SoFi

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

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

Refinancing to Pay Off Student Loans

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

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

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

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


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

What Is a Student Loan Cash-Out Refinance?

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

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

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

Some notes:

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

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

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

How Cash-Out Refinance Works for Student Loans

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

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

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

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

Recommended: Cash-Out Refinance vs HELOC

Pros of Cash-Out Refinance for Student Loans

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

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

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

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

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

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

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


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

Cons of Cash-Out Refinance for Student Loans

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

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

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

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

When to Execute a Student Loan Cash-Out Refinance

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

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

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

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

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

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

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

Refinancing Your Student Loans With SoFi

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

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

FAQ

How long does underwriting take for cash-out refinance?

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

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

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

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

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

Photo credit: iStock/FatCamera

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

SOSL09230684

A college degree can be a major rite of passage and career stepping stone for millions of Americans. Putting one’s education to work can unlock professional rewards and a solid financial future.

However, there’s no denying that the cost of tuition can be daunting. The student loan debt balance has surged 66% over the past decade and, according to the Federal Reserve, currently totals more than $1.77 trillion (that’s trillion, not billion).

Having those payments unfurling before you can be stressful and frustrating, and the effects of student loan debt can be far-reaching. It can seem as if some of your personal, professional, and financial goals will have to wait until you can pay off what you owe. But there are ways to manage those loans and navigate this situation. After all, student debt is what you are going through, not who you are.

Here, you’ll learn more about student loan debt, how it can impact borrowers’ life decisions, and ways to minimize those effects and manage debt more effectively.

Student Loan Debt Statistics

To understand how impactful student loan debt can be, here’s some perspective. Consumer debt in the United States is measured by the Federal Reserve in five distinct categories — home, auto, credit card, student, and other debt.

Using the Federal Reserve Bank of New York data from 2023, here’s how household debt stacks up in the U.S.:

•   Mortgage debt (excluding HELOCs, or home equity lines of credit): $12.14 trillion

•   Student loan debt: $1.599 trillion

•   Auto loan debt: $1.595 trillion

•   Credit card debt: $1.079 trillion

Here’s how educational debt stacks up more specifically: In 2023, the average student loan borrower carried $37,338 in federal debt and $54,921 in private debt.


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

Impact of Student Loan Debt on Life Plans

Given the cost of student loan debt, some borrowers may delay big life decisions, such as buying a home or starting a family until they are further along in their loan repayment or have their debt totally paid off. Here are some specifics about the potential negative effects of student loan debt. Then, more happily, you’ll find tips on managing what you owe.

Homebuying

One landmark study in the Journal of Labor Economics found that a $1,000 increase in student loan debt lowered the rate of homeownership by approximately 1.8% for people in their mid-twenties who went to a public college for four years. This is equivalent to a delay of about four months in achieving homeownership per $1,000 in debt.

Indeed, as student debt has increased, homeownership among younger Americans has decreased. Experts, however, caution that this is a complex situation and not a matter of student debt meaning you can’t buy a house.

It’s true that student loans can raise a person’s debt-to-income ratio (DTI), a critical measure of creditworthiness. And it can slow an individual’s ability to save for a down payment.

That said, there are ways to get a mortgage with a student loan. By managing debt responsibly and building your credit score, you can achieve this goal. It’s also wise to look into the various mortgages available with as little as 3% down or even 0% for qualifying candidates.

Pursuing Graduate School

If you have undergraduate student loan debt, you may decide to delay or forgo enrolling in a graduate or professional degree program. Graduate school can often mean even more debt. According to the Education Data Initiative, the average graduate student loan debt is $76,620 among federal borrowers, with only 14.3% of that coming from the borrower’s undergraduate studies.

That said, an advanced degree can mean increased job opportunities. For example, the starting salary for those who majored in computer and information sciences of a recent graduating class was $86,964 with a bachelor’s degree and $105,894 with a master’s degree. And if you want to go to medical school, law school, or business school (which can lead to fulfilling and lucrative careers), you will need significant additional training. So it’s important to determine if taking out the debt is worthwhile vs. your anticipated earning potential.

Recommended: Average Cost of Medical School

Employment and Career Choices

What you’ve just read indicates some of the ways that student loan debt can impact your career plans. There are a couple of other ways that your loan balance might impact your career:

•   If you have significant debt and are faced with the choice between your dream job at a lower salary and a basic job at a higher pay grade, you might opt for the one that fattens your bank account even though it doesn’t thrill you.

•   Also, some companies (particularly those in the financial industry) may check your credit score as part of your job application. Student loans could build your score if you pay on time, and they could broaden your credit mix. But loans also create the opportunity to make a late payment or miss one entirely. Those are aspects of your payment history, the single largest contributor to your score. If you don’t stick to your schedule and pay what you owe every month, you could wind up with a lower score.

Recommended: Average Student Loan Debt by State

Marriage and Divorce

Student loans can also impact one’s personal relationships. According to a 2023 Student Loan Planner® survey, one in four borrowers said they delayed their marriage plans due to student debt. In addition, more than half of respondents (57%) said their student loans were a source of considerable stress in their marriage or relationship.

Marriage can impact your student loan payments, depending on the types of loans you have and the repayment plan you are on. If you are on an income-based repayment plan, your monthly bill might change based on how much you and your spouse earn and how you file your taxes.

Marriages and money can create complex situations that are hard to fully decode. When looking at the impact of student loan debt on divorce, it can be tricky to unravel the interplay of factors. One survey conducted a few years ago found that 13% of respondents attribute student loan debt as a cause of their divorce. Yet some couples with student loan debt were more likely to delay divorce due to their student loans and how it might impact their ability to repay their debt. So in matters of the heart and the wallet, there isn’t a clear consensus.

Recommended: How Marriage Can Affect Your Student Loan Payments

Starting a Family

According to the USDA and other government statistics, it can cost more than $330,000 to raise a child to age 18. That’s no small amount, and it’s a daunting figure for many. Those carrying a hefty amount of student debt may delay parenthood as they pay off their loans.

One landmark New York Times survey in 2018 found that among people who didn’t plan to have children at all, 13% said it was as a result of student debt. In a more recent study of those with high student debt, 35% said they were waiting to have kids due to the impact of their loans on their finances. Still others may respond to this scenario by adopting strategies to pay off student loans faster.

Saving for Retirement

One of the negative effects of debt on young adults is that their retirement savings can be impacted. A recent study conducted by Fidelity found that 84% of borrowers felt that their loans impacted their ability to save for their retirement.

A study from a few years ago bore this out: Research by the Center for Retirement Research at Boston College found that Millennials who had never borrowed student loans saved twice as much for retirement by age 30 as college graduates who have student debt.

Here’s another bit of intel that supports the fact that student debt can make it harder to save for your future. Fidelity also found that the percentage of student loan borrowers who put at least 5% of their salary into their retirement plan rose from 63% to 72% during the Covid-19 loan payment pause.

Delaying retirement savings can mean playing catch up in your later years. Typically, the earlier you start saving for retirement, the more time your money will have to benefit from compound interest.

It can seem overwhelming to start saving for retirement while you’re still paying off student loan debt, but doing both at the same time can help you meet your financial goals in the future.


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

How to Manage Your Student Loans

As you’ve just read, student loans can impact many areas of your life. But you are not alone in this situation, and your loans will not be with you forever. Focus on smart solutions to help you manage your debt repayment. Consider the following strategies.

Keep Paying

Even when money is tight, it’s wise to pay on time, as much as possible. Timely payments are the single biggest contributing factor to your credit score, an important financial metric. So do your best to keep current on those monthly installments.

Make a Budget

It’s hard to effectively manage your student debt and your finances in general if you don’t know how much money you have coming in and going out. If you don’t yet have a budget or yours isn’t working well for you, commit to reviewing different budgeting methods and finding one that works.

This process of tracking your money and possibly trimming your spending could reveal ways to free up more funds to pay off your debt.

Repayment Plans

There are federal student loan repayment plans that base your monthly payment on your income or ones that give you a fixed monthly payment. Those that are based on your income may help you lower your monthly payment.

It can be worthwhile to consider your options. For fixed payments, you may have a choice between standard, graduated, and extended plans. If you focus on income-driven repayment (IDR) plans, you will likely review the SAVE Plan (which replaces REPAYE), PAYE, IBR (income-based repayment), and ICR (income-contingent repayment) plans. With IDR plans, once you satisfy a certain number of months of qualifying payments, you can be eligible for forgiveness on the remaining balance of your loan(s).

Deferment and Forbearance

If you are finding it challenging to pay your federal student loans, you may be able to take advantage of deferment or forbearance, which are both ways of pausing or lowering your payments for a specific period of time. Perhaps you haven’t yet found a job after graduation or have another situation that is impacting your ability to pay; these programs can help qualifying borrowers out.

The main difference between is that during deferment, borrowers are not required to pay the interest that accrues if they have a qualifying loan. With forbearance, however, borrowers are always responsible for paying the interest that accrues, no matter what kind of federal loans they have.

Forgiveness

Here’s another path to lessening the impact of student loans on your life: forgiveness, which means you may not have to pay back some or all of your federal student loans. For these programs, there are a variety of qualifying factors, such as whether you’re a teacher, government employee, or worker at a nonprofit. Other factors could be that you have a disability, your school closed, or you declared bankruptcy, among others. It’s worthwhile to research your eligibility because the upside could be significant.

Recommended: A Look at the Public Service Loan Forgiveness Program

Refinancing

Another possible way to reduce the impact of student debt on your life is student loan refinancing.

When you refinance your loans you take out a new loan with a private lender. Depending on your credit history and financial profile, you can qualify for a lower interest rate, which could substantially lower the amount of money you pay in interest over the life of the loan (depending on the term you select, of course). Two important notes about this:

•   When you refinance federal loans with a private loan, you forfeit federal protections and benefits (such as the forbearance and forgiveness options mentioned above).

•   If you refinance for an extended term, even though your monthly payment may be lower, you may pay more in interest over the life of the loan.

To see how refinancing could help you manage your student loans, take a look at an online student loan refinance calculator.

The Takeaway

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

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.

If you’re wondering how your student loan balance compares, here are the facts: The average student debt among borrowers ranges from more than $30,000 to over $50,000, depending on the kind of loans you have. Those are significant numbers, no doubt. If you are feeling the weight of your debt, you are not alone. There are currently about 45 million borrowers whose loans totaled a whopping $1.77 trillion at last count.

When you have student loans, it can be natural to think about how it compares to, say, your cousin’s, your BFF’s or your coworkers’ debt. Especially when you are feeling stressed about making your payments and paying off what you owe. “Is everyone in the same boat?” you may ask yourself.

Knowledge is power, so read on to learn more about how student loans shape up for other Americans, as well as options for managing your debt. You’ll get through this!

What Is the Average Student Loan Balance?

There are different ways to look at the data on average student loan balances. Here, using intel from the Education Data Initiative, you’ll find some important statistics so you can see how your student loan balance may compare to others.

•   The average federal loan debt is $37,338 per borrower.

•   The average private loan debt is $54,921 per borrower.

•   The average student borrows more than $30,000 towards their bachelor’s degree.

•   92% of borrowers with student loan debt have federal loans.

•   The average graduate student loan debt is $76,620 among federal borrowers.

•   For those with master’s degrees, the average debt is $83,651; among those with PhDs, the figure is $125,276.

•   As for Parent PLUS loans, the average amount of debt is $29,528, according to the most recent years studied.

Are you curious about how debt aligns with age? Here are additional figures to know.

•   Those borrowers age 30 have the highest average outstanding student loan debt, totaling $42,822 per person.

•   34% of those ages 18 to 29 have student loan debt.

•   Borrowers under age 40 account for 55% of all student loan debt.

•   Borrowers ages 40 to 49 owe 22% of America’s student loan debt balance.

Wondering how gender plays into student loan debt? Approximately 66% of debt belongs to women. The rest is borrowed by men. The data does not yet reflect nonbinary borrowers but will likely do so in the future.

If you are wondering how race correlates to student loan debt, these figures will shed some light on that angle:

•   Black college graduates owe on average $25,000 more in student debt than White graduates.

•   When checked four years after graduation, Black borrowers had student loan balances 188% higher than those of White borrowers.

•   Asian college graduates are the fastest to repay their debt.

•   Asian borrowers are also the most likely to earn a salary that exceeds their student loan balance.

Here’s a look at how student loan debt adds up by geographic location:

•   Borrowers in Washington, DC, have the top spot in terms of their average federal student loan balance at $54,945.

•   Borrowers in North Dakota have the lowest average federal student loan debt at $28,604. North Dakotans who take out these loans also have the distinction of living in the only state where borrowers have an average balance under $30,000.

•   The state with the highest percentage of borrowers with student loan debt is Washington, DC (not exactly a state, but still) at 17.2%. Hawaii earns the honor of state with the lowest figure. Only 8.4% of residents have student loan debt.

💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Other Student Loan Statistics

As you read these figures, you probably recognize that many other people are dealing with student debt, and considerable amounts of it in many cases. While you are thinking about how your student debt compares to others’, take a look at a few other interesting statistics:

•   The average student borrower takes 20 years to pay off their loan debt.

•   Some professional graduates can take more than 45 years to pay off all of their student debts.

•   At any moment, an average of 7% of student loans are in default. That’s about 4 million loans going into default per year.

•   In 2023, the amount of student debt that was forgiven was less than 1% of the total student loan debt balance.
Only 18.4% of eligible student loan borrowers apply for forgiveness.

Here’s something else to consider. If you’re getting ready to pay back what you owe or are already making your payments, you likely know how much you originally borrowed. But how can you tell what you owe with accumulated interest added on? Keep reading to learn more.

How to Check Your Student Loan Balance

Student loans come in two broad types, federal and private. Federal loans are either subsidized or unsubsidized. If it’s the former, then the government has been paying your interest while you’ve been in school. You only become responsible for interest when you’re no longer in college (and after your six-month grace period).

With unsubsidized loans, the interest will accumulate on the amount you borrowed while you’re still in school. You’re responsible for paying that interest from the moment your unsubsidized loan is disbursed.

Federal Student Loans

To find out what you owe in federal loans, you can check your federal student loan balance at StudentAid.gov. It will also show you how much of your loan balance is subsidized versus unsubsidized, along with other types of useful information.

You’ll need to create an account (if you haven’t yet done so) and use your FSA ID to log in and get the information you need.

Private Student Loans

For private student loans, you’ll need to contact the lender that gave you the funds to find out how much you owe. If you borrowed from more than one private lender, you’ll need to contact each one individually.

While federal loans typically come with a six-month grace period, check with each private lender, if applicable, to see if you have a similar grace period with them.

How to Manage Student Loan Debt

Once you know your total balance, then it’s time to figure out some strategic ways to pay back the balance. You want to still be able to enjoy postgrad life while eliminating those student loans.

Federal Repayment Programs

The federal government offers forgiveness programs, and, if relevant to your situation, you may get a portion of your remaining debt forgiven — meaning, you wouldn’t have to pay it back. It’s important to check to see which federal programs currently exist and see if you may qualify.

Some options to consider:

•   While the Standard Repayment Plan is the typical default repayment plan offered by the federal government, there are different federal student loan repayment options available that can have longer terms — but you have to request one. If you choose an option with a longer term, this will likely lower your monthly payment, but increase the amount of interest you’ll pay over the life of your loan. You might look into the Graduated and Extended Repayment Plans offered for federal loans.

•   A federal Direct Consolidation Loan can allow you to combine federal loans into one payment to lower the monthly amount due, simplify your personal finance management, and/or access federal forgiveness programs. (Note: This is not refinancing with a private lender; that will be covered in a minute.)

•   There are also income-driven repayment plans for federal student loan balances where payments are capped, based on your income. There are likely qualifying factors you’ll need to know about. If you consistently make payments for a specified number of years, depending upon your modified agreement, any remaining balance could be forgiven. (One potential downside is that loan amounts forgiven under this program can be taxed as income by your state.).

The income-driven plans you may qualify for are:

◦   The SAVE Plan (this replaces the REPAYE plans and comes fully available on July 1, 2024)

◦   The PAYE Plan

◦   The Income-contingent Repayment Plan, or ICR

◦   The Income-based Repayment Plan, or IBR a minute.)

◦   You might also look into the Public Service Loan Forgiveness (PSLF) Program where people who work in public service occupations may qualify for 100% forgiveness after making 120 on-time, qualifying payments.

Among the qualifying requirements, you would need to be employed full-time at an eligible governmental agency (federal, state or local) or at another designated organization, such as a 501(c)(3) nonprofit (not religious).

💡 Quick Tip: Federal parent PLUS loans might be a good candidate for refinancing to a lower rate.

Options for Private Student Loan Borrowers

If you have borrowed private student loans, sorry: None of the above options are available, nor can you refinance a private student loan with a federal one. But don’t feel discouraged, there are still repayment options.

•   You can see what offers you qualify for from other lenders. Depending on such factors as your credit score and loan term, you might be able to get a deal you prefer with a different lender. In other words, you are refinancing private loans with another private loan. (Just keep in mind that when you refinance a loan for an extended term, you typically pay more interest over the life of the loan.)

•   You might check with your employer and see if they offer any student loan repayment assistance. Some employers (though far from the majority) offer this as a benefit.

•   If you are truly struggling to make your loan payments, you might talk to your lender about what flexibility there may be in terms of your loan’s interest rate and/or repayment term. Meeting with a nonprofit credit counselor who is knowledgeable about student loans can be another helpful step.

Student Loan Refinancing

You’ve just read about private student loans and possibilities for refinancing them. Earlier in this article, you also learned about federal Direct Consolidation student loans. There’s one other option that you may want to consider as you manage your student loans and work to pay them off: refinancing federal student loans with private loans.

In this case, your federal loans are paid off with funds from a new loan secured from a private lender, which hopefully offers a more manageable monthly payment.

Two important points:

•   When you refinance a federal student loan with a private one, you forfeit federal benefits and protections, such as forbearance and forgiveness.

•   If you refinance for an extended term, it could mean that you pay more interest over the life of the loan, though your monthly payments may be more manageable for your budget.

If you’re considering this path, it can be wise to spend a bit of time with an online student loan refinance calculator to see how different options might play out. That can help you get on the best path to being debt-free based on your own particular circumstances.

The Takeaway

Student loans are a fact of life for more than 45 million Americans, and repaying them can be a challenge. As you look at your debt and repayment plan, it can be helpful to see how you compare to others who are also carrying this kind of loan. Average balances are currently in the range of $35,000 to $55,000 per borrower (or higher), so you may find that your situation is similar to many of your peers’.

However, just because student debt is common doesn’t mean it’s easy to pay back. So consider your repayment alternatives carefully and find the right fit for your needs. While it takes focus and patience, you can find a path to be done with your student debt.

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

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.

SOSL0124003

Imagine this: After spending 12 long years of education, it’s finally time to head to college. But hang on, because there’s a catch — tuition is much higher than you thought, and the school didn’t offer an academic scholarship.

One alternative for students can be to find a non-academic scholarship and keep pushing toward that dream. Here are tips on finding non-academic scholarships to help pay for a college education.

What Is a Non-Academic Scholarship?

Scholarships are one type of financial aid available to students that don’t need to be repaid and are typically awarded based on merit — that is, being especially knowledgeable or skilled in one area. Grants, which also do not need to be repaid, are typically awarded based on need and not based on academic or athletic merit. For example, Pell Grants are federal grants awarded to undergraduate students who exhibit exceptional financial need.

Scholarships can be awarded for many different reasons, including academic achievement. However, just because someone isn’t an A+ student doesn’t mean they can’t qualify for a scholarship. There are non-academic scholarships that are based on athletic or artistic achievement, community involvement, extracurricular activities, and more. Students may just need to put in a bit of legwork to find ones they qualify for and apply.

Recommended: Finding Free Money for College

Where to Find Non-Academic Scholarships

Often, the first step in getting a scholarship is to find it. Here are a few places to start your search.

School Counselor’s Office

High school students can check in with their high school counselor to see about any non-academic scholarship they may know about. The office may have a list of options available to students, and, because they may know the student, their skills, and their future aspirations, they may be able to hone in on the right scholarship for them.

School counselors may also have helpful information on navigating the financial aid process. One piece of the funding puzzle may be undergraduate loans if scholarships don’t cover all of the costs. Students may consider private student loans after exhausting federal aid, including federal student loans. This comprehensive private student loan guide dives into more detail.

College Admissions Website

If a high school student has already been accepted to school, they may check in with the college’s admission website. There, they could find a list of potential scholarships offered directly by the school. Students should also reach out directly to the admissions office or future academic counselors for assistance.

As the school year nears, you may consider checking in with your college’s financial aid office to see if they can guide you to unclaimed scholarships.

Scholarship Listing Websites

There are several scholarship search tools out there that roundup available scholarships to students, including destinations like FastWeb or CollegeBoard. Here, students can sift through hundreds of available scholarships and find help with the application process, as well.

Professional Associations and Clubs

Another place to find scholarships includes professional associations and clubs, such as churches, your parent’s employers, local businesses, minority groups, and more.

A quick Google search on professional organizations in your chosen field of study can lead to scholarships, too. Most are free to join and include fields such as marketing, engineering, graphic arts, law, and more.

Friends and Family

Sure, it may not seem as obvious, but merely asking around for scholarship opportunities can’t hurt. Students should reach out to their network and let everyone know they are on the hunt for financial assistance. Someone may know of a specific scholarship that could be the perfect fit for the student.

Connect With the Community

Explore connections with local religious groups, business, and other organizations. Having an existing connection can potentially improve an applicant’s chances of securing a scholarship. Plus, students may face less competition when they apply for more local scholarships.


💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.

Types of Non-Academic Scholarships

Need a little help thinking about what type of non-academic scholarship may fit? Here are a few types of scholarship ideas to get students started.

Talents

Have a unique talent? There’s probably a scholarship available for it. For example, you can find scholarships for duck calling, dancing, drawing, and much more.

Athletics

Each year, there are more than 180,000 athletic scholarships awarded to students. Scholarships are available for a wide variety of sports to both men and women, including volleyball, tennis, swimming & diving, skiing, lacrosse, golf, fencing, and more.

Heritage

Students may also find non-academic scholarships based on their heritage. Students from minority groups may find additional opportunities, including scholarships for African American or Hispanic students.

Some scholarships may be available through churches, while others can be found on websites like College Board. There, students of various backgrounds can search for a suitable match.

Interests

Students can apply to non-academic scholarships based on their various interests, too. For example, those interested in cars can apply for the National Corvette Club scholarship. Those students that love to cook can apply for the AAC Culinary Scholarships for High School Seniors .

Know a student who spends their Sundays completing The New York Times crossword puzzle in pen? Have them apply to the Crossword Hobbyist Crossword Scholarship . No matter the interest, odds are there is a scholarship out there for it.

Area of Study

Future and current college students may be able to find a scholarship that suits their future area of study. Students hoping to become their own CEOs can apply for The National Association for the
Self-Employed ’s Future Entrepreneur Scholarships, which helps promote “entrepreneurial thinking among aspiring business students.”

Again, if there’s an area of study, odds are there’s a scholarship available for it.

Area Code

Students looking for a non-academic scholarship can search for regional scholarships on many online databases. SoFi runs a state-by-state grant and scholarship database, so you can take a look at what is available in your area.

Other sources for regional or location-based scholarships may include local nonprofits and businesses.

Other, Outlandish Options

There are scholarships available for less obvious reasons, too. One of the more famous wacky scholarships is the Stuck at the Prom Scholarship Contest sponsored by Duck brand duct tape. Each year, the company awards a $5,000 scholarship to a teen who designs and wears a dress or tuxedo made out of their duct tape.

How to Get a Non-Academic Scholarship

There are thousands of non-academic scholarships available each year. In order to get a non-academic scholarship, you should first look for scholarships in line with your talents and career interests. From there, you can look to local businesses, friends and family, and your community to find other non-academic scholarships.

And finally, do a Google search for non-academic scholarships you think you may qualify for. There are scholarships available for almost every type of person and every interest, including scholarships for minorities, scholarships for people who dance, religious scholarships, first-generation scholarships, and more.

Tips for Finding & Applying for Non-Academic Scholarships

If you’re hoping to find and apply for non-academic scholarships to help pay for college, there are a few things you can do to increase your chances of getting one.

Start Early

Starting your search early is one of the best things you can do to land a scholarship. Since many scholarships come from the school you’re attending, it’s recommended to fill out the FAFSAⓇ as soon as possible. Some grants and scholarships offered by schools are on a first-come, first-served basis.

It’s also a good idea to start your search early so you can make sure you can meet all the deadlines for the scholarships you hope to apply for. Many will require essays, and the sooner you know which scholarships you want to apply for, the sooner you can get your essays completed and submitted.

Read the Fine Print

Make sure to read the fine print of all scholarship applications. This will ensure you won’t miss any deadlines or important information regarding the scholarship.

Showcase Your Personality

When applying for scholarships and writing essays, it’s important to showcase your personality through your written word. Most non-academic scholarships are fun, so feel free to express yourself and make it so your application stands out from the rest.

Proofread Your Application

Proofreading your application is a great way to catch any grammar errors or application mistakes prior to submission. If it comes down to you and one other candidate, you don’t want to miss out because of easy grammatical errors you could have caught by simply proofreading your application beforehand.

Don’t Give Up

And finally, keep searching and applying for scholarships until you receive the amount of money you’re hoping for. Scholarships can be competitive, so don’t get down on yourself if you’re struggling to get one. Instead, keep the momentum going by continually searching and applying for new opportunities as they arise.

The Takeaway

Non-academic scholarships can be awarded based on talent, skill, interest, and more. Some scholarships may even be regional or location based. To find non-academic scholarships, consult with your guidance counselor, your college’s financial aid office, local business and nonprofits, and online scholarship databases.

If scholarships and federal financial aid aren’t enough to cover college costs, private student loans can help fill in the gaps.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOIS0124009

In the wake of the Supreme Court’s decision to block the White House program for federal student loan forgiveness, President Joe Biden announced the Saving on a Valuable Education (SAVE) program, a new income-driven plan for federal loan repayment. Monthly payments on loans will be lowered, based on discretionary income.

On Jan. 12, 2024, the White House announced that beginning in February, borrowers enrolled in SAVE who took out less than $12,000 in loans and have been in repayment for 10 years will get their remaining student debt canceled immediately. In July, however, two courts issued injunctions against the plan, putting the forgiveness part on hold. We will update this page with new information as it becomes available.

Here’s what borrowers need to know about the SAVE Plan and who qualifies. As of January 2024, 6.9 million federal student loan borrowers were already enrolled in the plan.

Overview of the SAVE Plan

President Biden said he had created a new repayment plan, “so no one with an undergraduate loan has to pay more than 5 percent of their discretionary income.” It is part of his effort to make student loan debt more manageable especially for low-income borrowers, and it replaces the REPAYE program.

The SAVE Plan is the most affordable repayment plan for federal student loans yet, according to the Department of Education. Borrowers who are single and make less than $32,800 a year won’t have to make any payments at all. (If you are a family of four and make less than $67,500 annually, you also won’t have to make payments.)

For federal borrowers who are required to make payments (this depends on your income and family size) and have only undergraduate school loans, the monthly payments will be cut in half — from 10% of discretionary income to 5%, beginning in the summer of 2024. How long people will have to make payments depends on the size of their loan balance.

•   If their original undergraduate loan balance is $12,000 or less, they will need to make payments for 10 years – and after that, any remaining balance will be forgiven.

•   If their original undergraduate loan balance is more than $12,000, their payment period is capped at 20 years (the term goes up one year for every $1,000 above $12,000) — and any remaining balance will be forgiven.

For federal borrowers who have both undergraduate and graduate loans, their monthly payments will be a weighted average of 5% and 10% of their discretionary income. How long they will need to make payments is pending government guidance.

And for federal borrowers who have graduate school loans, their monthly payments will be 10% of their discretionary income. Also, under the SAVE Plan, those who originally took out $12,000 or less in loans are eligible for forgiveness after at least 10 years of monthly payments.

Recommended: Discretionary Income and Student Loans, and Why It Matters

How to Enroll in the SAVE Plan

Borrowers who are already enrolled in the REPAYE program will be automatically enrolled in the SAVE Plan. During the transition, the DOE says it will use the two plan names, SAVE and REPAYE, interchangeably.

Those who are not currently in the REPAYE program can apply now, and they will be switched to SAVE automatically.


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

How SAVE Is Better Than REPAYE

The SAVE Plan replaces the Revised Pay As You Earn Repayment Plan (REPAYE). It is an improvement on it in several ways:

•   The SAVE Plan allows for low-income borrowers to make no payments at all.

•   The SAVE Plan requires low-balance borrowers ($12,000 or less) to make payments for only 10 years.

•   The SAVE Plan requires borrowers with only undergraduate debt to pay 5% (instead of 10%) of their discretionary income.

Additionally, if the required payment based on your income does not cover all of the interest that accrues every month, the uncovered amount will not be added to your balance. In other words, your balance will not grow if you are making your payments.

Recommended: Supreme Court Blocks Student Loan Forgiveness, Biden Vows More Action

Who Will Owe $0 in Monthly Federal Loan Payments Under SAVE?

Whether you will owe monthly federal loan payments under the SAVE Plan depends on two factors: your income^* and your family size. Your payment will be zero if your income is at or under 225% of the Federal Poverty Level (FPL)^**.

To find out if you will be one of the estimated million borrowers who still won’t have monthly payments to make after the federal payment pause ends, look up your family size in the table below. If your income^* is equal to or below the corresponding “2023 Income Level Protected From Payment Under SAVE,”^** your monthly federal student loan payment will be $0.

^*Normally, the government uses adjusted gross income figures, but the DOE did not specify this in its factsheet .

^**Usually the government uses the prior year’s FPL and your prior year’s income, but the DOE used 2023 figures in its factsheet.

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

How Much Your Monthly Federal Loan Payments Could Be Under SAVE

To calculate how much your monthly federal payments could be starting in October 2023 under SAVE, look up your family size in the table above and see the corresponding protected income level^**. Subtract that dollar amount from your estimated 2023 income^* and multiply it by 10%. Then take that figure and divide it by 12 to get your monthly payment amount.

(2023 Income^* – 2023 Protected Income Level^**) x 10% ÷ 12 = Monthly Federal Loan Payment Under SAVE

^*Normally, the government uses adjusted gross income figures, but the DOE did not specify this in its factsheet.

^**Usually the government uses the prior year’s FPL and your prior year’s income, but the DOE used 2023 figures in its factsheet.

When Will the SAVE Plan Take Effect?

The SAVE Plan will replace REPAYE by the time payments were due in October 2023. Originally, the full impact of SAVE was supposed to happen in July 2024, but President Biden announced in January that starting in February, borrowers enrolled in SAVE who took out less than $12,000 in loans and have been in repayment for 10 years will get their remaining student debt canceled immediately.

The other elements of SAVE are not expected to take effect until July 1, 2024. This means that borrowers who are eligible to have their payments cut to 5% of their discretionary income won’t see the reduction until this summer.

But the DOE is increasing the amount of income that is protected from payments, so that single borrowers who make up to $32,800 will not have to make payments and borrowers in a family of four making less than $67,500 also won’t have payments due.

Also, starting in October 2023, an important change was made in the amount of interest paid through SAVE. If you make your full monthly payment, but it is not enough to cover the accrued monthly interest, the government covers the rest of the interest that accrued that month. This means that the SAVE Plan prevents your balance from growing due to unpaid interest.

Who Is Eligible for the SAVE Plan?

The SAVE Plan is available to federal student borrowers with Direct student loans. This includes:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans made to graduate or professional students

•   Direct Consolidation Loans that did not repay any PLUS loans made to parents

Additionally, you are eligible for the SAVE Plan if you consolidated a loan from the Federal Family Education Loan (FFEL) Program, including Subsidized and Unsubsidized Federal Stafford Loans, FFEL Plus Loans for graduate or professional study, FFEL Consolidated Loans that did not repay parents’ PLUS loans, and Federal Perkins Loans.

The SAVE Plan is not available for private student loans or Parent PLUS loans. Also, borrowers must be in good standing with their student loan payments. Borrowers in default who provide income information that shows they would have had a $0 payment at the time of default will be automatically moved to good standing, allowing them to access the SAVE plan.

Other Programs

In addition to the SAVE program, President Biden announced that the DOE is instituting a 12-month “on-ramp” to repayment, running from October 1, 2023 to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.

Moreover, the Public Service Loan Forgiveness Program exists to help professionals working in public service who are struggling to repay federal student loans.

The Takeaway

Though the new SAVE Plan for federal student loan borrowers won’t take full effect until July 2024, some benefits will be implemented by February. Namely, the SAVE Plan will give borrowers who originally borrowed $12,000 or less forgiveness after as few as 10 years. Also, low-income borrowers may be exempt from making payments, while loan balances will not grow for borrowers making payments even if their required payment amount doesn’t cover all of the interest that accrues every month.

In July 2024, eligible federal borrowers with only undergraduate debt will see their monthly payments cut at least in half.

This article will be updated as the DOE releases more information about SAVE. To find more details yourself, this StudentAid page is a good place to start.

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

Photo credit: iStock/Pekic

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

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOSL0124007