When it comes time to repay your federal student loans, you have to decide what kind of payment plan you want to be on. All borrowers qualify for the Standard Repayment Plan, which currently ensures you pay off your loan within 10 years. Starting in the summer of 2026, a new Standard Repayment Plan will be introduced and will require fixed payments over 10 to 25 years, depending on your loan amount.
The Standard Plan isn’t the only option available, and it might not be the best choice for your financial needs. By learning more about the Standard Repayment Plan, you can decide if it’s the right choice for you or you want to go a different route.
What Is the Standard Repayment Plan for Student Loans?
Upon graduation from college or if you drop below half-time enrollment, you have a six-month grace period for the Direct Loan program (nine months for a federal Perkins Loan) when you don’t have to make payments.
Once that ends, you’ll begin the Standard Repayment Plan, the default for all federal student loan borrowers once they have left school. That’s unless you choose a different plan. Let’s start by looking at the standard plan, which currently sets your monthly payments at a certain amount so that you will have your loans paid off within 10 years.
With the Standard Repayment Plan, borrowers currently pay fixed monthly payments for 10 years. Because the plan offers a relatively short repayment period and monthly payments don’t change, you will save more money in interest than longer repayment plans.
For example, if you just graduated with the average federal student loan debt of $39,075 at 6.39% interest, you’ll pay $13,905.58 in total interest. Expanding to 25 years at the same rate will lower your monthly payment by almost half, but you’ll end up paying $39,272.31 in total interest.
There’s a variation on the 10-year plan: the graduated repayment plan. Under this plan, repayments start low, and every two years, your payments increase. This is a good option for recent graduates who may have lower starting salaries but expect to see their pay increase substantially over 10 years.
Note that the Standard Repayment Plan will change for loans taken out on or after July 1, 2026. The refashioned plan will still have fixed payments, but the repayment term will be based on the loan amount, from 10 years for less than $25,000 to 25 years for more than $100,000.
What may make the Standard Repayment Plan less appealing to some borrowers is that payments will likely be higher than on any other federal repayment plan because of the short loan term.
For people with a large amount of student debt or high interest rates, the monthly payments can be daunting or unmanageable. You might face sticker shock when you receive your first bill after your grace period, so don’t let it come as a surprise.
To determine if the Standard Repayment Plan is a good option for you, you can use the federal Loan Simulator to calculate student loan payments. Or contact your loan servicer before your first payment is due to see how much you will owe each month.
Changing Your Repayment Schedule
If you want to change your repayment schedule or plan, call your loan servicer and see what they can do.
You’ll need to contact each loan servicer if you took out more than one loan and want to change repayment schedules. You can change your federal student loan repayment plan at any time, free of charge.
What Are the Pros and Cons of the Standard Repayment Plan?
There are upsides and downsides to weigh when considering the Standard Repayment Plan.
Pros
You will pay off your loans in less time than you would with other types of federal repayment plans, which may allow you to set aside money for things like purchasing a home.
You’ll save money on interest, since you’re paying your loan back faster than you would on other federal plans.
The plan offers predictability. Payments are the same amount every month.
You don’t need to recertify your loan every year to prove your eligibility.
Cons
Your monthly payments will probably be higher than payments made under other student loan repayment plans with extended repayment periods.
Your monthly payments are based on the number of years it will take you to repay the loan, not on how much you can afford, as with income-driven repayment plans.
With the Income-Based Repayment plan, your remaining balance will be forgiven after you make a certain number of eligible payments over 20 to 25 years.
The Takeaway
The federal Standard Repayment Plan of 10 years could be right for you if you’re able to keep up with payments and you want to pay off your debt quickly. (Be aware that the Standard Plan will be changing for loans taken out on or after July 1, 2026.)
Another option is to refinance your student loans to improve your interest rate and possibly change your loan term. Just realize that refinancing federal student loans into a private student loan means giving up federal benefits like income-driven repayment and loan forgiveness. Refinancing with an extended term could also increase your total interest charges.
If refinancing makes sense for you, it could save you money over the life of your loans and potentially allow you to pay your debt back faster.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
About the author
Kylie Ora Lobell
Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.
SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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.
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.
Unpaid student loans can take a significant toll on personal finances. For millions of Americans, outstanding student debt means years of ongoing payments, often averaging hundreds of dollars per month. It can be hard to balance paying back what’s owed on student loans while meeting immediate expenses and pursuing long-term financial goals.
But the impact student loan debt has on the economy goes deeper than dinging individuals’ bank accounts — it impacts entire economic sectors. Here’s how student debt affects the economy, plus ways borrowers can pay off their loans faster.
Key Points
• Student loan debt limits the disposable income of borrowers, leading to decreased spending on goods and services, which can slow economic growth.
• High debt levels often delay homeownership, marriage, and starting a family, affecting long-term economic stability and consumer markets.
• Borrowers are less likely to save for retirement or emergencies, which can lead to financial vulnerability and reduced economic resilience.
• The burden of student loans can influence career decisions, pushing graduates towards higher-paying jobs rather than pursuing their passions or contributing to less lucrative but essential sectors.
• Ways to pay off student loans quickly include making more than the minimum payment due, pursuing loan forgiveness programs, or refinancing their student loans.
Understanding How Many Americans Have Student Loans
For a comprehensive view of student loan debt and the economy, it’s useful to know just how much money is owed by borrowers across the U.S. in educational debt. In 2025, the cumulative total of student loan debt in the U.S. is nearly $1.8 trillion.
This educational debt load affects tens of millions of Americans. More than 42 million borrowers have federal student loan debt, with an average balance per individual of $38,375. To obtain a bachelor’s degree, the average public university student takes out almost $32,000 in undergraduate student loans.
For those with master’s degrees, student loan debt is even higher. The average master’s degree holder’s student loan debt is $84,203, which is more than double the average student debt balance.
Given these massive amounts, it becomes clearer how the U.S. college student loan debt crisis and the economy are enmeshed.
Demographics Most Affected by Student Loan Debt
The amount of student loan debt a borrower has varies by a number of demographic factors, including the level of education they attain, with individuals with graduate student loans owing more, as well as their race, income level, and gender. For instance, more women than men have student loan debt and black student loan holders tend to owe more than white borrowers, according to the Education Data Initiative (EDI).
Age is also a factor that can significantly affect student loan debt.
Age Groups Carrying the Most Debt
Borrowers under age 40 owe 54.5% of student loan debt, the EDI reports. While those in their 30s owe 32.5% of the student loan debt (or $517.45 billion in loans), student loan borrowers ages 18 to 29 are the age group most likely to have debt: One in four borrowers in this group owes student loan debt.
Older adults are also struggling with debt from their college years. In fact, adults ages 50 to 61 have an average student loan debt of $46,790, which is the highest student loan debt per borrower.
Here’s how student loan debt breaks down among age groups:
Age
Average student loan debt
18 to 29
$23,795
30 to 39
$42,014
40 to 49
$44,798
50 to 61
$46,790
Reviewing Effects of Student Loan Debt on the Economy
If the total amount of student loan debt held by Americans sounds staggering, that’s because it is. That total — $1.777 trillion — is more than the GDP of countries such as Australia, Spain, and South Korea.
With these numbers in mind, let’s dive deeper into the impact this massive amount of educational debt has on the U.S. economy.
Does Student Loan Debt Hamper Spending?
For those paying off a student loan, the average student loan payment for bachelor’s degree-holders is $336. Those with a master’s degree pay $842 per month, on average. For many — especially those embarking on a career and earning an entry-level salary — this ongoing financial obligation can put a serious dent in funds they could otherwise spend elsewhere.
Student loan repayments can take a big chunk of the money that individuals have available each month for buying, investing, saving, or starting a business.
Here’s why: More money spent paying back student loans means less money for consumer spending and saving. Consumer-driven economies grow when people spend their hard-earned money. If people are struggling to pay off their student loans, they’ll have less money to spend on purchases that help fuel the economy, businesses, and the workforce. The more individuals there are who are struggling to pay off loans, the greater this economic dampening effect that occurs.
During periods that require economic resilience, such as in a recession, reduced spending can be especially harmful. On the flipside, consumer spending can help to stimulate a floundering economy, possibly mitigating or reversing sudden downturns in specific sectors.
When spending doesn’t happen during a downturn, it can take longer for the economy as a whole to bounce back. And for those with student debt, it can also be harder to weather a financial crisis, compounding the pain of higher unemployment and lower spending.
With less money to spend, it’s no surprise that people with student loans have fewer funds for big ticket items, such as buying a home. According to the EDI, 29% of borrowers with student loan debt say their debt has prevented them from owning a home, and 51% of those who are currently renting say their debt prevents them from buying a place of their own.
Because home ownership is a major driver of wealth accumulation, delaying homeownership can impact an individual’s net worth for decades to come.
How Do Student Loans Stifle Entrepreneurship?
Small businesses contribute to the economy in major ways. In fact, they’re responsible for 1.5 million jobs annually, accounting for 64% of all new jobs. Small businesses employ 61.7 million people, which is almost 46% of the private sector workforce.
Future business owners who are saddled with student loan debt may not be able to turn to traditional means of financing, such as small business loans. It can be harder to get approved for financing when your debt-to-income ratio is high due to loans.
And when an individual with student debt does become an entrepreneur, they’re at risk of falling behind on student loan payments if their income decreases as they work to launch their business.
Paying Off Student Loans Can Benefit Individuals and the Economy
When examining student loan debt and the economy, it may be helpful for borrowers to research additional ways to pay off existing student loans — both for their own financial well-being and the future growth of the U.S. economy as a whole.
Here are some strategies that could help those with outstanding student debt to pay down their student loans faster.
Paying More than the Minimum Due
Student loan interest generally accrues over time. In most cases, the longer student loan debt goes unpaid, the more the borrower will owe, as unpaid interest gets added to the base dollar amount that had been borrowed from the lender. This is called compounding, and most student loans compound their interest daily. Our student loan calculator can help you see exactly how much you’re spending on interest over the life of the loan.
Many lenders allow borrowers the option to submit a minimum payment. In the short term, paying a lower amount per month can free up some income or cash. But paying the minimum does little or nothing to tackle the outstanding loan balance — typically, the borrower is just paying the accruing interest.
Paying more than the minimum can help reduce the length of time it will take to pay off an existing student loan, shrinking the principal balance as well as the amount of interest paid during the life of the loan. You can ask your lender to apply the additional payment to the principle of the loan, which can help reduce the amount you pay in interest over the life of the loan.
While increasing monthly payments may not be manageable for every individual, paying a little extra when possible can help borrowers eliminate student debt faster. If nothing else, borrowers may want to apply occasional windfalls, such as a work bonus or tax refund, toward their outstanding student debt.
Applying for Loan Forgiveness
Under some circumstances, the government will forgive federal student loans, essentially canceling out the remaining debt after a specific set of conditions have been met.
Some teachers and public servants are among the groups that may be eligible for federal student loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF). This program is available to qualifying federal student loan borrowers who work in public service for an eligible non-profit or government organization and who make a qualifying number of payments on an eligible repayment plan.
Some states and other organizations also offer forgiveness, especially for those in the healthcare field. There are also military forgiveness programs. Check to see what forgiveness programs are available that you might be eligible for.
Refinancing Student Loans
Refinancing student loans with a private lender may result in lower interest rates and/or the ability to pay off what’s owed in a shorter amount of time.
Student loan refinancing replaces outstanding student loans with a new loan. The new loan can have different terms and ideally, a lower interest rate.
However, it’s important to know that refinancing federal student loans with a private lender means that the borrower will forfeit federal benefits, such as access to income-driven repayment plans and federal public service forgiveness programs.
Budgeting and Financial Planning for Faster Repayment
Finally, to help pay off your student loans faster, examine your budget carefully. Track your spending and expenses and look for areas where you can cut back. For instance, maybe you can eat home more often to save on restaurant bills, or eliminate one of your streaming services — or both. You can then apply the money you save to your student loan payments.
Another step that could help: automating your monthly payments. That way, you can avoid any late fees. Plus, some lenders offer interest rate discounts to borrowers who enroll in auto pay.
The Takeaway
Student loan debt affects the economy in a number of different ways. Borrowers with student loan debt may have to reduce their consumer spending and delay buying a home or starting a business, for example, which can affect the broader economy.
Fortunately, there are methods borrowers can use to help manage student debt, such as paying more than the minimum amount due, budgeting for faster repayment, looking into student loan forgiveness programs, and considering student loan refinancing.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
How does student loan debt affect life?
Student loan debt can impact life significantly, affecting financial stability, mental health, and major life decisions. It may delay homeownership, marriage, and starting a family, and can cause stress and anxiety. High debt levels may also limit career choices and savings for retirement.
How does being in debt affect the economy?
Being in debt can strain personal finances and thus reduce consumer spending and savings. This can slow economic growth, as consumer spending is a key driver. High levels of debt can also lead to increased student loan default rates, affecting financial institutions and potentially causing broader economic instability.
How many Americans have student loans?
Almost 43 million million Americans have student loans, collectively owing over $1.7 trillion. This widespread debt affects a significant portion of the population, impacting their financial decisions and economic contributions.
What economic sectors are most impacted by student loan debt?
The economic sectors most impacted by student loan debt include consumer spending, since borrowers with high student loan debt may cut back on spending; housing, because student loan debt makes it more difficult for many student loan holders to save for a down payment or qualify for a mortgage; and entrepreneurship since those with student loan debt may have a tough time qualifying for financing, including small business loans.
Can widespread student loan forgiveness boost the economy?
It’s not known whether widespread student loan forgiveness could boost the economy and there is a lot of debate about the effect it might have. Some economists think widespread forgiveness could provide an economic boost because it would increase consumer spending, drive sales of housing, and help with the launch of new businesses. Other economists believe the impact might be small, that forgiving student loans would be a huge cost to the federal government, and that forgiveness would be unfair to borrowers who have already repaid their loans.
SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
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.
Student loans can be discharged in certain circumstances. When federal student loans are discharged, your requirement to pay back some or the entire remaining amount of your debt due is eliminated. However, this usually only happens in unique life situations, such as school closure, permanent disability, or death. However, because of a new student loans bankruptcy process, it may be possible to discharge student loans in bankruptcy.
Ahead, we explain who may qualify for student loan discharge, and other options for managing student loan debt.
When You Can Discharge Student Loans
Interested in discharging your student loans? Wondering when can student loans be discharged during bankruptcy? Here are details about some of the circumstances under which you may qualify for student loan discharge.
Total and Permanent Disability Discharge
To qualify for a federal student loan discharge due to disability, you must have a “total and permanent” disability that can be verified by the U.S. Department of Veterans Affairs, the Social Security Administration, or a qualified doctor. You also must complete a discharge application available at StudentAid.gov, which includes documentation showing you meet the government’s requirements for being considered disabled.
Veterans may be eligible for student loan discharge if they can provide paperwork from the VA demonstrating they either have a disability that is 100% disabling due to their service, or are totally disabled due to an individual unemployability rating.
For those borrowers who are eligible for Social Security Disability Insurance or Supplemental Security Income, you may also qualify for loan discharge by providing documentation of your Social Security award.
Not all private student lenders give you the option to discharge your loans if you’re permanently disabled. While you might be able to file an application to discharge your federal student loans because of disability, with private loans, you may have to consider legal action. You should speak to an attorney to determine if that’s the right course of action.
Federal student loan discharge may also be granted if the borrower dies. Parents who have taken out Parent PLUS loans on behalf of a student may also have these loans forgiven if the student or parent dies.
Proof of death, such as an original death certificate or certified copy, must be submitted in order for the loans to be canceled.
Declaring Bankruptcy and Discharging Student Loans
Can student loans be discharged during bankruptcy? And does bankruptcy clear student loans? The answer is yes to both questions, but the process can be lengthy and somewhat complicated.
Until late 2022, it was challenging and rare for federal student loans to be discharged through bankruptcy. But a process unveiled by the Justice Department in November 2022 makes it easier. Those filing for bankruptcy must fill out what’s called an attestation form to verify that they fit the definition of “undue hardship.” Their request is then evaluated by the bankruptcy judge under new standards, and their debt may be fully or partially forgiven.
Borrowers must pass a three-part test to prove they qualify for “undue hardship” and should have their federal loans discharged:
1. Is the borrower able to maintain a minimal standard of living while paying their student loans?
2. Have they made a good faith effort to repay the loans?
3. Will they continue to struggle to make payments during the remaining term of their loan?
It’s important to understand that filing for bankruptcy can have serious consequences. For instance, bankruptcy will impact your credit for years. It’s best to consult with a qualified professional, such as an attorney specializing in bankruptcy law, before making any decisions.
Closed School Discharge of Loans
If your school closes, you may be eligible for a 100% discharge of certain loan types, including Direct Loans, FFEL, and Federal Perkins loans. However, for this to apply, you must meet one of the following criteria:
• You must have been enrolled at the time the school closed
• You must have been on an approved leave when the school closed
• Your school closed within 180 days after you withdrew
Only federal student loans can be discharged due to school closure and other circumstances. For private loans, you must contact your lender directly to see if you will qualify with them.
Loan Discharge Because You Were Misled By Your College
If you have federal loans, and you feel your school “misled” you — for instance, by promising you’d get certain jobs or certain salaries — you may qualify to apply for Borrower Defense Discharge through the Department of Education. Note that this program has been challenged in court, but borrowers can still submit an application.
The application process is lengthy and submitting an application does not guarantee that your loans will be canceled.
False Certification Discharge
In very rare circumstances, you may be eligible for a discharge if loans were issued but they should not have been given out to you in the first place. For instance, this may apply if:
• Your school falsely certified that you had a high school diploma or GED
• You had a disqualifying status, such as a physical or mental condition, criminal record or other circumstance, at the time of the school certified your eligibility
• Someone else or your school signed your name on the loan application or promissory note
In all of the above circumstances, your loans might be discharged.
Unpaid Refund Discharge
If you leave school after getting a loan, your school may also be required to return part of your loan money. You may be eligible for a partial discharge if you withdraw from school, and the college did not return the portion it was required to under the law.
In this case, only the amount of the unpaid refund would be discharged.
Alternatives to Discharging Student Loans
Since qualifying for a student loan discharge is only permitted under certain circumstances, it’s important to look at other options for federal loans. Here are some of the other choices you may have to help you pay off your student loan debt:
Forbearance: Forbearance temporarily allows you to stop making your federal student loan payments or reduce the amount you have to pay. You may qualify if you are unable to make monthly loan payments because of financial difficulties, medical expenses, or changes in employment. Usually interest will still accrue while your loan is in forbearance.
Deferment: You may be able to defer your loans in certain circumstances, such as going back to school. Depending on your loan type, your loans may still accrue interest while in deferment. However, if you qualify for deferment on federal subsidized loans, you generally will not be charged interest during deferment. Note that deferment for economic hardship or unemployment will no longer be an option for loans issued after July 1, 2027.
Income-based repayment: With income-driven repayment, you may be able to reduce your monthly student loan payments if you can’t afford your monthly payments on a Standard Loan Repayment plan. With an IDR plan, you’ll make monthly payments of 10% to 20% of your monthly discretionary income. The Income-Based Repayment plan will forgive your remaining balance after 20 or 25 years. Note that two current options, PAYE and ICR, are set to close in the coming years. Existing borrowers will still be able to use IBR or switch to the new Repayment Assistance Plan (RAP).
Cancellation: If you have a federal Perkins Loan, you may qualify for up to 100% cancellation if you served full-time in a public or nonprofit elementary or secondary school system as a teacher serving low income students or students with disability or teach in a certain field. In addition to teachers, the following jobs may qualify you for partial or whole Perkins Loan cancellation: early childhood education provider, employee at a child or family services agency, faculty member at a tribal college or university, firefighter, law enforcement officer, librarian with master’s degree at Title I school, military service, nurse or medical technician, professional provider of early intervention (disability) services, public defender, speech pathologist with master’s degree at Title I school, volunteer service (Americorps Vista or Peace Corps).
Forgiveness: For borrowers working certain qualifying public service jobs, student loan forgiveness may be an option. With this option, your remaining student loan balance will be forgiven after you make 120 qualifying monthly payments while working full-time for a qualifying employer, which can include government organizations and certain not-for-profit organizations.
When to Refinance Your Student Loan Debt
Unlike student loan forbearance or deferment, which are temporary, short-term solutions, student loan refinancing can be a long-term debt solution. If you don’t qualify for the options mentioned above, refinancing can help simplify your repayment process since all of your loans can be taken care of with one monthly payment. If you refinance with a private lender, you can also change the term length on your student loans.
Should you refinance your student loans? You’ll need to weigh the pros and cons. One very important consideration is that if you refinance your federal student loans with a private lender, you will forfeit your eligibility for federal loan benefits, including student loan forgiveness or deferment. Using a student loan refinance calculator can show you how much you might save.
As you can see, it is possible to discharge student loans, but only in unique life circumstances, such as disability or false certification. If you do qualify, you may not have to pay some or all of your student loans, though you may have to pay taxes on the discharged balance.
If you don’t qualify for student loan discharge or one of the alternatives programs, refinancing your student loans with a private lender like SoFi can help get you a potentially lower interest rate, or a lower monthly payment if you extend your loan term. (You may pay more interest over the life of the loan if you refinance with an extended term.) Refinancing federal student loans also means losing access to federal discharge programs and other benefits.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
This article is not intended to be legal advice. Please consult an attorney for advice.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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.
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.
Can you pay off someone else’s loan? As a general rule, yes — so if you’re a student loan borrower and someone offers you assistance in paying off your loans, you may want to take them up on it.
However, it’s important to understand the implications. While a parent, grandparent, or even a mysterious benefactor could pay off your student loans, they may be responsible for a gift tax if they contribute more than the annual limit. The gift could also come with emotional strings attached.
Read on to learn about the tax implications of paying off someone else’s student loans — and how to repay your loans if the responsibility is all yours.
• If someone pays off your student loans, they may face a gift tax if the amount exceeds the annual IRS exclusion limit.
• Employers can contribute to your student loans without it counting as taxable income, up to a certain amount per year.
• Payments made by parents or others directly to the loan servicer do not count as taxable income for the recipient.
• Gift tax implications apply if a single individual gifts more than $19,000 in one year, but actual tax liability may depend on lifetime gift amounts.
• Ways to pay off your student loans include student loan consolidation, student loan forgiveness, student loan refinancing, and income-driven repayment plans.
Student Loan Repayment
Repaying student loans is a significant financial commitment that requires careful planning and management. After graduation, most federal student loans enter a grace period, typically lasting six months, during which no payments are required. This grace period allows you to get settled into your post-graduation life and start preparing for regular monthly payments. Once the grace period ends, you will begin making payments according to the repayment plan you have chosen.
The standard repayment plan is a fixed monthly payment over 10 years, but there are several other options available to accommodate different financial situations, including income-driven repayment plans.
Common Repayment Scenarios Involving Third Parties
Third parties, such as family members, friends, or employers, can play a significant role in helping borrowers pay off their student loans.
For instance, parents or grandparents might choose to make payments directly to the loan servicer, or they could gift money to the borrower to be used for loan repayment.
Employers may offer student loan repayment assistance as part of their benefits package, contributing a set amount each month or year toward the borrower’s loans. Through CARES Act legislation, employers can contribute up to $5,250 per employee per year toward student loans without the payment counting toward the employee’s taxable income, through 2025.
While these third-party contributions can be a huge relief, it’s important for borrowers to communicate clearly with their servicers and ensure that payments are applied correctly to avoid any administrative issues.
Tax Implications of Employer Student Loan Assistance
Employer-provided student loan assistance can offer significant financial relief, but it also comes with potential tax implications. As of 2023, the first $5,250 of employer contributions toward an employee’s student loans is tax-free. Any amount above this threshold is considered taxable income and must be reported on the employee’s W-2 form. This means that the employee will owe income tax on the additional amount, which could affect their overall tax liability.
Can Parents Pay Off Their Child’s Student Loans?
Yes, they can. But can parents pay off student loans without a gift tax? It depends. If a parent is a cosigner, paying the student loans in full will not trigger a gift tax. In the mind of the IRS, the parent is not providing a gift but is paying off a debt.
However, if a parent is not a cosigner, a gift tax could be triggered, depending on how much they pay.
How the Gift Tax Works
The gift tax applies to the transfer of any type of property (including money), or the use of income from property, without expecting to receive something of at least equal value in return, the IRS says — adding that if you make an interest-free or reduced-interest loan, you may be making a gift.
There are some exceptions. Gifts between spouses aren’t included in the gift tax. That means if you are married and your spouse pays off your loans, that would not trigger a gift tax event.
Tuition paid directly to qualifying educational institutions in the United States or overseas is also not subject to gift tax, but student loans are different.
The annual exclusion for gifts is $19,000 in 2025. That means an individual can give you up to $19,000 without triggering the gift tax, which the givers, not receivers, generally pay. If your parents file taxes jointly, they would be able to give a combined $38,000 a year, which could include paying down loans. Borrowers who have the good fortune to snag $19,000 from mom, dad, granddad, and grandma could get a total of $76,000 without any family member having to file a gift tax return.
As stated, the annual gift tax exclusion for 2025 is $19,000. However, a gift of more than $19,000 towards your student loans doesn’t mean that your benefactor is on the hook for paying a tax on their gift.
The excess amount just gets added to the lifetime exclusion — currently set at $13.99 million. As long as the benefactor’s total lifetime gifts are below that amount, they don’t have to worry about paying a gift tax. Still, if bumping against that lifetime exclusion is a concern, they can spread out their support over the years to avoid gifting you more than $19,000 in a calendar year.
Filing Requirements for Gifts Over the Limit
When an individual gives a gift that exceeds the annual exclusion limit, they are required to file a gift tax return, Form 709, with the IRS.
If the total value of gifts given over the years, including the current gift, does not exceed this lifetime exemption of 13.99 million, no gift tax will be due. However, failing to file the required return can result in penalties and interest. Therefore, it’s essential for individuals who make large gifts to stay informed about these requirements and to consult with a tax professional to ensure compliance and manage their tax obligations effectively.
What Happens When Someone Pays Off Student Loans For You?
• Paying you, with the expectation you will pay the lender
But if someone pays off your debt, is that income? Once another person has paid off your student loans, it’s as if you had paid them off yourself. You would not have any tax liability.
Financial and Tax Consequences
When someone pays off a student loan on your behalf, the financial and tax consequences can vary. Financially, the immediate benefit is the reduction or elimination of your debt, which can build your credit score, free up cash flow, and reduce financial stress.
However, from a tax perspective, the situation is a bit more complex. If the payment is made by a family member or friend, it is generally considered a gift and is not taxable to you, provided it does not exceed the annual gift tax exclusion limit, which is $19,000 per recipient as of 2025. If the gift exceeds this limit, the giver may need to file a gift tax return, but this typically does not result in immediate tax for the recipient.
If the payment is made by an employer, up to $5,250 of the assistance is tax-free, but any amount above this threshold is considered taxable income to you and must be reported on your W-2.
Impact on Credit and Loan Balances
When someone pays off your student loan, the impact on your credit and loan balances is generally positive. Your loan balance will decrease or be completely eliminated, which can significantly improve your debt-to-income ratio and reduce your monthly financial obligations.
The timely payment of your student loan can have a positive effect on your credit score, as it demonstrates responsible debt management. However, it’s important to ensure that the lender reports the payment to the credit bureaus, as this will help reflect the positive change in your credit report.
Other Options to Pay Off Student Loans
Not everyone has a benefactor, of course. While someone taking your student loan balance down to zero can seem like a dream, there are realistic ways to ease the burden of student loans, no third party required.
The one thing that won’t help: if you stop paying your student loans. Ignoring your student loan payments will result in an increased balance, additional fees, and a lower credit score.
If you hold federal student loans and stop paying them, part of your wages could be garnished, and your tax refund could be withheld. If you default on a private student loan, the lender might file a suit to collect from you.
In other words, coming up with a repayment plan is crucial. Strategies to pay off undergraduate and graduate student loans include student loan consolidation, student loan refinancing, student loan forgiveness, and income-driven repayment plans.
Student Loan Consolidation
If you have federal student loans, you may consider consolidation, or combining multiple loans into one federal loan. The interest rate is the weighted average of all the loans’ rates, rounded up to the nearest one-eighth of a percentage point.
Federal student loan consolidation via a Direct Consolidation Loan can lower your monthly payment by giving you up to 30 years to repay your loans. It can also streamline payment processing.
Consolidating federal loans other than Direct Loans may give borrowers access to programs they might not otherwise be eligible for, including additional income-driven repayment plan options and Public Service Loan Forgiveness.
Student loan forgiveness is a program designed to alleviate the financial burden of student debt for eligible borrowers. These programs are often aimed at individuals who have pursued specific careers in public service, teaching, or other fields that benefit society. To qualify, borrowers typically need to meet certain criteria, such as making a set number of on-time payments and working in a qualifying job for a specified period. The most well-known program is the Public Service Loan Forgiveness (PSLF) program, which forgives the remaining balance of federal student loans after 120 qualifying payments.
Borrowers who take out loans on or after July 1, 2026 can still benefit from PSLF so long as they choose the RAP and not the standard repayment plan.
Another way students can get their loans forgiven is through a disability discharge. Disability discharge is a provision that allows borrowers with total and permanent disabilities to have their federal student loans forgiven. To qualify, borrowers must provide documentation from a physician or the Social Security Administration (SSA) confirming their disability status. Once approved, the borrower’s remaining loan balance is forgiven, and they are no longer responsible for making payments.
Student Loan Refinancing
With student loan refinancing, a borrower takes on one new, private student loan to pay off previous federal and/or private student loans. Ideally, the goal is a lower interest rate. The repayment term might also change.
However, refinancing federal loans means that borrowers will no longer be eligible for federal repayment plans, forgiveness programs, and other benefits. If a borrower needs access to those programs, student loan refinancing won’t make sense.
But for borrowers who have no plans to use the federal programs, a lower rate could make refinancing worthwhile. Using a student loan refinancing calculator can help a borrower see how much money they might save by refinancing one or all of their loans.
Income-driven repayment (IDR) plans are federal student loan repayment options designed to make monthly payments more affordable by basing them on a borrower’s income and family size. These plans typically cap your monthly payment at 5% to 20% of your discretionary income and extend the loan term to 20 or 25 years, depending on the specific plan.
Starting on July 1, 2026, income-driven repayment plans PAYE, ICR, and SAVE will be replaced by a new Repayment Assistance Plan (RAP). The existing IDR plans will be eliminated by July 1, 2028. With RAP, payments range from 1% to 10% of adjusted gross income with terms up to 30 years. After the term is up, any remaining debt will be forgiven.
Refinancing Student Loans With SoFi
Even if your parents, grandparents, or others in your life are not in a position to pay off your student loans for you, understanding your options for potentially lowering your monthly payments or saving money over the life of a loan can give you multiple avenues to explore as you work toward taking control of your finances.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
Can I pay off my child’s student loans?
Yes, you can pay off your child’s student loans. But, depending on the amount, there may be tax implications.
Is paying off a child’s student loans considered a gift?
Yes. Paying student loans for someone else is considered a gift and would incur a gift tax for any gift above $19,000, which is the gift exclusion cutoff for 2025. That means both parents can contribute $38,000 per calendar year toward their child’s student loans without owing gift tax.
Can I pay off my sibling’s student loans?
Yes. You can absolutely win sibling of the year and pay off your sibling’s student loans. Just know that any gift above $19,000 in 2025 will trigger a gift tax that you will be responsible for paying.
Do I owe taxes if someone else pays my student loans?
If someone else pays your student loans, the amount paid may be considered taxable income, especially if it exceeds the annual gift tax exclusion. However, if the payments are made directly to the lender, they are generally not taxable. Always consult a tax professional for specific advice.
Can paying off someone’s loans impact their eligibility for forgiveness programs?
Paying off someone’s loans can impact their eligibility for forgiveness programs, as these programs often require a specific amount of unpaid debt and a history of consistent payments. If the loans are fully paid off, the individual may no longer qualify for forgiveness. Consult the specific program’s rules for details.
Photo credit: iStock/Halfpoint
SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Attending college is a big milestone that both parents and students look forward to for many months.
While this is a highly anticipated event, college move-in day can also be a very stressful and emotional day for both students and parents. Attending a college that is out of state can be another nerve-wracking factor.
Moving can be challenging, especially if it’s hot or you have to climb up several sets of stairs. Fortunately, there are several things you can do ahead of time over the summer that can help ensure the day goes as smoothly as possible.
• On college move-in day, it’s best to beat the crowds and find parking more easily by arriving early, giving you and your child more time to settle in and meet roommates.
• Bring only essential items to avoid clutter and make the move-in process smoother and less stressful.
• Maintain a positive and encouraging attitude to help your child feel confident and excited about their new college life.
• Introduce yourself to your child’s roommates and their families to foster a friendly and supportive living environment.
• After helping with move-in, trust your child to handle their new independence and encourage them to explore and engage with their new surroundings.
Preparing for the Big Day
Getting organized beforehand is one surefire way to prepare for the big move as a college freshman. Here are a few ideas to help you and your child get ready for move-in day.
Getting Familiar with Dorm Room Rules
Being prepared and learning what the college dorms allow students to bring can relieve some potential headaches. Colleges typically post a list of items that students can bring and ones that are prohibited in the residence halls.
Sticking to the basics is a good start since your child can buy more items from a local store or have it shipped to them at a later date.
Recommend that your child contact their roommate over the summer and discuss their interests and what items each of them are bringing. This can be one way to help avoid bringing duplicates, especially for larger items like TVs or bean bags.
Another idea is to coordinate the time you are going to move in so you can assist each other during the process. This can also be helpful if the parents are interested in meeting each other.
Packing with Purpose
Packing for college can be a frustrating task, but one way to expedite the chore is to have your child label all the containers and boxes so you know what’s already packed and can easily find things once you arrive. If you have items that are more fragile, consider putting them into heavy plastic containers so they are less likely to be damaged during the move.
Also consider making a list of must-have items to limit the chance that something important is forgotten. For example, bedding, computer, school supplies, a first aid kit, and basic tool kit — which can be extremely useful on move-in day.
Consider the Climate
If your child is attending a college that is out of state or in a different climate, you may have to build out a more weather-appropriate wardrobe. For instance, if your child is moving to a college in the Midwest from Florida, you might buy and pack weatherproof boots, jackets, scarves, gloves, and other clothing suited for colder temperatures.
If they are attending college in a warmer climate, consider packing more t-shirts and shorts and leave some of the sweatshirts and wool sweaters at home.
Once you’ve organized and packed all of your child’s belongings, it’s time to decide how you’ll get everything to campus. This will likely depend on factors like how far away the school is.
Consider renting an SUV or a moving van if the university is within driving distance and you own a smaller vehicle. If you plan on driving your own vehicle, pack the car strategically, so items you’ll need first (like cleaning supplies), are easily accessible when you arrive.
If you’re planning to fly to the college, another strategy may be to mail some of the belongings to the residence hall ahead of time, if it is permitted.
💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than Federal Parent PLUS Loans. Federal PLUS Loans also come with an origination fee.
What to Expect on Move-In Day
Below are some ways to make college move-in day easier on you and your student.
Limit the Number of People
While going to college is exciting for your child and your family, consider limiting the number of people you bring with you on moving day.
Having too many people could actually slow down or complicate the process. Plus, it’s likely that many students and their parents will all be in the residence halls at the same time. Dorm rooms can be pretty small and having more people in the space could create more chaos and tension.
Instead, consider planning a visit when there is more flexibility. Many colleges have a family weekend in the fall. This could provide an opportunity for a longer, more relaxing and fun visit, especially if grandparents, aunts, and uncles also want to tag along.
Be Prepared for Hot Weather
Since many students move in during late summer, it can help to be prepared for heat (and humidity, depending on the local climate). It’s likely going to be hot, especially if the residential dorm does not have central air conditioning and only window units or getting to a top floor requires traipsing up and down several flights of stairs.
Consider bringing a fan to help circulate some air while you get everything settled.
Wear Comfortable Clothing
Doing all that heavy lifting is no easy task. Wear comfortable clothing and shoes for the move and bring another outfit to change into later as you tour the campus or grab dinner with your child.
Bring Snacks
Bringing water and snacks is generally a good idea too, especially if you are moving furniture and other heavier items. Putting the drinks in a cooler will help keep them cold, especially if the room does not have a refrigerator. Make sure you have enough for the roommate and their parents.
Remember a Dolly
Determine whether the residence hall has a dolly or other items that you can borrow because they can help make the move easier. Signing up for those items early can help ensure that you can use them the day you move in. Otherwise, you can buy one from a local hardware store or split the costs with a roommate or another friend who is living in the same residence hall.
Students who have other friends who are also moving in during the same day might want to consider connecting beforehand so they can help each other move, especially bulky or heavier pieces of furniture.
Buy Some Items Later On
If your student lives near a grocery or drugstore, they can buy other items later on or they can have the items delivered to them. Many retailers offer free shipping and stores at college campuses often have special offers suited for students.
Move-in day can be emotional, for everyone involved. As hard as it is to say goodbye, try not to hang around too long — let your child adjust to their new surroundings, hang out with their new roommate, make new friends in their residence hall, and get ready for their first day as a freshman.
When we say no required fees we mean it.
No late fees, & insufficient fund
fees when you take out a student loan with SoFi.
Considering SoFi Private Student Loans
As you gear up for move-in day, you may have other concerns, including how you’re going to cover the cost of your child’s education. Financing your child’s education is a large responsibility and can be complicated. While there are some ways to prepare for college, like filling out the FAFSA to apply for federal aid, some families do not receive enough to pay for tuition and room and board entirely.
After exhausting federal aid options, you might want to explore private student loans. Just keep in mind that private student loans don’t offer the same protections, like government-sponsored forgiveness programs, that come with federal student loans.
The Takeaway
College move-in day is a significant milestone for both students and parents, marking the beginning of a new chapter filled with excitement and challenges. From packing efficiently and arriving early to staying positive and knowing when to step back, each step plays a crucial role in setting the stage for a successful college experience.
When it comes to how to pay for college, students and parents can rely on cash savings, scholarships, grants, federal student loans, and private student loans.
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.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
FAQ
How can parents best help with college move-in day?
Parents can best help with college move-in day by arriving early, packing efficiently, staying positive, meeting roommates and their families, and knowing when to step back. This ensures a smooth transition and sets the stage for a successful college experience.
What is a crucial step for parents to take after helping their child move in?
A crucial step for parents after helping their child move in is to know when to step back and allow their child to begin their independent college life. This might involve saying goodbye and leaving the campus, trusting that they are ready for this new phase, and encouraging them to explore and engage with their new environment.
How can parents support their children emotionally during college move-in day?
Parents can support their children emotionally by staying positive, being encouraging, and acknowledging their feelings. It’s important to reassure them that it’s normal to feel nervous or excited and to remind them of the exciting opportunities and experiences that await them in college.
About the author
Julia Califano
Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
