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With Americans facing over $1.6 trillion in combined student loan balances, many borrowers are on the hunt for ways to ease their debt burden. One option you may have seen was called the Obama Student Loan Forgiveness Plan, which according to some websites, was a way for some borrowers to escape their debt for a small fee.

This offer might sound appealing, but there’s one problem: It’s fake. It’s just one example of real ads that scammers have used to target and bilk borrowers.

Fraudsters have used lines like this to lure in their marks, then charged them hefty fees to fill out forms they could’ve filled out themselves for free. In the worst cases, people end up paying for nonexistent services.

Here are some answers to your burning questions on student loan forgiveness, so you can get a better idea of how the program works:

Does Any Student Loan Forgiveness Act Exist?

Yes. The Student Loan Forgiveness Act (SLFA) was a congressional bill introduced in 2012 intended to help borrowers with paying down their student debt.

In addition to capping interest rates for all federal loans, the proposed law would have introduced a repayment plan that allows borrowers to have their loans forgiven after 10 years if they made monthly payments equivalent to 10% of their adjusted gross income. The bill also would have made borrowers in public service jobs eligible for loan forgiveness after five years, instead of 10.

Sound too good to be true? It was. The bill never made it out of committee.

So, What is Obama’s New Student Loan Forgiveness Program?

Even though you may have heard about it, “Obama’s new student loan forgiveness program” doesn’t exist. During his tenure, President Obama did expand the reach of federal loan forgiveness programs. A bill he signed in 2010 allowed students who took out certain federal loans to have their balances forgiven in 20 years, rather than 25.

The same bill capped annual payments at 10% of adjusted gross income, rather than 15%. It also ushered in loan forgiveness after 10 years for borrowers working in qualified public service jobs.

Those changes preceded the introduction of the Student Loan Forgiveness Act (SLFA), and was never officially called “Obama’s Student Loan Forgiveness Program.” Likewise, there is no “new” student loan forgiveness program in Obama’s name, either, obviously.

Then Why Have I Read About Obama’s New Student Loan Forgiveness Program?

Because it’s a term that debt relief companies use to confuse student loan borrowers. The name seems convincing since President Obama did take action on federal student loans and legitimate federal loan forgiveness programs exist. That’s why some borrowers have been duped into paying high fees for pointless—or nonexistent—services. Don’t be fooled: The program isn’t real!

Debt relief companies advertising the “Student Loan Forgiveness Act” or “Obama’s New Student Loan Forgiveness Program” are bad news. Understanding which programs are real and which are fake can help you avoid being scammed—and find legitimate ways to actually have some of your student loans forgiven.

What Are Some Legitimate Options for Student Loan Forgiveness?

No, Obama’s Student Loan Forgiveness Act never passed. However, there are several real options for having federal student loans forgiven.

In fact, in response to the coronavirus epidemic, the CARES Act suspended federal student loan interest and payment suspension through September 2020. (Update: The pause on federal student loan repayment has been extended through Dec. 31, 2022)

The pending HEROES Act (narrowly passed by the House in mid-May, 2020) proposed $10,000 each of federal student loan AND private student loans forgiveness initially but may have more stringent eligibility requirements if passed by the Senate. While it’s definitely something to keep an eye on, here are some existing programs that may be helpful.

Income-Driven Repayment Plans

The government currently offers four income-driven repayment plans for federal student loans that can forgive borrowers’ balances after 20 or 25 years.

There are eligibility requirements, like making required monthly payments for a designated period of time, which are tied to a person’s income. The plans a borrower qualifies for will depend on the types of loans they have and when they took them out.

These student loan repayment plans are based on borrowers’ discretionary income, or the amount they earn after subtracting necessary expenses like taxes, shelter, and food. Here is a brief overview of each one:

•   Revised Pay As You Earn Repayment Plan (REPAYE): Borrowers’ monthly payment is typically 10% of their income. If all loans were taken out for undergraduate studies, they’ll make payments for 20 years; if they also took out loans for graduate or professional studies, they’ll make payments for 25 years. At the end of 20 or 25 years, the remaining amount will be forgiven.
•   Pay As You Earn Repayment Plan (PAYE): People pay up to 10% of their discretionary income each month, but they never pay more than they would under the 10-year Standard Repayment Plan. After 20 years, the remaining debt will be forgiven.
•   Income-Based Repayment Plan (IBR): People will pay 10% of their discretionary income for 20 years if they became a new borrower on or after July 1, 2014, and 15% for 25 years if they were a borrower before July 1, 2014. They will never pay more than they would under the 10-year Standard Repayment Plan. Borrowers’ debt will be forgiven after either 20 or 25 years.
•   Income-Contingent Repayment Plan (ICR): Borrowers choose whichever repayment plan is cheaper—20% of their discretionary income or what they would pay if they spread their payments out equally over 12 years. Any remaining balance will be forgiven after 25 years.

These four plans are designed to help borrowers make monthly payments they can actually afford. Some people may assume that an income-driven repayment plan that results in forgiveness is best for them, when in reality, this might not be the case.

Note that if the remaining balance of your loan is forgiven, you may be responsible for paying income taxes on that amount.

A repayment calculator can be a useful tool to help determine enrolling in an income-based forgiveness program that would be beneficial. After a borrower plugs in their information, they could discover that they would pay less, in the long run, should they enroll in, say, the government’s Standard Repayment Plan.

Public Service Loan Forgiveness

Borrowers can have their loans forgiven in 10 years under the Public Service Loan Forgiveness (PSLF) program. To potentially qualify, they must work full-time for a qualified government organization, nonprofit, or certain public-interest employers, such as a public interest law firm, public library, or public health provider.

Over those 10 years, borrowers must make 120 qualifying monthly payments, and the payment amount is based on their income. Those 120 payments don’t necessarily have to be consecutive. For example, let’s say a borrower works for the local government for three years, then switches to the private sector for a year.

If they decide to go back into public service after that year, they can pick up where they left off with payments rather than start all over.

The PSLF program can be difficult to qualify for, but some people have successfully enrolled. As of March 2020, 145,758 borrowers had applied for the program. Only 3,174 applications were accepted. 171,321 applications had been rejected, and the remaining applications were still processing.

Teacher Loan Forgiveness Program

Qualifying teachers can also get up to $17,500 of their federal loans forgiven after five years teaching full-time under the Teacher Loan Forgiveness Program. The American Federation of Teachers has a searchable database of state and local loan forgiveness programs.

To qualify for the full amount, teachers must either teach math or science at the secondary level, or teach special education at the elementary or secondary level. Otherwise, borrowers can have up to $5,000 forgiven if they are a full-time teacher at the elementary or secondary level.

NURSE Corps Loan Repayment Program

Health professionals have access to other loan assistance programs. The federal government’s NURSE Corps Loan Repayment Program pays up to 85% of eligible nurses’ unpaid debt for nursing school.

To receive loan forgiveness, borrowers must serve for two years in a Critical Shortage Facility or work as nurse faculty in an accredited school of nursing.

After two years, 60% of their nursing loans will be forgiven. If a borrower applies and is accepted for a third year, an additional 25% of their original loan amount will be forgiven, coming to a total of 85%.

Borrowers interested in the NURSE Corps Loan Repayment Program can read about what qualifies as a Critical Shortage Facility or an eligible school of nursing before applying.

Indian Health Services’ Loan Repayment Program

The Indian Health Services’ Loan Repayment Program will repay up to $40,000 in qualifying loans for doctors, nurses, psychologists, dentists, and other professionals who spend two years working in health facilities serving American Indian or Alaska Native communities.

Once a borrower completes their initial two years, they may choose to extend their contract each year until their student loans are completely forgiven.

In 2019, the Indian Health Service’s budget allows for up to 384 new awards for two-year contracts, and around 392 awards for one-year contract extensions. The average award for a one-year extension is $24,840 in 2019.

Even those who aren’t typical medical professionals, like doctors or nurses, may still qualify. The IHS has also provided awards to people in other fields, such as social work, dietetics, and environmental engineering.

The National Health Service Corps

The National Health Service Corps offers up to $50,000 for loan repayment to medical, dental, and mental health practitioners who spend two years working in underserved areas.

Loan forgiveness programs are generally available for federal loans, as opposed to private ones. In rare cases, such as school closure while a student is enrolled or soon after, they could qualify to have their loan discharged or canceled.

Health Professional Shortage Areas (HPSAs) include facilities such as correctional facilities, state mental hospitals, federally qualified health centers, and Indian health facilities, just to name a few. Each HPSA receives a score depending on how great the site’s need is.

Scores range from 0 to 25 for primary care and mental health, and 0 to 26 for dental care. The higher the score, the greater the need.

Borrowers have the option to enroll in either a full-time or part-time position, but people working in private practice must work full-time. Full-time health professionals may receive awards up to $50,000 if they work at a site with a score of at least 14, and up to $30,000 if the site’s score is 13 or below. Half-time employees will receive up to $25,000 if their site’s score is at least 14, and up to $15,000 if the score is 13 or lower.

Interested in learning more about your options for student loan repayment? Check out SoFi’s student loan help center to get the answers you need about your student debt. The help center explains student loan jargon in terms people can understand, provides loan calculators, and even offers student loan refinancing to hopefully land borrowers lower rates.

Refinancing student loans through a private lender can disqualify people from enrolling in federal loan forgiveness programs and loan forgiveness programs, and disqualifies them from CARES Act forbearance and interest rate benefits.

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.

SLR17149

With graduation comes a fair share of celebration and changes. From grad parties to finding your first job to possibly a major move, life moves pretty fast during that first year out of school. While you’re busy setting up a new life, you may not even have time to think about those student loans you might’ve taken out for school.

When it comes to student loans, however, it’s not as easy as out of sight, out of mind. You might be busy setting up the next phase of your life, but don’t forget that your loan repayment will come calling, and likely sooner than you think.

But one possible avenue for relief is that many student loans come with a grace period. A student loan grace period can be a helpful tool—especially if you don’t have a steady source of income after college—but it’s important to pay attention to the specifics of your student loans so that you understand if you have a grace period, how long your grace period is, and what it entails.

What is a Student Loan Grace Period?

You might not have to pay your federal student loans back immediately after you graduate college. Depending on the loan type, former students may be given a six-month grace period before loan repayment starts. This “grace period” gives new graduates some breathing room before they start making student loan payments.

Without a grace period, you’d need to pay student loans back immediately. This could be challenging if you’re not yet on your feet with a steady income, post-college.

Remember, it’s not just graduation that kicks off the grace period. Grace periods for federal student loans can apply to anyone who has graduated, left school entirely, or dropped below half-time attendance.

If you have one, a grace period won’t magically end one day without notice and leave you scrambling to find out where to send your monthly loan payment. Your student loan servicer is obligated to provide you with the following information:

•   Your loan repayment schedule.
•   The date of your first payment.
•   The number of payments.
•   The frequency of payments.
•   The amount of each payment.

A grace period can provide an opportunity for borrowers to plan for the future. How you use your grace period can make a difference in your ability to pay down your student loans later on. Establishing yourself in the workforce and earning a regular income can be helpful, but try not to worry so much if that doesn’t happen immediately after college.

Finding a job after college might require a bit of hustle. Some people may find themselves filling out countless job applications, networking, participating in a post-graduation internship, or relying on side hustles to start earning money.

As you prep your resume and polish off your interview skills, it can be tempting to push the thought of student loans to the back burner. But your grace period can provide a valuable reprieve that could give you a bit of breathing room to sort through financial obligations and determine a repayment plan.

Here are a few more ins and outs of student loan grace periods so you can enter the “real world” with your best foot forward.

You May Have a Longer Student Grace Period Than You Think

Not all grace periods fall within the six-month range. Your grace period could be longer than six months or you might not have a grace period at all. It all depends on your lender and the types of loans you have.

Direct Unsubsidized and Direct Subsidized student loans have a six-month grace period. Interest accrues from the time the loan is disbursed and will continue to accrue during the grace period on unsubsidized loans. Borrowers with subsidized loans generally will not be responsible for accrued interest during the grace period.

The grace period on Federal Perkins loans can vary. The Perkins loan program expired in 2017. Borrowers with existing Perkins loans can check with their loan servicer or the school that made the loan to get more information about the repayment plans available to them.

Federal PLUS loans for graduate or professional students don’t have a grace period, but graduate or professional student borrowers receive an automatic six-month deferment when they drop below half-time enrollment, leave school, or graduate. During this deferment, borrowers are not required to make payments but interest will continue to accrue.

Parents who borrowed PLUS Loans to pay for their child’s education are able to request a six-month deferment when their child drops below half-time enrollment, leaves school, or graduates.

Some federal student loan grace periods can be extended even longer, for active duty military for instance.
What about private student loans? Typically, private lenders don’t offer grace periods, but options will vary from lender to lender. Some lenders, however, may offer a six-month grace period.

For example, SoFi will honor the first six months of any existing grace period of the loans you refinance. With other lenders, payments may begin as soon as the loan is disbursed. The terms of the loan should specify what grace period, if any, is available.

You Might Not Owe Interest During Your Student Loan Grace Period

A grace period can be a welcome break from making payments, and on some loans, hitting pause won’t lead to additional interest. But depending on the type of loan you have, this isn’t always the case. Certain loans will continue to accrue interest during the grace period.

Direct Subsidized Loans (sometimes known as Stafford Loans), Grad PLUS, and Perkins loans don’t accrue interest during the grace period. That means that you won’t have six months’ worth of interest added to the life of your loan that accrued during your grace period.

But if you have Direct Unsubsidized Loans, your interest will begin to accrue when the loan is disbursed and will continue to accrue while you are in school and during your grace period.

By the time you’re ready to make your first payment, your balance will be slightly higher than it was when you took out your loan (unless you’ve made interest-only payments).

At the end of the grace period, any unpaid interest is capitalized on Direct Subsidized loans (same goes for Grad PLUS loans and their deferment period). This means that the accrued interest is added to the total outstanding balance of these loans.

Interest payments calculated after this will use the new, capitalized balance. This means you’d be paying interest on top of interest, unless you make interest payments of course! For private loans, check with the specific lender regarding their policy.

Extending Your Student Loan Grace Period is Possible (in certain situations)

There are certain situations in which your grace period on a federal student loan may be extended. These depend on the loan type, but generally include:

•   If you’re serving in the military and are deployed on active duty for more than 30 days before your grace period ends. In that case, you’ll receive a reinstated six month grace period when you return from active duty.
•   If you re-enroll in school even part-time before your student loan grace period ends, you won’t be required to pay your student loan back while in school. When you finish or drop below half-time attendance, you’ll receive a six month grace period.

Consolidating your federal student loans with a Direct Consolidation loan during the grace period will eliminate the time remaining on the grace period. You’d then be responsible for repaying the Direct Consolidation when it’s disbursed. Generally, the first payment is due about two months after the loan is disbursed.

There are options available to federal student loan borrowers who might want to pause repayments after the grace period ends. During certain periods of financial hardship, borrowers might consider applying for deferment or forbearance. These options allow borrowers to temporarily pause payments on their loans.

Depending on the type of loan you have, interest may or may not accrue during deferment. You can take a look at this article for an in-depth explainer of the differences between deferment and forbearance.

Choosing How to Handle Your Student Loan Grace Period

If you decide that the pros of the student loan grace period outweigh the cons, you could use that payment-free time to start setting aside funds for later. During your grace period you can:

•   Use a student loan calculator to estimate your monthly payments.
•   Work with your lender/servicer to see what your actual payments will be.
•   Make it a goal to try and put away at least a partial amount each month.

If you get used to living on a budget that doesn’t include your student loan payment, you may be setting yourself up for future stress. Instead, you could consider:

•   Waiving the grace period and starting student loan payments immediately. If you have enough wiggle room in your budget, you can start paying your loans down immediately. Since your loan wouldn’t be accruing unpaid interest during the grace period, it could lead to savings in the long term.
•   Setting aside a part of your monthly paycheck to start paying down the interest. If your budget doesn’t allow for monthly payments yet, you could try saving what you can to pay off some of the interest on your student loans during the grace period. Even a small contribution can make a difference.
•   Making payments that even just cover your loan’s interest during that time could help you avoid having a higher balance than when you graduated (due to pesky capitalized interest, discussed above).

Finding your federal student loans can be a challenge in and of itself. If you want to track down your loan to confirm the grace period or make interest-only payments during it, you can take a look at the National Student Loan Data System (NSLDS).

This site is operated by the U.S. Department of Education and can provide a comprehensive overview of a borrower’s federal student loans, including the loan servicer assigned to each loan.

Grace periods are all about giving you some financial space. If you have the room in your budget to make interest-only payments during the grace period, it could help keep you on track to pay off your loans even sooner. It’s a small sacrifice now that could potentially make a difference later.

But if your budget doesn’t allow for any payments during your grace period, don’t sweat it. Your grace period is there for a reason, to give you some breathing room while you sort things out financially.

Some Ways Student Loan Refinancing Can Help

Unlike using a Direct Consolidation Loan, refinancing your student loans doesn’t automatically mean that you’ll have a shorter grace period.

Refinancing is when a private lender pays off your loans and gives you a brand new loan. Refinancing with a private lender could potentially result in a lower interest rate or more favorable terms.

If you are managing a number of student loans, refinancing may help to simplify your life by giving you one loan to pay, instead of multiple loans to remember.

However, not all private lenders will honor your federal student loan grace period—if you choose to refinance during your grace period, you may have to begin repayments as soon as the refinance loan is disbursed.

Some private lenders will still honor your six-month grace period, and SoFi is one of them. If you want to get ahead of those student loan payments, and are searching for a lower rate and more flexible terms, refinancing might be worth considering.

A grace period can be a helpful time to pause and consider your finances. As a recent graduate, you probably have a lot on your plate as you find your footing in your career and figure out how to become an adult in the working world. Part of adulting might include creating a student loan repayment plan.

If you’re considering refinancing, take a look at SoFi. You can find out if you prequalify in a few minutes.
An important thing to note: Refinancing your federal student loans with a private lender will eliminate them from federal benefits and protections—like deferment, forbearance, and income-driven repayment plans—so refinancing won’t be right for everyone.

Don’t let your grace period’s end catch you off guard. If you plan ahead, and plan for future payments, you could end up on more solid financial footing.

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.

SLR17109

When outlining your plans for how to pay for college, student loans may be part of the financial picture. According to information published by the Pew Research Center, roughly one-third of adults under age 30 have some student loan debt as higher education costs continue to climb.

If you’ve already qualified for federal student loans and have sourced other forms of financial aid but still need more funding for school, private student loans can help close the gap. When applying for private student loans, your current bank might be the first place you look. But there are some reasons to cast the net wider and compare other borrowing options.

Here’s some helpful information worth knowing about how to choose a student loan lender other than your current bank and why it might make sense to do so.

Pros and Cons of Getting Private Student Loans With Your Current Bank

Applying for private student loans with your current bank may seem like a natural choice. If you already have checking and savings accounts at the bank or other loans, then it is possible you may feel more comfortable borrowing from a financial institution you’re familiar with.

And that can have certain advantages. For example, some banks might offer an interest rate discount or reduction for private student loans if you have another account with the bank that is in good standing. Scheduling your student loan payments may also be easier if you can link your checking account to your loan account and see balances and payments in one place.

On the other hand, there are some benefits to getting private student loans with another bank or private lender. Banks and other lenders that offer private student loans can vary greatly when it comes to things like:

•   Minimum and maximum loan amounts
•   Interest rates
•   Loan fees
•   Repayment options

Looking for a private student loan with a different bank or lender could give you more options for a better interest rate, fewer fees, being able to borrow more money, or qualifying for more flexible repayment terms. These are important considerations which can impact student loan repayment.

Choosing a Lender for a Student Loan

Whether you’re borrowing a little or a lot, it’s important to find a bank or lender that matches up with what you need for private student loans. If you’re starting from square one with how to choose a lender for a student loan, these tips could help.

1. Considering Loan Limits

When comparing banks, credit unions, or other private student loan lenders one of the first things to look at is the lending limits at each institution.

Some private student loan lenders impose a minimum loan amount and cap on the total lifetime amount you can borrow to finance your education. Being aware of those thresholds matters for making sure that you can borrow what you need.

Keep in mind, however, that the actual amount you’re able to borrow may be lower than the total loan maximum advertised by the financial institution. The amount you ultimately qualify for (or don’t) can depend on many factors including state laws and your credit history. (More on that and other factors below.)

2. Looking at What’s Needed to Qualify

Every private student loan lender is different when it comes to their minimum qualifications to borrow. While thresholds vary from lender to lender, common criteria reviewed to make lending decisions might include:

•   Credit scores and credit history
•   Income
•   Enrollment status
•   Citizenship or permanent residency status

Also, be aware that you may not be able to qualify for a new private student loan if you have any existing loans that are in default. In that case, you’d need to bring your old loans current first before you could be approved for a new loan by most lenders.

3. Checking Co-Signer Requirements

Credit scores and credit history can play a big part in private student loan approval decisions. Borrowers with little or no credit history may need a qualifying co-signer to get approved for private student loans. Depending on the bank or lender, a qualifying co-signer could be a:

•   Parent
•   Grandparent
•   Sibling
•   Spouse
•   Other relative
•   Friend

For those who think they’ll need a co-signer to qualify for private student loans, there are a couple of things to remember.

First, it’s a solid idea to be upfront with the prospective student loan co-signer about the implications of signing off on the loans. As a co-signer, they’re equally responsible for the debt and all loan activity will show up on their credit report the same as it will on a primary borrower’s credit report. So if the borrower pays late or defaults, it could adversely affect both the co-signer and the primary borrower.

Second, you can check to see if the banks, credit unions, or private lenders you’re looking into offer a co-signer release. This allows the co-signer to be removed from the loans once certain conditions have been met. For example, you may be able to get a co-signer release after making a certain number of consecutive on-time monthly payments.

Going forward, then, only the primary borrower’s name would be listed on the loans. Each lender will have different requirements for co-signer release, and some lenders will not offer that option, so understand the policies at each institution before borrowing the loan.

4. Reviewing Repayment Options

Next, look at the different options a bank or lender offers for repaying private student loans. For example, do the loans come with five-year terms? 10 years? 15? Also, consider whether there is an option to make full payments or interest-only payments while in school or whether the lender offers a repayment deferment while enrolled.

Consider whether the lender offers any type of student loan grace period immediately after graduation in which no payments need to be made. And if a deferment or grace period is available, take note of what interest and/or fees accrue on your loan balances during that time.

5. Comparing Interest Rates and Fees

Cost is often one of the most important considerations for how to choose a student loan lender. After reviewing the other details of borrowing narrow the focus down to the interest rates and fees a private student loan lender charges.

Consider whether a bank offers variable rate loans, fixed rate loans, or both. On a variable rate loan, the interest rate is just that—variable. This means it can fluctuate over time, increasing or decreasing, depending on how the underlying benchmark rate moves. With fixed rate loans, the interest rate stays the same for the life of the loan.

Deciding which one to choose may depend on what’s happening with interest rates in general. With interest rates already low, a fixed rate loan option could make sense if you want reassurance that your rates won’t go up over time.

But if rates drop even further, a variable rate loan could allow you to capitalize on that and potentially save money on interest—provided rates don’t go back up again over time!

Other factors to consider when deciding between a fixed and variable rate loan include the length of the repayment term, and whether or not the borrower would be able to cover a higher monthly payment should the variable interest rate increase.

Aside from whether private student loan rates are fixed or variable, take time to compare the rates themselves across different lenders. If a lender offers a range of interest rates, look at how the high end and low end of that range lines up with what other banks or lenders are offering.

Remember, your credit score and history (or the credit score and history of your co-signer, if you need one) can play a big part in determining the rates you qualify for. But looking at how rates stack up overall can help with how to choose a lender for a student loan.

Banks and other lenders typically allow potential borrowers to see what rates they may qualify for. When getting rate quotes, double check that the lender is doing an initial “soft” credit pull. This won’t impact an individual’s credit score¹, unlike a “hard” credit inquiry.

After you’ve compared rates, check out the fees a bank or lender charges as well. Some fees to consider include:

•   Loan origination fees
•   Late payment penalties
•   Returned payment fees

The good news is, there are plenty of lenders that don’t charge fees like origination fees for private student loans. These fees could add up, and if there is a fee for paying late or for unforeseen insufficient funds, it can be important to factor those costs in.

6. Asking About Loan Discounts or Other Benefits

Another item on the list of things to consider for how to choose a student loan lender are the “extras” a bank might offer. For instance, it’s not uncommon for lenders to cut you a break on interest when you enroll in automatic payments for your loans.

While the specifics vary by lender, some may offer a reduction of the interest rate when the loan is enrolled in autopay, which can help reduce the cost of interest over the life of the loan. Another consideration may be whether a bank offers things like hardship programs or forbearance options in case there are issues repaying the loan at some point.

Unlike federal student loans, private student loan lenders aren’t required to offer hardship deferment or forbearance programs, but some do. SoFi members, for example, may qualify to pause their payments temporarily through the Unemployment Protection Program.

And finally, look at whether a lender offers anything else that could make help make your life as a student loan borrower easier. That could include an easy-to-use mobile app for managing loans, free online educational resources to help you better understand student loans, or career counseling.

All of those features can add value when choosing a student loan lender that isn’t your primary bank or another lender.

Doing Your Homework Can Pay Off When Choosing a Student Loan Lender

When considering private student loans, it’s important to remember that all banks and lenders aren’t created equally. If you’re willing to spend some time researching loan options, it might become easier to find a lender that’s the best fit for your personal needs and budget.

While we believe exhausting your federal aid options first before taking on private student loans is wise, when looking for private student loans beyond your bank, consider adding SoFi to your list of potential lenders.

SoFi offers no-fee private student loans for undergraduate and graduate school and for parents, too, all with flexible repayment options and competitive interest rates.

¹Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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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Student loans can have a way of making you feel like a hamster in a wheel—spinning like crazy but getting nowhere fast. And while knowing that around 44 million Americans carry student loan debt might offer some comfort in a “misery loves company” kind of way, the magical loan-forgiveness fairy is still—as far as we know—a myth.

In the meantime, though, there’s a bit of good news—you may have more control than you think. We are here to help illuminate some options available to student loan holders, so they can make decisions that fit best with their financial goals.

Have you been considering one of those options—choosing whether to consolidate or refinance student loans?

But what is consolidation, what is refinancing, and how do you know which one (if either) may be right for you?

This could be a somewhat complicated question, especially since these terms are sometimes used interchangeably. For example, consolidation simply means combining multiple student loans into one loan, but you have different options and can end up with different results by consolidating with the federal government vs. consolidating with a private lender.

Student loan refinancing is when you receive a loan with new terms and use that loan to pay off one or more existing student loans.

Consolidate vs. Refinance. Let’s break it down.

Here’s a simple overview of the different types of student loan consolidation, how they differ from student loan refinancing, and some tips for evaluating whether one of these options might work for you.

Federal Student Loan Consolidation

Federal student loan consolidation is offered by the government and is available for most types of federal student loans—no private loans allowed. When you consolidate with the government, your existing federal loans are combined into one new loan with a new rate, which is a weighted average of your old loans’ rates (rounded up to the nearest eighth of a percent).

This option may not save you any money, but there are still a few potential benefits:

1. Fewer bills and payments to keep track of each month.

2. The ability to switch out older, variable rate federal loans for one, new, fixed rate loan, which could protect you from having to pay higher rates in the future if interest rates go up. (Note: the last variable rate federal student loans were disbursed in 2006. Since then, all federal student loans have been fixed-rate.)

3. Lower monthly payments. But beware—this is usually the result of lengthening your repayment term, which means you might pay more interest over the life of the loan.

Private Loan Consolidation

Like federal consolidation, a private consolidation loan allows you to combine multiple loans into one, and offers some of the same potential benefits listed above. However, the interest rate on your new, consolidated loan is not a weighted average of your old loans’ rates.

Instead, a private lender will look at your track record of managing credit and other personal financial information when deciding whether to give you a new (ideally lower) interest rate on your new consolidation loan.

Bottom line: when you consolidate student loans with a private lender, you are also in fact refinancing those loans. When federal student loans are consolidated or paid off using a private loan, however, it’s important to know you will lose access to certain benefits such as income-driven repayment plans, forbearance and deferment options, and Public Service Loan Forgiveness (among others).

Student Loan Refinancing

As noted above, student loan refinancing is when a new loan from a private lender is used to pay off one or more existing student loans. If your financial situation has improved since you first signed on the dotted line for your original student loans(s), you may be able to refinance student loans at a lower interest rate and/or a different loan term, which could potentially allow you to do one or more of the following:

1. Lower your monthly payments.

2. Shorten your loan term to pay off debt sooner.

3. Reduce the money you spend in interest over the life of the loan.

4. Choose a variable interest rate loan, which can be a cost-saving option for those who plan to pay off their loan relatively quickly.

5. Enjoy the benefits of consolidation, including one simplified monthly bill.

Unlike federal loan consolidation, student loan refinancing is only available from private lenders. However, SoFi will refinance both private student loans and federal student loans, so well-qualified borrowers can consolidate all of their loans into one with loans and/or terms that work better for them.

Things to Consider

While there are advantages to both consolidation and refinancing, sometimes the answer—depending on timing, your budget, or other outside factors—could be to leave well enough alone. As you research your options, consider asking yourself these questions:

What kind of student loans do you have?

Refinancing federal student loans through a private lender might result in a lower interest rate, but you will also lose access to the benefits that come with federal loans, such as Public Service Loan Forgiveness (PSLF), flexible repayment plans, the ability to pause payments, and an interest rate that’s determined by Congress—not your credit score.

If your loans are private, they were issued based on creditworthiness to begin with, so a refinanced loan will follow similar qualifications, and each private lender will have its own underwriting criteria.

What is the loan payoff amount?

While the amount of a monthly payment is important, especially if a refinance could reduce it, it’s wise to read through all the terms of the loan to understand the big picture.

Are the monthly payments lower because the loan is now on a 20-year term instead of a 10-year term? Are there loan origination fees rolled into the payment? Knowing the full, total repayment amount can help ensure that short-term gains don’t bite you in the long run.

What’s the goal?

Consider your reasons for a refinance or consolidation—lowering monthly payments, keeping better track of due dates, or paying off debt as quickly as possible will likely lead to different strategies.

Your monthly budget and what you can (and can’t) afford to put toward your loan repayment will also play a factor here. One way to help ensure the right decision for you is to play with your budget a bit to see which loan options might benefit you most.

What factors do lenders review?

This isn’t typically an issue when it comes to consolidating loans through the federal government. But people interested in refinancing student loans with a private lender will likely need to meet various lender requirements, much like they would for a mortgage or personal loan.

Lenders generally review information like the borrower’s credit history, income, debt-to-income ratio, and other factors to determine what type of interest rate and loan terms they may qualify for.

You may not be able to change the fact that you have student loans, but you can make smart decisions about them. And that’s what ultimately gives you power over your debt. For more information about student loans, you can explore SoFi’s student loan help center to find guidance and gain knowledge to help point you in the right direction.

$500 Student Loan Refinancing Bonus Offer: Terms and conditions apply. Offer is subject to lender approval, and not available to residents of Ohio. The offer is only open to new Student Loan Refinance borrowers. To receive the offer you must: (1) register and apply through the unique link provided by 11:59pm ET 11/30/2021; (2) complete and fund a student loan refinance application with SoFi before 11/14/2021; (3) have or apply for a SoFi Money account within 60 days of starting your Student Loan Refinance application to receive the bonus; and (4) meet SoFi’s underwriting criteria. Once conditions are met and the loan has been disbursed, your welcome bonus will be deposited into your SoFi Money account within 30 calendar days. If you do not qualify for the SoFi Money account, SoFi will offer other payment options. Bonuses that are not redeemed within 180 calendar days of the date they were made available to the recipient may be subject to forfeit. Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received as required by applicable law. Recipient is responsible for any applicable federal, state, or local taxes associated with receiving the bonus offer; consult your tax advisor to determine applicable tax consequences. SoFi reserves the right to change or terminate the offer at any time with or without notice.

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

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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Studying medicine and working in the medical field can be highly rewarding as you assist people with illnesses and injuries and help them to live their healthiest life.

In this career, how you help others could literally be life-changing. Other benefits of a medical career might include the wide variety of opportunities in an array of specialties, from pediatrics to geriatrics, medical research, and more.

Medical school might be considered a safe investment in the future as well, with the possibility of a high salary in a chosen field. In fact, according to the United States Department of Labor’s Bureau of Labor Statistics , in 2019, nine out of the top 10 highest-paid professions are in the field of medicine.

Read on for more good news on medical careers and finances, plus some information about what it might cost to earn a medical degree.

Medical Professionals and Their Salaries

According to the Medscape Physician Compensation Report 2019 , physicians’ incomes are increasing. Primary care physicians, for example, are earning an average of $237,000 annually, a 21.5% increase over their average earnings in 2015 ($195,000). Specialists, meanwhile, earn an average salary of $341,000, a 20% increase over the 2015 average of $284,000.

When looking at specialties, orthopedics ($482,000) and plastic surgery ($471,000) top the list in 2019. The lowest physician salaries are pediatrics ($225,000) and public health and preventive medicine ($209,000).

Salaries may also vary by state, with these three having the highest overall in 2019:

•   Oklahoma: $337,000/yr
•   Alabama: $330,000
•   Nevada: $329,000

As lucrative as a medical career can be, the commitment to medical school is significant, and the educational journey can be pricey. According to the Association of American Medical Colleges (AAMC), here are the average costs of tuition, student fees, and health insurance for medical students during the 2018–2019 school year (costs include discounts from stipends, scholarships, or grants):

•   Public school, resident: $36,755
•   Private school, resident: $59,076
•   Public school, nonresident: $60,802
•   Private school, nonresident: $60,474

Medical Students and Debt

Although the costs of attending medical school are significant, the number of medical school students who are graduating with no debt continues to rise, with the AAMC noting that, in 2019, 28.7% of students completed medical school with no student loan debt. In 2018, the figure was 27.7%.

Another study of medical students and corresponding student loan debt was conducted by researchers who have inferred that more and more students entering medical schools come from wealthy backgrounds.

This implies that some students might be discouraged from pursuing medicine, based on financial considerations alone. Also, students incurring a lot of debt might feel pressured to specialize in more lucrative fields, because when they have student loan debt, cardiology (with a 2019 average salary of $430,000) might look better than endocrinology (with a 2019 average salary of $236,000) simply because cardiologists make so much more.

Medical Student Loan Debt by State

When it comes to debt, not all medical programs are equal. According to U.S. News and World Report’s “Best Grad School ,” the range can be quite significant. Out of 114 medical schools listed, the three that left its grads with the most debt in 2018 were:

•   Rocky Vista University in Parker, Colorado: $364,000
•   Nova Southeastern University Patel College of Osteopathic Medicine (Patel) in Fort Lauderdale, Florida: $272,764
•   Western University of Health Sciences in Pomona, California: $272,311

On the other end of the spectrum, the schools that graduated students with the least amount of debt in 2018 were:

•   Johns Hopkins University in Baltimore, Maryland: $104,016
•   Stanford University in Stanford, California: $104,988
•   Baylor College of Medicine in Houston, Texas: $107,469

Average Medical School Debt and Loan Options

Although the percentage of medical students who have no debt is rising, when students do have student loan debt, the amount is going up, with the 2019 average for medical students at $200,000 , a 2.7% increase over the 2018 amount of $195,000.

Note that, when it comes to borrowing for medical school, loan interest rates offered by the federal government, along with their terms and conditions, might be different from borrowing as an undergrad.

Types of federal student loans available to medical students include Direct Unsubsidized Loans, with loan limits up to $20,500 each year, and $138,500 overall. Rates for this type of loan are currently less than for the other type of federal aid available to people going to medical school—Direct PLUS loans .

There isn’t a financial need requirement for either type of loan, so many borrowers qualify for both. With Direct Unsubsidized Loans, there is no credit check, but there is a credit check for PLUS loans.

Medical students can also apply for private student loan funding, with different private lenders offering different rates, terms, and overall loan programs. Typically, you need good credit for private student loans, among other financial factors that will vary by lender.

Federal loans do come with many important student protections that private loans typically don’t, such as loan forgiveness for working in public service, income-driven repayment, and deferment programs; some medical students defer loans during their residency.

High Debt Loads—and Compound Interest

Unfortunately, debt doesn’t necessarily pause when deferred. There are some federal student loans that, when deferred, will continue to accrue interest. The problem those in medical fields can face, then, is debt accumulation during their residency, which can last anywhere from three to seven years depending on the specialty.

Here’s a very high-level, simplified example. Say, for instance, a med student defers loan payments on a $180,000 Direct PLUS Loan with an annual percentage rate (APR) of 7%. If the student defers payments for a seven-year residency, this could lead to a debt increase of around $88,200. With a 6% interest rate, debt could increase by around $75,600.

Even while making a modest income—in 2018, the average resident earned just under $60,000 —the debt would grow substantially.

Other than deferral, the federal government does offer additional income-driven payment protections for federal student loans—for example, certain
programs are offered during the years of residency, lowering payments to match current income so monthly loan payments are more manageable..

The Revised Pay As You Earn Repayment Plan (REPAYE) caps payments at 10% of discretionary income for qualifying borrowers. If you are married, the government will factor in a spouse’s income when determining monthly payments.

Options for Paying Back Medical School Loans

Once you are ready to get serious about paying back student loans, refinancing with a private lender might help save you money. Although refinancing your federal student loans does mean forgoing government protections such as loan forgiveness and income-driven repayment, some companies offer refinance interest rates that are lower than federal rates.

The bottom line: Student debt should not be the thing standing between you and your goals. Between a variety of repayment plans, loan consolidation, or refinancing, there are ways to repay your debt that are manageable.

Loan Consolidation vs Loan Refinancing

The word “consolidating” can have more than one meaning in connection with student loan financing. The federal government, for example, offers Direct Consolidation Loans, through which eligible federal student loans are combined into one, with the interest rate on the new loan being a weighted average of each of the original loans’ interest rates (rounded up to the nearest eighth of a percent).

When the word “consolidating” is used by private lenders, though, the loans are combined into one, but you get a brand new interest rate, not a
weighted average, based on personal financial factors. This means that when you “consolidate” student loans with a private lender such as SoFi, you’re also refinancing them.

If you consolidate your federal loans via a Direct Consolidation Loan with the government, and your payment goes down, that’s likely because the term has been extended from the standard 10-year repayment to 20 or even 25 years. This means that although you may be paying less each month, you’ll also be paying more in interest over the life of your loan.

If, though, you refinance your student loans with a private lender, and you get a better rate, you could choose a term that allows you to pay your loan off more quickly, which should save you in interest. Again, refinancing isn’t right for everyone—especially those who have federal student loans and may wish to take advantage of Public Service Loan Forgiveness, income-driven repayment, Direct Consolidation Loans, and other federal benefits and protections.

Medical Resident Refinance

If it’s time to refinance and you are interested in exploring a private lender, SoFi has created a student loan refinance program that’s specifically for medical residents. Potential borrowers can quickly and easily find their interest rate online and might benefit from low rates and low monthly payments during residency.

Is student debt getting in the way of pursuing a career in medicine? Check out SoFi’s medical resident student loan refinancing. By refinancing, you could save on your student loans, so paying for your M.D. is that much easier.

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.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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