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Are you one of the many people who make financial resolutions every New Year? If so, congratulations! Whether your goal is to pay off debt, increase your savings or start investing for the future, there’s no time like the present to get started.

But if you’re one of the millions of Americans with student debt , it’s hard to know where to begin. How do you find extra money after making your student loan payment each month? Should you wait until your loans are paid off to start a savings account or begin investing ASAP for retirement? How much money should you allocate to each goal?

6 Tips to Build Your Savings—Even with Student Loans

While everyone’s situation is different, there are a few rules of thumb that can be useful when you’re trying to build a solid financial foundation, no matter how much student loan debt you have. Here are six steps that could help you get started.

1. Starting Small

If you’re like many people with student loans, you might not have a lot of extra money to invest or save at the end of each month. But that doesn’t have to stop you from trying. Putting away a small but consistent amount every paycheck, or once a month, can make a big difference over time. (Even a little something is better than nothing at all).

If you feel overwhelmed, perhaps focus on one or two goals at a time and just do what you can when you can. Maybe you want to save for a car or to put a down payment on a house. Or perhaps you don’t yet have an emergency fund (see #3).

You can start out by putting whatever you can afford into a high-yield savings account each month. Online-only financial institutions, like SoFi, are often able to offer more competitive interest rates than their brick and mortar counterparts.

So, if your money is sitting in a basic checking account, you could be missing out on the extra growth an online account can offer.

If you don’t want to think about setting that money aside every month—or worry that you won’t have the discipline to stick to your plan—you can arrange automatic transfers with your financial institution.

Some financial institutions also offer programs that can take a bit of the sting out of saving by rounding up expenditures to the nearest dollar and depositing the difference into your account.

And should you get an unexpected financial windfall—a tax refund, some birthday money, or a bonus at work—putting all, or a portion of it into that savings account can give it a nice boost here and there.

2. Reducing High Interest Rate Debt

If you have multiple sources of debt, it may make sense to focus your efforts on those with the highest interest rates first.

Of course, you should always pay at least the minimum on every debt you have each month. But if you have credit card debt as well as student loan debt, you might benefit from using a debt reduction strategy to pay off your bills.

Everyone’s financial situation is different, and there’s no “right way” to tackle debt, but we think SoFi’s “Fireball” method offers a balanced approach, because it targets high-interest debt and helps keep you motivated as you knock down each bill. Here’s how it works:

1. First, you’d separate your bills into “good” and “bad” debt. “Good” debts are those that can help you build your net worth—like a mortgage, business loan, or student loans. Good debt usually comes with a lower interest rate—typically 7% or less. “Bad” debt is different, because it can inhibit your ability to save money, and with higher interest rates, it’s usually more expensive in the long run.

2. Next, you’d take those bad-debt bills and list them in order from the smallest balance to the highest. Take the No. 1 bill on that list (the one with the smallest balance), and once you’ve paid the minimum on all your other bills—you could make it your mission to funnel any extra cash toward knocking down that balance.

3. Work your way down the list until all the bad debts are paid off. Once you blaze through the list, you should have more money to put toward the next bill and the next, until you get to and through the highest balances.

4. Carrying a balance on a high-interest credit card is kind of like swimming with weights tied to your ankles—it can make your financial strategy more difficult than it needs to be. So the last step of the Fireball method is to keep those balances paid off.

If you only have student loans, you can still use the Fireball method to pay them off. For example, you might pay the minimum on your lowest-interest subsidized loans while paying down your high-interest, unsubsidized PLUS or private loans more aggressively.

It also may be worth looking into consolidating your non-educational debt with a personal loan or, if you qualify, refinancing your student loans at a lower interest rate. A lower interest rate can reduce the amount of money you spend on any debt over the life of the debt.

And if the debt seems overwhelming—if, for example, you have multiple student loans—combining them into one payment could make things more manageable. (It’s important to note, though, that if you refinance your federal loans with a private student loan, you will lose access to borrower protections, such as Public Service Loan Forgiveness and income-driven repayment plans.)

3. Giving Yourself a Cushion

A general rule of thumb is to have three to six months’ worth of living expenses saved in an emergency fund in case you’re faced with an unexpected expense or if your source of income should suddenly disappear.

This is especially crucial for student loan borrowers, since, in some cases, even one late or missed payment can have an impact on your credit score. The ultimate purpose of an emergency fund is to create a financial cushion that allow you to pay all of your bills, including payments on your student loans, for at least a few months until you’re back on your feet.

4. Considering Investing as Soon as Possible

When it comes to retirement investing, waiting can cost you money. The sooner you start investing, the more time your portfolio has the potential to grow through compound interest.

Delaying your savings means you may need to save more on a monthly basis down the line. If you wait to get started until your student loans are totally paid off, you could be missing out on a lot of precious time.

That said, you don’t want retirement investing to come at the expense of your overall financial health. For example, you may want to delay or minimize investment contributions until you’ve paid down your high-interest debt and established an emergency fund (see #2 and #3). Instead, you could plan to increase contributions when you have only low interest rate student loans left on your plate.

5. Take the (Free) Money and Run

If you’re ready to start investing even though you still have student loans, there are a lot of account options out there. You could start by checking with your employer to see if the company offers a defined contribution plan, such as a 401(k), and if there is some type of matching contribution.

Many employers will match an employee’s elective deferral contribution up to a certain dollar amount or percentage of compensation. If that’s a perk at your place of business, why not aim to make the most of that match?

If you can do more, a frequently cited target is to save 15% of your income annually. But remember, if you start saving for retirement early, even small contributions can have an impact.

If your employer doesn’t offer a defined contribution plan or you’re self-employed, there are a number of other tax-advantaged retirement accounts that can help you grow your nest egg.

If you’re opening your own retirement savings account, such as a traditional or Roth IRA, you can do so at a brokerage firm, a bank, or an online financial services company, including SoFi Invest®. To find the right account for you, do your research and talk to a financial professional if needed. (As a SoFi member, you can get one-on-one access to financial advisors on the house.)

6. Adjusting as Needed

Your financial situation may look different each year, so you may want to occasionally revisit your strategy. (Quarterly might be a solid goal for you, but if that seems like a lot, an annual review could still be helpful.) In between reviews, you may find that using a tracking app can help you stick to your plan.

With an app like SoFi Relay, you can set goals, track your spending, and monitor your savings. As part of that review, you also may want to see if your investment account still matches the asset allocation you’re comfortable with, or if it needs rebalancing.

Staying on top of the day-to-day movements in your financial life can help you make better decisions for now and the future.

The next time you think about making an impulse purchase, you might decide to apply that money to your financial strategy instead. And if, down the road, you get a new job, get married, or get pregnant, you’ll have a head start on planning for what’s next.

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

SLR14102

When children first learn to walk, their parents usually hold their hand until they get the hang of it.

When children learn to ride a bike, their parents often run alongside them holding on until they get control.

In the same way, when children go off to college, parents typically want to help with the costs. College is expensive, after all, and they don’t want their kids to be buried in student debt before they ever really get on their own two feet.

So many parents offer all the support they can—even if they have to borrow the money. Which is why the government created Parent PLUS Loans—federal student loans that are extended directly to biological or adoptive parents (and, in some cases, stepparents) of undergraduate students.

The loans, which allow parents to borrow up to the cost of attendance at their student’s school, minus any other forms of financial aid received by the student, are relatively easy to get. They do require a credit check, but many private lenders have stricter eligibility criteria.

Direct PLUS Loans for parents, commonly called Parent PLUS Loans, are popular. According to the National Student Loan Data System, as of the second quarter of 2019, at least 3.5 million borrowers currently owe a collective $93.9 billion in Parent PLUS Loans.

Unfortunately, that’s becoming a problem. The Brookings Institute reported at the end of 2018 (the most recent report from them on the topic) that repayment outcomes for parent borrowers appear to be getting worse as balances continue to increase.

“Many parents supporting college students are saddled with large debt burdens,” the report states, “ultimately repaying just enough to avoid default and sometimes owing significantly more than their initial balance.”

Well-intentioned borrowing can end up backfiring on parents, who could be making loan payments for years or even decades, depending on the student loan repayment plan they choose.

That might not seem like a big deal when the loan is new—especially if the parents are nowhere near retirement age. But as the payments drag on, long after those children are settled and doing fine—perhaps with families of their own—it might make sense to rethink the debt and how it should be repaid.

For some parents, that could mean refinancing the student loans with a private lender, with the goal of getting lower monthly payment or a lower interest rate.

Some private lenders, like SoFi, allow the child to take out a refinanced loan to pay off the Parent PLUS loan. Or parents could set up an arrangement to have the child pay the Parent PLUS loan once they graduate from college.

Either way, Parent PLUS Loan refinancing is an option for getting that debt load under control. Here’s a guide to some key pros and cons and some steps to getting started:

1. So What Exactly Is Parent PLUS Loan Refinancing?

Parent PLUS Loans are federal loans offered to parents of undergraduate students. Refinancing these loans means consolidating them into one new loan from a private lender, ideally with a lower interest rate and/or better loan terms.

2. What Are the Benefits of Parent PLUS Loan Refinancing?

There are few reasons Parent PLUS Loan refinancing can make sense for a family. Moving to one manageable payment with a potentially lower interest rate might make it possible to pay off the loan faster and for less money overall.

Direct PLUS Loans typically have a higher interest rate than other federal student loans, and competitive private lenders (including SoFi) can potentially offer lower rates to qualifying borrowers.

3. Is There a Downside to Refinancing?

Yes. Federal Parent PLUS Loans come with certain borrower protections that private loans don’t offer. Payments can be deferred, and some or all of the debt may be discharged in the event of parental disability or bankruptcy or if the school closed.

(To make Parent PLUS Loans eligible for income-contingent repayment forgiveness—the only income-driven repayment plan Parent PLUS Loans are eligible for—the loans must be consolidated with a Direct Consolidation Loan—see the next topic.)

These federal benefits will be lost when refinancing to a private loan. However, some lenders offer their own benefits.

4. What’s the Difference Between a Federal Consolidation Loan and Private Loan Refinancing?

A federal Direct Consolidation Loan allows borrowers to combine multiple federal education loans into one more manageable payment.

And it may give borrowers access to additional federal loan repayment plans (including the income-contingent repayment plan). But it’s generally aimed at lowering payments by lengthening the amount of time agreed upon to pay the loan—not by lowering the interest rate.

The new fixed interest rate on a Direct Consolidation Loan is the weighted average of the interest rates on the loans that are being consolidated, rounded up to the nearest eighth of a percent. Also, parents can’t put a federal consolidation loan in their child’s name or transfer their debt to their child. So it is not the same as refinancing a Parent PLUS Loan through a private lender.

5. What Should Families Consider Before Moving Forward With Parent PLUS Loan Refinancing?

When refinancing, the new interest rate and overall eligibility for the loan may be determined by a number of factors. A bumpy credit history can affect a person’s ability to refinance.

Refinancing can be an especially attractive option for those with a steady income and strong credit histories. A borrower’s debt-to-income ratio and ability to pay when making lending decisions are typically also factors, but every lender has different criteria—so shopping around to compare offers is wise.

6. How Can Parents Get a Refinanced Loan in Their Name?

Parents can research the best refinancing interest rates, loan terms, and other benefits online, then apply for a new loan.

If the application is accepted, parents can use it to pay off the Parent PLUS Loan, then begin making scheduled payments to the new lender. The child can make payments on it if they choose as well, but the loan will still be in the parents’ names.

7. Can Parents Use Parent PLUS Loan Refinancing to Transfer That Debt Into the Child’s Name?

The short answer is “no.” The longer answer is, “but there’s another option.”

There’s no federal repayment program that will allow you to transfer your Parent PLUS Loan to your child. If the child is offering (or, at least, willing) to take over the debt, however—and if they have the means to make the payments—refinancing with a private lender can make that possible. In this case, it’s the child, not the parent, who applies for the loan.

With a few private lenders (SoFi included), your child can take out a refinanced loan and use it to pay off their parents’ Parent PLUS Loan. Your child still has to qualify and provide additional documentation (check with each lender to understand what’s required). And just like any would-be borrower, a solid credit history and a secure income (among other factors) help determine the interest rate offered.

If the child’s refinanced loan application is accepted, they can take over their parent’s PLUS loan and start paying it off. If there are any bumps in the road for the child, such as limited work history or adverse credit, parents could agree to co-sign for the new refinanced loan.

It’s important to remember, though, that a co-signer is promising to pay off the debt if the borrower stops making payments. So, parents who co-sign are still on the hook if their child can’t come up with the money every month.

If that scenario has your head spinning, it’s understandable. Refinancing might not be right for every family. But if you’re one of the many Parent PLUS borrowers who ends up with more debt than expected, refinancing to a private loan could be an option worth considering.

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.

SLR17108

Trying to figure out ways to lower your student loan interest rates?

The process may seem impossible to understand. Consolidation, refinancing, federal vs. private student loans, variable vs. fixed rates—what do these terms even mean?

The lingo isn’t as scary as it sounds. And snagging a lower student loan rate may not be as difficult as you think.

Granted, there are a lot of moving parts, between understanding average student loans rates and learning the difference between federal and private loans.

Don’t worry, though — we’ve done some homework for you. Once you get the hang of how rates work, you may be able to better determine whether you’re getting a good deal.

Who Sets Student Loan Rates for Federal and Private Loans

Federal student loan rates are set by Congress (through legislation). Your student loan servicer, or the company in charge of your loan repayment plan, doesn’t have any power to change your federal student loan interest rates.

Private lenders set their own interest rates, and each of those lenders may have multiple loan packages offering different rate and term options. The rate can depend on several factors, such as the lender’s underwriting criteria, and the borrower’s credit history, employment history, and income.

Average Student Loan Rates for Federal Loans

For the 2019–2020 school year, the interest rate on undergraduate Direct Loans taken out after July 1, 2019, is 4.53%. And for graduate Direct Loans, it’s 6.08%.

Direct PLUS loans, which are federal loans available to graduate students or to parents of undergrads, have an interest rate of 7.08% as of July 2019.

To break this down a little further, let’s say your debt is $31,172 , which is the average amount of student debt per person in the U.S. as of 2019.

Using SoFi’s Student Loan Calculator for an estimate, if you are paying an interest rate of approximately 4.53% over a 10-year term, your monthly payment would come to around $323.51 and the interest charge would be approximately $7,650, for a total debt of $38.822.

While these numbers may seem high, federal rates are actually down. Rates on federal student loans had been steadily rising for the past two years, but they dropped from 5.05% for the 2018–2019 school year to 4.53% for the 2019-2020 school year.

Federal student loan rates have been reset annually (in July) since a 2013 law that tied loan rates to market conditions and placed a cap on rates. Because of this law, federal student loan rates are based on the yield, or return on investment, of 10-year Treasury notes. These notes are sold at Treasury auctions held annually in May. A lower yield at the Treasury auctions prompts lower student loan rates.

If you’re a parent expecting more than one child to attend college in the coming years, remember that federal rates currently change annually. This means that your second or third child’s rate could be different from the rate of your student starting school in 2020. .

However, if rates rise, you can take comfort in knowing that a higher yield at the Treasury is also seen as a signal of investor confidence in U.S. economic growth—and though there’s obviously no guarantee of where the economy is headed, a strong economy is just the kind of thing you want when your child enters the job market after college.

Average Rates for Private Student Loans

Private lenders each set their own fees, interest rates, terms, and APRs. An APR (or annual percentage rate) combines the interest rate over a year with the fees to reflect the total cost of the loan and make it easier to compare lenders.

As of this writing, APRs on private student loans range from around just under 3% (for variable rate loans) to just under 14% . This range is similar to 2019, but can (and does frequently) fluctuate. Many lenders offer repayment terms of five, 10, or 15 years, and some will offer even more repayment options, like eight-year terms.

Even for a single lender, rates offered can differ depending on factors like the borrower’s credit history, employment, whether they have a cosigner, and the specific loan package chosen.

Lenders typically offer fixed rate loans, meaning the rate doesn’t change over time, or a variable rate loan, meaning the rate could go up or down during the debt repayment term depending on market factors.

Lowering Student Loan Payments by Consolidating or Refinancing

Whether you have one student loan or several, you might be able to get better rates or terms by either refinancing or consolidating your loans.

When you initially took out your student loan(s), you agreed to certain conditions, like fees, length of loan repayment, and, of course, interest rate. But better loan conditions might become available after you’ve agreed to your loan terms.

Maybe there’s a student loan option that better fits your needs but didn’t exist before, or there’s a new financial institution that’s arrived on the scene.

Or maybe your own financial situation has changed and you have a better-paying job or an improved credit score. Or perhaps you’ve chosen to work for a non-profit or for a government agency to give back to underserved communities.

In these cases, among others, consolidating or refinancing could be a game-changer. These two options are similar but have some important differences.

Lowering Monthly Payments by Consolidating Student Loans

If you have multiple federal loans, you could consider consolidating them with a Direct Consolidation Loan. When you consolidate federal student loans, you lump the loans you have chosen to consolidate into just one loan.

Consolidating your loans won’t necessarily land you a lower rate, first because the outstanding interest on the loans you’re consolidating is added to the principal balance on your new Direct Consolidation Loan..

In addition, to determine your new interest rate with a Direct Consolidation Loan, figure out the weighted average of all your original loans’ rates, then round up to the nearest eighth of a percent. You may want to play with the mix of loans you are thinking about consolidating to view different weighted averages.

In some cases, your monthly payments may decrease when you consolidate your loans, but it’s usually because you end up paying back your loans over a longer period of time—which means paying more for your loans overall.

Consolidation could be an ideal solution, especially if you’re seeking to take advantage of income-driven repayment or Public Service Loan Forgiveness (PSLF), but you might not save much on interest in the long run. However, some borrowers still prefer to consolidate. One reason may be because making one monthly payment is simpler than making several, so it can be easier to keep up.

Lowering Rates by Refinancing Student Loans

If you have private student loans (or a combination of federal and private student loans), you may benefit from refinancing. Essentially, refinancing is taking out a new loan with new terms to pay off an older debt.

How can refinancing lower your interest rate? When you refinance, the lender looks at your financial situation now as opposed to your finances from when you originally took out your loans.

Depending upon market conditions and if your credit has improved or you earn more money now, you could possibly qualify for a lower rate or more favorable terms on a new loan. If you qualify for a better interest rate, refinancing could mean saving thousands of dollars over the life of the loan. And the earlier you refinance into a lower student loan interest rate, the more you could possibly save.

Student loan refinancing into a longer term also could be a great way for working graduates with high-interest loans to save money without having to cut other expenses. Although, just as it is with the Direct Consolidation Loan, lower monthly payments are usually achieved by having a longer repayment term, which likely means paying more interest over the life of the refinance loan.

When refinancing, you can typically choose between fixed or variable interest rates. If a rate is fixed, your monthly payments will stay the same until you pay off the entire loan. When the rate is variable, it can change as economic conditions change.

As of this writing, fixed rates for private refinance loans range anywhere from around 4% to around 13%, and variable rates range between just under 3% to around 13% (but these rates can, and do, change frequently ).

Before you choose between a fixed or variable rate, you might want to talk with your chosen lender and if you are considering a variable rate, check out the London Interbank Offered Rate (LIBOR) movement to view how the LIBOR index is directly tied and can move in tandem with economic conditions and the fed funds rate. Refinancing is always done through a private lender. Many private lenders handle only private loans, but SoFi refinances both private and federal loans. This makes it possible to have only one monthly payment, even if you have both federal and private loans.

This way, you’ll no longer have to deal with the hassle of keeping track of multiple student loan payments that may have different lenders, terms, or interest rates.

SoFi doesn’t charge application fees, origination fees, or prepayment penalties. As a SoFi member, you are also eligible to gain complimentary access to features like career services, exclusive member events, , and live online customer support.

Before refinancing, keep one thing in mind: Refinancing government loans could mean losing out on federal benefits such as student loan forgiveness programs and income-driven repayment options, so it is worth considering this tradeoff before making any decisions.

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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.

SLR17108

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

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

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

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

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

Considering Refinancing Your Student Loans

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

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

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

Considering Consolidating Your Student Loan Debt

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

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

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

Paying Student Loans On Time Can Help Build Your Credit Score

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

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

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

Trying Increasing Your Student Loan Payment Each Month

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

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

Finding a Way to Save In Addition To Your Payment Plan

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

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

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

Trying to Paying Your Savings Account Like a Bill

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

Considering a Side Hustle

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

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

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

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

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

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

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

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

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

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

Why You Shouldn’t Ignore Missed Payments

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

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

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

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

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

Review Your Spending by Making a Budget

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

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

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

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

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

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

Looking into Deferment or Forbearance

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

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

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

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

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

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

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

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

Considering an Income-Driven Repayment Plan

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

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

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

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

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

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

Refinancing Your Student Loans

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

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

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

Getting Your Loans Back on Track

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

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

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

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