSLR-Q324-018

When you file the Free Application for Federal Student Aid (FAFSA), you’ll answer questions that will determine your status as a dependent or an independent student.

Most students under the age of 24 are considered dependent students. However, students in certain exceptional situations can apply for a dependency override for FAFSA from their school’s financial aid office. The override allows a student to be considered an independent student for financial aid purposes and to exclude parental information on the FAFSA form. This means that only the student’s income and assets will be reported on the FAFSA.

A dependency override can result in more financial aid for a student. Learn about the FAFSA dependency override, the criteria to qualify, and how to apply.

Understanding Dependency Status

A student’s dependency status determines the information they must report when filling out the FAFSA. As part of the steps to complete the FAFSA, dependent students include their parents’ information as well as their own information on the form. Independent students report only their own information on the FAFSA.

According to FAFSA requirements, a dependent student is someone who does not meet any of the criteria of an independent student.

Independent students must be at least one of following:

•   24 or older

•   Married

•   Graduate or professional student

•   Veteran

•   Member of the armed forces

•   An orphan

•   Ward of the court

•   In foster care

•   Someone with legal dependents other than a spouse

•   Emancipated minor

•   Homeless or at risk of becoming homeless

If you meet one or more of the conditions above you are considered an independent student and you’re not required to report information about your parents, including their income, on the FAFSA.

If you don’t meet any of the criteria, but you are unable to include your parents’ information on the FAFSA for very specific reasons, such as cases of abuse or neglect or a parent who is absent from your life or incarcerated, you can file for a FAFSA dependency override. In general, the requirements to qualify for an override are strict.

If you cannot get a dependency override, don’t be discouraged. There is other financial aid you may be eligible for through the FAFSA, including grants, scholarships, and federal student loans.

And keep this in mind: In the future, you can choose to refinance student loans if you can qualify for better rates and terms, which might help make it easier to repay your student loan debt. In other words, you have options.

Recommended: FAFSA Facts for Parents

Eligibility for Dependency Override

As mentioned, the criteria to determine eligibility for a FAFSA dependency override can be strict. That said, don’t be deterred from applying if you think you may qualify.

Qualifying Circumstances

A FAFSA dependency override might be granted to you by your school’s financial aid office if certain circumstances apply to your situation, including the following:

•   An abusive family environment, including sexual, physical, or mental abuse, or domestic violence

•   Abandonment or estrangement by your parents

•   Parents are incarcerated or institutionalized

•   Parents cannot be located

•   Parents are physically or mentally incapacitated

•   Parents are hospitalized for an extended period

What doesn’t qualify for dependency override? Circumstances that are not considered FAFSA dependency override qualifications include:

•   Parents who refuse to help pay for your education

•   Parents who are unwilling to provide information on the FAFSA

•   Parents who refuse to complete FAFSA verification

•   Parents who do not claim the student as a dependent on their taxes

•   Students who are self-supporting and live on their own

Recommended: FAFSA Guide

Documentation Required

Each school has different documentation requirements for the FAFSA dependency override, so it’s best to contact your school directly to find out exactly what’s needed. You may be asked to provide various types of documentation depending on your situation, including:

•   Parental incarceration information such as jail records and sentencing documents

•   Missing person’s reports or police reports for parents who can’t be located

•   Records from homeless shelters or homeless youth centers, and signed statements from counselors or teachers verifying that you’re experiencing homelessness

•   Police, court, medical, and child welfare records that indicate an abusive situation

It’s important to note that if you have been declared homeless or at risk of homelessness by a homeless youth Basic Center, an emergency shelter funded by the U.S. Department of Housing and Urban Development, or a school district homelessness liaison, you can qualify as an independent student without applying for a dependency override.

Likewise, if you were in foster care for even one day after the age of 13, you can also qualify as an independent student without applying for an override.

Applying for a Dependency Override

In addition to the FAFSA, your college or university will require you to submit additional information about your situation, including documents, letters, and proof that explains your situation as described above, to apply for a dependency override.

Here are the actions to take as well as some FAFSA tips:

On the FAFSA form, fill out Steps 1, 2, and 3. For Step 4, if you can’t provide parental information due to one of the qualifying circumstances above, leave the step blank and contact your school’s financial aid office immediately to explain your situation and find out how to proceed.

A financial aid officer will give you information about what’s required for the FAFSA dependency override, the documentation you need to provide, and a timeline of how long it might take for your application to be reviewed. Schools have up to 60 days after the student enrolls to make a decision.

It’s vital for students to contact their financial aid office about an override as soon as possible so as not to miss any deadlines for state or institutional aid. In some states and at some schools, the FAFSA must be fully completed in order to determine the student’s FAFSA amount and for students to be considered for these aid opportunities.

The Takeaway

A student may qualify for a FAFSA dependency override in certain situations such as having a parent who is incarcerated or incapacitated. The override allows students to exclude their parents’ information on the FAFSA form and helps determine the amount of financial aid they may receive from their school.

Dependency overrides have specific requirements and may be difficult to qualify for. If you are ineligible, the FAFSA can still help you access student aid, including federal student loans, grants and scholarships.

You can also take out private student loans to help pay for college. You could then refinance them later on if you can qualify for lower rates and better terms.

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.

FAQ

What are the reasons for a FAFSA dependency override?

A dependency override for FAFSA can help students in exceptional situations qualify as independent and report only their own financial information, and not their parents’, on the FAFSA form. Students who come from situations of abuse or abandonment, or whose parents are incarcerated, hospitalized for an extended time, or institutionalized, among other situations, may qualify.

How often can you request a dependency override?

Thanks to the FAFSA Simplification Act, which went into effect in the 2024-2025 academic award year, students who qualify for the dependency override no longer need to request or recertify their status each year unless their situation changes. Students must still submit the FAFSA each year, however.

Can the dependency override decision be appealed?

If you’re denied a dependency override, these decisions are final at many colleges and cannot be appealed. However, reach out to your school’s financial aid office to find out if it’s possible to appeal. If it is, get specific instructions from them about how to proceed.

Photo credit: iStock/shapecharge

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.

SOSLR-Q324-017

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.

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.

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.

Photo credit: iStock/urbazon

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.

SOSLR-Q324-014

If you’re married and struggling to pay off multiple debts, you might consider applying for a debt consolidation loan jointly with your spouse. This approach allows you to roll multiple loan payments into a single monthly payment, which can simplify your household finances, reduce stress, and potentially save money.

Depending on your — and your spouse’s — income and credit score, getting a debt consolidation for married couples could help you qualify for a lower rate and/or better terms compared to applying on your own. However, there are also some downsides to consolidating debt when you get married. Here’s what you need to know.

What Are Debt Consolidation Loans?

A debt consolidation loan allows you to combine your outstanding debt balances into one loan, leaving you with a single monthly payment. In other words, you take out a new loan and use the proceeds to pay off your existing debt.

You can use a debt consolidation loan to combine different types of debt, like credit cards, personal loans, and medical debt. It won’t erase your debts, but it can make things easier by simplifying your payments. If you can qualify for a debt consolidation loan with a lower interest than what you’re paying on your current debts, you could also save money.

Typically, debt consolidation loans are unsecured personal loans, meaning they don’t require collateral. However, some people choose to use secured loans, like a home equity loan, to consolidate debt. Either way, the goal is to reduce the complexity of managing multiple debts and, ideally, save on interest.

Benefits of Debt Consolidation for Married Couples

Debt consolidation offers several advantages for married couples looking to streamline their finances and reduce financial pressure. Here’s a look at the key benefits:

Simplified Financial Management

Managing multiple debts as a couple can be overwhelming, especially when you’re juggling other financial responsibilities like bills, savings, and investments. Consolidating your debts into one loan, and one monthly payment, can make it easier to stay on top of your monthly bills.

A simplified approach to paying off your combined debts can also reduce stress, make it easier to set (and stick to) a household budget, and enable you to work together to achieve your financial goals, whether it’s buying a home, building an emergency fund, or planning for retirement.

Potential for Lower Interest Rates

One of the reasons why many people consolidate debts is to save on interest. This not only saves you money over time but can also help you pay off your debt faster.

When you apply for a debt consolidation loan as a couple, the lender will use your combined income and credit profiles to determine if you qualify and, if so, what your interest rate will be. Applying with your spouse might help you qualify for a lower rate, especially if they have better credit than you. Reducing the overall interest rate on your combined debt can result in significant savings over time.

Recommended: Debt Payoff Guide

Types of Debt Consolidation Loans

There are several types of debt consolidation loans for married couples, each with its own benefits and drawbacks. The right choice will depend on your needs and financial situation.

Personal Loans

A personal loan is one of the most common forms of debt consolidation. These loans are typically unsecured, meaning they do not require collateral like a house or car. With a personal loan, individuals or couples can consolidate various types of debt into one loan with a fixed interest rate and a set repayment term.

A personal loan for debt consolidation can be a smart way to consolidate debt if you qualify for a low interest rate, enough funds to cover your combined debts, and a manageable repayment term. Because these loans are unsecured, your rate and terms will largely depend on your and your partner’s credit profile.

Recommended: How to Use a Personal Loan for Loan Consolidation

Home Equity Loan

If you and your spouse own your home and have built up significant equity, you might consider using a home equity loan to consolidate your debts as a couple. This allows you to borrow against the equity in your home and use the funds to pay off other loans and/or credit card balances.

Home equity is the difference between the appraised value of your home and how much you owe on your mortgage. Depending on the lender, you may be able to borrow up to 85% of the equity you own.

Since home equity loans are secured against the value of your home, lenders can often offer competitive interest rates, usually close to those of first mortgages. However, this type of debt consolidation loan is secured by your home. If you and your spouse are unable to keep up with payments, you could lose your home.

Student Loan Consolidation

In the past, the government allowed married borrowers to combine their federal student loans into one joint consolidation loan, but that program ended in 2006.

Currently, the only way to consolidate federal student loans with a spouse is by using a private lender. With private student loan consolidation or refinancing, you can combine your federal and/or private student loans into a single private student loan at a new interest rate.

If you apply jointly with your spouse, the lender will look at your combined household income and both of your credit scores. If your spouse has better credit or a higher income than you, refinancing with your spouse may allow you to qualify for a lower interest rate than you’d get on your own.

However, not all lenders offer spouse student loan consolidation, which can limit your options. Also keep in mind that refinancing federal loans with a private lender means giving up federal loan benefits and protections, including the ability to enroll in an income-driven repayment plan and eligibility for loan forgiveness programs.

Factors to Consider Before Consolidating Debt

Before committing to a debt consolidation loan as a married couple, it’s important to consider the potential complications and drawbacks of this decision.

Different Money Management Styles

When you take out a debt consolidation loan with your spouse, you’re both on the hook for the payments. So it’s worth thinking about how you handle money as a couple and if you’re okay sharing the debt. Are you both ready to commit to making monthly payments and following a budget together? If managing money together seems challenging, you might want to look into other options like consolidating your debts separately.

Marital Breakdown

If you take out a loan as co-borrowers, you’re both 100% legally responsible for paying it back, even if things don’t work out and you separate. It doesn’t matter if your partner has been paying the loan all along and agrees to continue. If you separate or divorce and that partner stops making payments, the lender will look to you to repay the debt.

Also keep in mind that you can’t remove your name from a joint loan without the lender’s permission. If approval was based on your joint personal loan application, the lender may not be willing to do that. Should your marriage break down, you might end up with payments you can’t afford to make.

Credit Score Impact

Even after you get married, you and your spouse still have separate credit reports. When you apply for a new loan as co-borrowers, the lender will do a hard credit pull on both of your credit reports, which can cause a small temporary dip in your scores. And if either of you misses a payment or falls behind on the loan, it can hurt both your credit scores — even if it’s not your fault.

If you handle repayment responsibly, however, a joint debt consolidation loan for married couples could positively influence your individual credit histories over time.

Irreversible Process

When you consolidate debts with a spouse, the process is permanent. You won’t have the opportunity to revert your former debts back to their original state. Once you use the proceeds of the new loan to pay off your existing loans, those accounts will be closed. This could be problematic if you consolidate federal student loans into a private consolidation loan, since you’ll lose your federal protections like forgiveness and forbearance.

Takeaway

Debt consolidation loans for married couples allow you and your spouse to combine multiple debts into one new loan. This can be an effective way to simplify your financial situation, reduce interest rates, and take control of your debt.

Before you jump in, however, it’s a good idea to discuss how a joint loan will affect your individual credit scores, who will make the payments, and how refinancing will impact your future financial goals.

Considering a personal loan to pay off credit card debt? With low fixed interest rates on loans of $5K to $100K, a SoFi Personal Loan for credit card debt could substantially decrease your monthly bills.

FAQ

Can a married couple consolidate their debt into one loan?

Yes, married couples can combine their debts into one loan if they qualify. The process typically involves applying for a personal loan or a home equity loan in both spouses’ names and using it to pay off one or both of their individual debts.

If your spouse has a stronger credit score than you, applying for a consolidation loan together could improve your chances of approval and potentially secure a better interest rate. However, both partners are equally responsible for repaying the loan, so it’s important to ensure that consolidating the debt benefits both parties.

How will debt consolidation affect credit scores?

Debt consolidation can impact credit scores in both positive and negative ways. Initially, applying for a new loan may result in a temporary dip in your credit scores due to a hard inquiry. However, if you use the loan to pay off high-interest credit card debt and make timely payments, it can improve your credit profile over time. Also, having just one payment can reduce the risk of missed payments, further benefiting your credit.

What are the alternatives to debt consolidation loans?

Alternatives to debt consolidation loans include:

•   Balance transfer credit cards: These cards may offer a low or 0% introductory interest rate for transferring existing credit card balances. This can help you save on interest if you are able to pay off the balance within the promotional period. Just be sure any transfer fees don’t negate the savings.

•   Debt snowball or avalanche methods: These strategies focus on paying off smaller debts first (snowball) or debts with the highest interest rates first (avalanche) without consolidating.

•   Debt management plans (DMPs): Offered by credit counseling agencies, DMPs help negotiate lower interest rates and consolidate payments without taking out a new loan.

Photo credit: iStock/milorad kravic

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.

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

SOPL-Q324-019