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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.

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The average cost of college in the U.S. is $36,436 per year, including books, supplies, and daily living expenses, according to the Education Data Initiative. While grants and scholarships can significantly lower your out-of-pocket expenses, they typically don’t cover the full cost of your college education.

Student loans, both federal and private, can help bridge this gap in financial aid to allow you to attend the college of your choice. Federal student loans are funded by the government. They tend to offer the best rates and terms but come with borrowing limits. If you still have gaps in funding, you can turn to private student loans.

Private student loans are funded by banks, credit unions, and online lenders. Private lenders set their own eligibility criteria, and interest rates generally depend on a borrower’s creditworthiness. While private student loans don’t offer all the same borrower protections as federal loans, they can still be a smart choice to help you pay for educational expenses, as long as you do your research.

This guide offers private student loan basics, including what they are, how they work, their pros and cons, and how to apply for one.

What are Private Student Loans?

Often when people talk about student loans, they’re referring to federal student loans, which are provided by the federal government. Private student loans, by contrast, are given out by individual banks and lenders. Students typically turn to private student loans when federal loans won’t cover all of their costs.

You can use the money from a private school loan to pay for expenses like tuition, fees, housing, books, and supplies. Interest rates for private student loans may be variable or fixed and are set by the lender. Repayment terms can be anywhere from five to 20 years.

Unlike federal student loans, borrowers must pass a credit check to qualify for private student loans. Since most college students don’t have enough credit history to take out a large loan, a cosigner is often required.


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

How Do Private Student Loans Work?

Loan amounts, interest rates, repayment terms, and eligibility requirements for undergraduate private student loans vary by individual lenders. If you’re in the market for a private student loan, it’s key to shop around and compare your options to find the best fit.

To get a private student loan, you need to file an application directly with your lender of choice. Based on the information you submit, the lender will determine whether or not you are approved and, if so, what rates and terms you qualify for.

If you’re approved, the loan proceeds will typically be disbursed directly to your university. Your school will apply that money to tuition, fees, room and board and any other necessary expenses. If there are funds left over, the money will be given for you to use toward other education-related expenses, such as textbooks and supplies.

Repayment policies vary by lender but typically you aren’t required to make payments while you’re attending school. Some lenders will allow you to defer payments until six months after you graduate. However, interest typically begins accruing as soon as the loan is dispersed. Similar to unsubsidized federal student loans, the interest that accrues while you’re in school is added to your loan balance.

The Pros and Cons of Private Student Loans

If federal financial aid — including grants, work-study, and federal student loans — isn’t enough to cover the full cost of college, private student loans can fill in any gaps. Just keep in mind that private student loans don’t offer the same borrower protections that come with federal student loans. Before taking out a private student loan, it’s a good idea to fully understand their pros and cons.

The Benefits of Private Student Loans

Here’s a look at some of the advantages that come with private student loans.

Apply Any Time of the Year

Unlike federal student loans, which have application deadlines, you can apply for private student loans any time of the year. As a result, they can be helpful if you’re facing a mid-year funding shortfall or if your college expenses go up unexpectedly.

Higher Loan Amounts

Federal loans have annual maximums. For example, a first year undergraduate can borrow up to $5,500. The aggregate max you can borrow from the government for your entire undergraduate education is $31,000. Private student loan limits vary with each lender, but you can typically borrow up to the full cost of attendance minus any financial aid received.

Choice of Fixed or Variable Interest Rates

Federal loans only offer fixed-rate loans, while private lenders usually give you a choice between fixed or variable interest rates. Fixed rates remain the same over the life of the loans, whereas variable rates can change throughout the loan term, depending on benchmark rates.

Variable-rate loans usually have lower starting interest rates than fixed-rate loans. If you can afford to pay off your student loans quickly, you might pay less interest with a variable-rate loan from a private lender than a fixed-rate federal loan.

Quick Application Process

While federal student loans require borrowers to fill out the Free Application for Federal Student Aid, or FAFSA, private student loans do not. You can apply for most private student loans online in just a few minutes without providing nearly as much information. In some cases, you can get a lending decision within 72 hours. By comparison, it typically takes three to five days for the government to process the FAFSA if you submit electronically, and seven to 10 days if you mail in the form.

Statute of Limitations

While you never want to default on your student loans (since it can cause significant damage to your credit), it can be nice to know that private student loans come with a statute of limitations. This is a set period of time that lenders have to take you to court to recoup the debt after you default. The time frame varies by state, but it can range anywhere from three to 10 years. After that period ends, lenders have limited options to collect from you.

However, that’s not the case with federal student loans. You must eventually repay your loans, and the government can even garnish your wages and tax refunds until you do.

Options for International Students

International students typically don’t qualify for federal financial aid, including federal student loans. Some private lenders, however, will provide student loans to non-U.S. citizens who meet specific criteria, such as attending an eligible college on at least a half-time basis, having a valid student visa, and/or adding a U.S. citizen as a cosigner.

The Disadvantages of Private Student Loans

Private student loans also have some downsides. Here are some to keep in mind.

Requires a Cosigner

Most high school and college students don’t make enough income or have a strong credit history to qualify for private student loans on their own. Though some lenders will take grades and income potential into consideration, most students need a cosigner to qualify for a private student loan. Your cosigner is legally responsible for your student debt, and any missed payments can negatively affect their credit. If you can’t repay your loans, your cosigner is responsible for the entire amount.

The good news is that some private student loans allow for a cosigner release.That means that after you make a certain number of on-time payments, you can apply to have the cosigner removed from the loan.

Less Flexible Repayment Options

Federal student loans offer several different types of repayment plans, including Income-Driven Repayment (IDR) Plans, which calculate your monthly payment as a percentage of your income. With the new Saving on a Valuable Education (SAVE) Plan, for example, your monthly payments are generally equal to 5% of your discretionary income (which is the extra income you have after paying for basic necessities).

With private student loans, on the other hand, usually the only way to reduce your monthly payment is to refinance the loan to a lower interest rate, a longer repayment term, or both.

No Loan Forgiveness Programs

Federal student loans come with a few different forgiveness programs, including Public Service Loan Forgiveness (PSLF), IDR forgiveness. and Teacher Loan Forgiveness. While these programs have strict eligibility requirements, they can help many low-income borrowers. Private lenders, however, generally don’t offer programs that forgive your debt after meeting certain requirements.

If you’re experiencing financial hardship, however. the lender may agree to temporarily lower your payments, waive a payment, or shift to interest-only payments.

Can Lead to Over-Borrowing

Private loans typically allow you to borrow up to 100% of your cost of attendance, minus other aid you’ve already received. Just because you can borrow that much, however, doesn’t necessarily mean you should. Borrowing the maximum incurs more interest over the duration of your loans and increases your payments, which can make repayment more difficult.

Not Always Discharged in Death or Disability

Federal loans are discharged if the borrower passes away, which means that the debt will be cleared and won’t count against the borrower’s estate. With private student loans, however, lenders can try to collect any outstanding loan amounts against a borrower’s estate in the event of death. They can’t, however, try to collect from a relative who did not cosign the debt.

Also keep in mind that your private loan could go into automatic default if your cosigner passes away, even if you’ve been making your payments on time.

No Federal Subsidy

Subsidized federal student loans, awarded based on financial need, come with an interest subsidy, meaning the government pays your interest while you’re in school and for six months after you graduate. This can add up to a significant savings.

Subsidies don’t exist with private student loans. Interest accrues from day one; in some cases, you might need to make interest payments while still in school. If you don’t pay the interest as you go, it’s added to your debt as capitalized interest when you finish school. (This is also the case with federal unsubsidized loans.)

Federal vs Private Student Loans

Here’s a look at the key differences between federal vs. private student loans.

The Application Process

Federal student loans are awarded as a part of a student’s financial aid package. In order to apply for federal student loans, students must fill out the FAFSA each year. No credit check is needed to qualify.

To apply for private student loans, students need to fill out an application directly with their preferred lender. Application requirements may vary depending on the lender. A credit check is typically required.

Recommended: Financial Aid vs Student Loans

Interest Rates

The interest rates on federal student loans are fixed and are set annually by Congress. Once you’ve taken out a federal loan, your interest rate is locked for the life of the loan.

For the 2024-2025 school year, the federal student loan interest rate is 6.53% for undergraduates, 8.08% for graduate and professional students, and 9.08% for parents. The interest rates, which are fixed for the life of the loan, are set annually by Congress.

Private lenders, on the other hand, are free to set interest rates. Rates may be fixed or variable and depend on several factors, including your (or your cosigner’s) credit score, loan amount, and chosen repayment term. Private student loan rates range anywhere from 2.99% to 14.96% APR for fixed-rate loans and 2.99% to 14.86% APR for variable-rate loans.

Repayment Plans

Borrowers with federal student loans can select from several different federal repayment plans , including income-driven repayment plans. You can defer payments while enrolled at least half-time and immediately after graduation

Repayment plans for private loans are set by the individual lender. Many private student loan lenders allow you to defer payments during school and for six months after graduation. They also have a variety of repayment terms, often ranging from five to 20 years.

Options for Deferment or Forbearance

Federal student loan borrowers can apply for deferment or forbearance if they encounter financial difficulties while they are repaying their loans. These options allow borrowers to pause their loan payments (interest, however, will typically continue to accrue).

Some private lenders may offer options for borrowers who are facing financial difficulties, including short periods of deferment or forbearance. Some also offer unemployment protection, which allows qualifying borrowers who have lost their job through no fault of their own to modify payments on their student loans.

Loan Forgiveness

Borrowers with federal student loans might be able to pursue loan forgiveness through federal programs such as PSLF or Teacher Loan Forgiveness, or after paying down their balances on an IDR plan for a certain period of time.

Since private student loans aren’t controlled by the government, they are not eligible for federal loan forgiveness programs. Though private lenders will often work with borrowers to avoid default, private student loans are rarely forgiven. Generally, it only happens if the borrower becomes permanently disabled or dies.

Should You Consider Private Student Loans?

There are many different types of student loans. It’s generally a good idea to maximize federal student loans before turning to private student loans. That way, you’ll have access to income-driven repayment plans, loan forgiveness programs, and extended deferment and forbearance periods.

If you still need money to cover tuition or other expenses, and you (or your cosigner) has strong credit, a private student loan can make sense.

Private student loans can also be useful if your expenses suddenly go up and you’ve already maxed out federal student loans, since they allow you to access additional funding relatively quickly. You might also consider a private student loan if you don’t qualify for federal loans. If you’re an international student, for example, a private loan may be your only college funding option.

Another scenario where private student loans can make sense is if you only plan to take out the loan short-term. If you’ll be able to repay the loan over a few years, private student loans could end up costing less overall.

Recommended: When to Apply for Student Loans

How to Get a Private Student Loan

Here’s a look at the steps involved in getting a private student loan.

1.    Shop around. Your school may have a list of preferred lenders, but you’re not restricted to this list. You can also do your own research to find top lenders. As you evaluate lenders, consider factors like interest rates, how much you can borrow, the loan term, when you must start repayment, any fees, and if the lender offers any hardship programs.

2.    See if you can prequalify. Some lenders allow borrowers to get a quote by filling out a prequalification application. This generally involves a soft credit inquiry (which won’t impact your credit score) and tells you what interest rates and terms you may qualify for. Completing this step can help you decide if you need a cosigner.

3.    Gather your information. To officially apply for a private student loan, you typically need to provide your Social Security number, birthdate, and home address, as well as proof of employment and income. You may also need to provide other financial information, such as your assets, rent or mortgage, and tax returns. If you have a cosigner, you’ll have to provide their personal and financial details as well.

4.    Submit your application. Once you’ve completed your application, the lender will typically contact your school to verify your information and eligibility. They will then process the student loan and notify you about your approval and disbursement of your money.

💡 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.

Does Everyone Get Approved for Private Student Loans?

No. Requirements for private student loans will vary depending on the lender, but generally to qualify you need to:

•   Attend an accredited school (this typically includes four-year colleges and, sometimes, two-year community colleges and trade schools).

•   Have a strong credit score (usually in the mid-600s or higher).

•   Have a steady income that can cover your expenses.

If you don’t meet these qualifications you can apply with a cosigner who does.

Apply for a Private Student Loan with SoFi

Private student loans are offered by banks, credit unions, and online lenders to help college students cover their educational expenses. They are not part of the federal student loan program, and generally do not feature the flexible repayment terms or borrower protections offered by federal student loans. However, private student loans come with higher loan limits, and the borrowing costs are sometimes lower compared to their federal counterparts. If you’re thinking about a private student loan for college, it pays to shop around to find the best rates and terms.

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.

FAQ

Why would someone get a private student loan?

Students typically turn to private student loans when federal loans won’t cover all of their costs. Private student loans come with higher borrowing limits than their federal counterparts. The aggregate max you can borrow from the government for your entire undergraduate education is $31,000. With private loans, on the other hand, you can typically borrow up to the total cost of attendance, minus any financial aid received, every year. This gives you more flexibility to get the financing you need.

Will private student loans be forgiven?

Private student loans aren’t funded by the government, so they don’t offer the same forgiveness programs. In fact, private student loan forgiveness is rare.

If you experience financial hardship, however, many lenders will work with you to stay out of default. They may agree to temporarily lower your payments, waive a payment, or switch to interest-only payments. Or, you might qualify for deferment or forbearance, which temporarily postpones your payments (though interest continues to accrue).

Are private student loans paid to you or the school?

Typically, lenders will send your private student loan money to your school, which will apply the loan to your current charges. The school will then transfer any balance to you to use towards other costs, such as school supplies and other living expenses.

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

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

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.

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After attending college, you might have a hefty student loan you need to pay off, and you might also have some credit card debt you’re ready to eliminate.

Having two (or more) separate payments each month, as well as more than one interest rate, can get messy, and could negatively impact your credit if you don’t make all the minimum payments required. You may be wondering if it’s possible to consolidate student loans and credit card debt together to make things easier.

We’ll look at the differences between debt consolidation, debt refinancing, student loan consolidation, and student loan refinancing, plus explore your options to lower your interest rates and possibly get one single payment for all your student loan and credit card debts.

What Is Debt Consolidation?

There are two different ways you can change what your debt looks like: debt consolidation and debt refinancing.

It’s important to understand that when it comes to loans and credit cards, consolidating is different from refinancing. Refinancing refers to changing the financial terms of a debt. Maybe when you took out your student loan, for example, interest rates were higher than they are now. You might be able to refinance your loan with current, lower rates or you could refinance to extend the loan term.

Debt consolidation, on the other hand, refers to combining more than one debt into a new loan with a single payment. Maybe you have three different credit card balances and you take out a new loan to pay them off. Now, those three credit cards have a zero balance and you’re left with a single monthly payment and a new interest rate and terms with the new loan.

But is consolidating credit cards and student loans together possible? Or are they two different animals?

Consolidating Student Loans

The U.S. Department of Education offers what’s called a Direct Consolidation Loan, which consolidates all your federal education loans that qualify into one new loan with a single interest rate, typically the average of the loans you’re consolidating. When you consolidate federal student loans, you keep federal benefits, such as income-driven repayment plans and student loan forgiveness.

Student loan consolidation may be useful if you have federal loans from different lenders and are making more than one payment per month. However, your interest rate won’t necessarily be lowered, nor will you be allowed to consolidate private student loans or credit card debt.

So, what can you do if you have private student loans you want to consolidate or other loans that don’t qualify for the Direct Consolidation Loan? And what if you want to consolidate student loans and credit card debt together?

Before we get to the solution, let’s talk about consolidating credit cards.


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

Consolidating Credit Cards

Just like with student loans, you may have multiple credit cards each with their own balance, interest rate, and minimum payment due each month. This can make paying off all this debt next to impossible and feel like you’re treading water as you pay the minimum amount due on each card.

With credit card consolidation, you take out a new personal loan and pay off all outstanding credit card debt.
You then have one payment and one interest rate (which may often be significantly lower than some astronomically high rates for credit cards). You’re now making one monthly payment for all your credit card debt. Sounds good, right?

How to Consolidate Student Loans and Credit Card Debts

As discussed, with a Direct Consolidation Loan, you can’t add credit card debt to the consolidation loan. Direct Consolidation Loans are reserved for federal student loans only.

However, if you’re wanting to consolidate both student loans and credit card debts, there are options you can consider.

Personal Loan

One way to pay off different types of debt is with a personal loan. While personal loans may have higher interest rates than you’re paying for your student loans, the rates for personal loans may be significantly lower than credit card interest rates if your credit is good.

By taking out a personal loan, you may be able to pay off all of your student loans and credit card debt. Your debt is now rolled up into one monthly payment with one interest rate.

The higher your credit score, the lower the interest rate you may qualify for with a personal loan. But even if you don’t get a fantastic rate, you can extend the loan term to make your payments more manageable. And, of course, you can usually pay off a personal loan early without penalty, which can cut down on what you’d otherwise pay in interest.

Balance Transfer

If a personal loan isn’t for you, check to see if you have a credit card with a balance transfer offer. Often, credit cards will offer a promotion of 0% on any balances from other credit cards or loans transferred. Take note though: often these promotions end after a year, and then you’re stuck with the interest payment on the remaining balance.

A balance transfer makes sense if you know you can pay off your debts within a year. If you have a large amount of credit card debt or a high student loan, this may not be the best solution if you can’t pay it off quickly. Instead, you might consider transferring the amount of your debts that you know you can pay off within the timeframe.

Alternatives to Consolidation

If you’re hoping to consolidate student loans and credit card debt together, taking out a personal loan or using a transfer balance are two options to explore.

You might also look at a debt reduction strategy, such as the Avalanche Method or the Snowball Method.

The Avalanche Method

The Avalanche Method focuses on paying off your debts with the highest interest rates first. Once those are paid off, you put that money toward the debts with the next highest interest rates, and so on and so forth, until they are all paid off.

The Snowball Method

With the Snowball Method, you focus on the largest balance first. Put extra money toward paying that off, then when it’s paid off, move to the next largest balance.

Continue Payments

Whatever strategy you choose, the key is to keep making payments. And if possible, pay more than the minimum amount due. Even paying an additional $25 a month on a debt will help you pay it off faster and reduce the total amount of interest you pay overall.

Student Loan Refinance Tips from SoFi

Because student loans are often the largest debts people carry (even if they don’t have the highest interest rate), you may want to have a separate strategy for paying off your student loans.

When you refinance student loans, look for loans that offer a longer time period if you want a smaller monthly payment. However, keep in mind that with a longer loan term, you’re likely to pay more in interest over the life of the loan.

Also, if you plan on using federal benefits, it’s not recommended to refinance with a private lender. Instead, look into a Direct Consolidation Loan or refinance your student loans once you’re no longer using federal benefits.


💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.

The Takeaway

While it may be challenging to consolidate student loans and credit card debt together, you may be able to do so with a personal loan or a credit card balance transfer. Using one of these methods allows you to transfer these debts into a single loan with a single payment and interest rate.

However, if a personal loan or balance transfer credit card isn’t an option, you could consider refinancing your student loans to possibly lower your interest rate and save money each month. The money you save could then be put toward paying off your credit card debt.

FAQ

Do I lose my credit cards if I consolidate?

Consolidating credit card debt does not cause you to lose your credit cards. It merely wipes out the debt on each card you include in the consolidation.

Will consolidating my student loans lower my credit score?

If you use the Direct Consolidation Loan, this will not impact your credit score. However, if you consolidate your student loans with a personal loan or through student loan refinancing, it may impact your credit.

Can my student loans be forgiven if I consolidate?

If you consolidate your loans with a Direct Consolidation Loan, you’re still eligible for student loan forgiveness. However, if you refinance your student loans with a private lender, you are no longer eligible for federal benefits, including loan forgiveness.

Photo credit: iStock/PeopleImages

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.

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

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Refinancing student loans involves taking out a new student loan (ideally with better rates and terms) and using it to pay off your existing loans. Generally, the reason why people refinance student loans is to save money, although there are some additional benefits that come along with refinancing.

Refinancing private student loans can be an easy decision if your income and credit score can qualify for a lower rate than you got originally. You can also refinance federal student loans with a private lender, potentially at a lower rate. But doing so means giving up federal benefits and protections, so it’s important to weigh the benefits against the risks.

Here’s what you need to know about refinancing student loans so you can decide if this option is right for you.

Benefits of Refinancing Private Student Loans

Refinancing private student loans comes with a number of potential perks. Here are some reasons why you might consider a student loan refinance.

A Lower Interest Rate

One of the main reasons people refinance their existing student loans is because they can find a lower interest rate through a new lender. This can help you save money, potentially thousands over the life of your loan. It can also help you pay off your loan faster, or lower the amount you pay each month.

While student loan interest rates have been on the rise in the last couple of years, you may still be able to do better if your financial situation has considerably improved since you originally took out your student loans.


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

Reduced Monthly Payments

Another reason why people refinance their private student loans is to lower their monthly payments. You can do this by qualifying for a lower interest rate. Or, you can do this by extending your repayment term. Generally, the longer the loan term, the less you pay each month. Just keep in mind that extending your loan term could cause you to pay more in interest over the life of your loan.

Consolidation of Multiple Loans

If your student loan debt is a messy mix of loans, it can be difficult to stay on top of your payments and track your repayment progress. In this scenario, refinancing can double as a form of debt consolidation and allow you to combine those different loans. Once you refinance, you’ll only have to deal with one loan (and one payment and one due date) each month.

Releasing a Cosigner

When students take out private student loans, they generally need a cosigner. These are usually family members or friends of the student, and they share legal liability for the loan.

If you originally needed a cosigner but are now in a financial position to handle your debt on your own, you might consider refinancing your private student loans. This will give you a new loan and, in the process, release your cosigner from liability for your debt. If you currently have a higher income or credit score than your cosigner, you might even qualify for a better rate.

Factors to Consider Before Refinancing

To determine if refinancing is the right move for you, here are some factors to consider.

Credit Score Requirements

Not every borrower is eligible for refinancing. To get approved, you typically need a credit score of at least 650. A score in the 700s, however, gives you a much better chance of qualifying.

Your credit score also helps determine your new interest rate. Generally, the better your credit score is, the more competitive your interest rate will be. If you can’t qualify for an attractive refinance on your own, you might want to recruit a cosigner who has excellent credit.

Financial Stability

A good credit score is one qualifier for a favorable refinance rate, but that’s not the full story. Lenders will generally look at a wide range of financial factors when determining your interest rate, including your annual income and your debt-to-income ratio (how much of your monthly income you currently spend on debts).

If all three of those financial factors have improved since you’ve taken out your private student loans, it can be worth shopping around for better terms. If, on the other hand, you don’t have consistent earnings and/or have a lot of credit card debt, you’ll likely want to wait until your situation stabilizes before looking into a refinance.

Recommended: Can You Refinance Student Loans More Than Once?

Length of Repayment Term

Refinancing allows you to alter your payment plan. Once you qualify, you can typically choose the new term of your loan, whether it’s five, 10, or 20 years. By setting a new repayment term, you can decide how quickly you want to pay off your loans.

You might choose a shorter repayment term to pay off your loan faster and potentially save on interest. Or, you might opt to go with a longer repayment term to lower your monthly payments. Keep in mind, though, that extending your term may mean paying more in interest over the life of the loan. It will also take you longer to fully pay off your loans.

When Refinancing Might Not Be the Best Option

Refinancing isn’t the right move for every borrower. Here are some scenarios where it may not make sense to refinance your student loans.

You Can’t Get a Lower Interest Rate

Before choosing to refinance, you may want to shop around and see what rates you can potentially qualify for.

Many lenders offer online prequalification where you can enter some information to receive a rate quote without having to submit an actual loan application (which results in a hard credit inquiry). Prequalifying lets you shop around for the personalized rates and terms so you have a better idea of what to expect if you were to refinance, without hurting your credit.

If you can’t get a better rate than you currently have, refinancing might not make sense, at least right now.


💡 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.

You Have Federal Loans and Could See a Decline in Income

If you have federal student loans and think your income could drop, or you might lose your job, it’s generally not a good idea to refinance those loans. Doing so means giving up federal student loan relief options, such as deferment and forbearance, as well as government programs like income-driven repayment. These protections could come in handy should you run into any financial hiccups.

Some private lenders offer relief programs but they may not be as generous as what you can get with the federal government.

You Are on an Income-Driven Repayment Plan

Income-driven repayment (IDR) plans are one of the many benefits available to federal student loan borrowers. When you choose one of these plans, the amount you pay each month is tied to the amount of money you make, so you never need to pay more than you can reasonably afford. Generally, your payment amount under an IDR plan is a percentage of your discretionary income (typically 10% to 20%).

Under all IDR plans, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period (either 20 or 25 years).

If you are currently on one of these federal repayment plans and you refinance, your loan becomes a private loan and you lose access to IDR plans.

You’re Working Toward Student Loan Forgiveness

In addition to the loan forgiveness associated with IDR plans, the federal government offers other types of loan forgiveness programs, including Public Service Loan Forgiveness, which is for public-sector workers, as well as a separate program just for teachers. If you think you may benefit from any of these federal relief programs, it’s probably not a good ideal to refinance your federal student loans. Doing so will bar you from getting your federal loans forgiven.

The Takeaway

So should you refinance your student loans? The answer depends on your financial situation and repayment goals. Generally, refinancing your student loans makes sense only if you can qualify for a lower rate than you have now.

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

Why do people refinance their student loans?

Often, people will refinance their student loans to get a lower interest rate, a lower monthly payment, or both. Refinancing can also simplify student loan repayment by replacing multiple loans with a single loan and just one monthly payment.

Why should you avoid refinancing student loans?

Refinancing generally doesn’t make sense if you can’t qualify for a lower rate. You’ll also want to avoid refinancing if you have federal loans and are using (or plan to use) federal benefits like income-driven repayment or student loan forgiveness. Once you refinance a federal student loan, you’ll no longer have access to these federal programs.

Why should private student loan borrowers refinance right now?

You might consider refinancing your student loans now if you are able qualify for a lower rate than you originally got. Refinancing also gives you the opportunity to change the terms of your existing loan, remove a cosigner, and simplify your repayment process by replacing multiple loans with a single loan.

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

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If you’re interested in earning a master’s degree in business administration, an MBA program that is partially or totally online might suit your needs. These programs can give you the flexibility you need (in terms of the time you have available for your education, your geographic location, and your finances) to get the graduate diploma you’re seeking.

An MBA can unlock a fascinating and lucrative career path, but not everyone can turn up on a campus full-time for a couple of years. So in this guide, you’ll explore the top online MBA programs available. Equipped with this information, you can then move ahead with your plans, accommodating your particular set of needs and wants.

What Is an MBA Program?

MBA programs offer master’s degree level courses in a variety of business-related content, including economics, finance, marketing, accounting, entrepreneurship, and statistics. Many provide hands-on learning through capstones or client projects, and some also offer the opportunity to study abroad.

There are many types of MBA programs, just as there are many undergrad majors. Some details:

•   There are in-person one- or two-year programs as well as partially and fully online MBA programs.

•   In terms of e-learning opportunities, some programs are 100% online, while others require you to attend classes on the weekend once a month or so. Your willingness and ability to travel, if necessary, should be a part of which format you choose for your MBA studies.

•   There are also executive MBA programs, which are geared toward working professionals with a bit more professional experience than the average undergrad.

You can pay for an MBA program in several ways: paying out of pocket, taking out a student loan for your MBA, securing scholarships, or a combination of these.


💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

What Are the Benefits of an MBA Program?

You may wonder whether getting an MBA is worth the investment. Generally, studying topics like management, marketing, or finance can help make you a more knowledgeable employee, which may help you secure a job or a promotion in one of these fields.

And having a master’s degree can potentially make you more appealing to employers, helping you stand out from the sea of applicants. The degree may also help increase earning potential, which can be a good thing since you may have to finance your degree.

The top online MBA programs may also present networking opportunities, whether virtual or in-person, that can connect you with others in your field as well as employers looking to hire MBAs from your university.

Choosing the Best Online MBA Program for You

The program you ultimately choose will depend on factors like:

•   How much do you want to spend?

•   Are you willing to be on campus for classes occasionally?

•   What concentration are you interested in?

•   How quickly do you want to complete your coursework?

Each of the MBA programs on this list is ranked highly, but the choice will be personal based on your own criteria. Spend time speaking with admissions reps at each of the schools you’re interested in, as well as talking to grads to understand their experience.

Recommended: Which Debt to Pay Off First: Student Loan or Credit Card?

Top Online MBA Programs to Consider

What defines an MBA program as being one of the top online business schools will vary depending on your criteria. To give you a place to start, here are some of the top online MBA programs in several categories, culled from online reviews, ratings, and other lists.

Top Affordable Online MBA Programs

Online MBA programs can get fairly expensive. Consider an affordable MBA program with a smaller price tag, such as these three highly rated options.

Louisiana Tech University

This university, located near Ruston, Louisiana, has one of the best rated affordable MBA programs in the country, and is accredited by the Association to Advance Collegiate Schools of Business (AACSB). Courses can be taken wholly online, and the degree requires 30 credits. Its MBA program has been ranked highly by U.S. News & World Report.

Total tuition: $14,250

University of Texas Permian Basin

Another award-winning online MBA program comes from the University of Texas Permian Basin. This program is accredited, affordable, and ranks highly for services and technologies, as well as being a good option for military veterans. Between 30 and 36 credits are typically required.

Total tuition: $11,729.70 -14,075.64

Fitchburg State University

This Massachusetts-based program requires 30 credits and presents the same learning as in-person classes in the online studies, which are recorded and archived. The business administration-focused course doesn’t require graduate exam results with the application.

Total tuition: $13,080

Top Executive Online MBA Programs

If you’ve been in the workforce for several years and are looking to move up in your career, an executive online MBA program could be a good fit, as it’s typically flexible in how and when you do your coursework so it doesn’t interfere with your job. That said, these programs can be significant investments of time and money, with some programs approaching or topping the $200K mark. So research your financing options for graduate school as you determine your next steps. What follows are affordable options.

Washington State University

WSU’s Carson College of Business offers an EMBA that can be completed in as little as 16 months. This program offers perks like an option for international field study in a seven-day overseas program, an annual Leadership Conference, and professional coaching.

Total tuition: $57,162

Texas Southern University

Texas Southern University offers an online executive MBA program; it can be completed in 24 months. It has received recognition both for its reasonable costs and its academic excellence. Since it’s online, you can fit it in around your professional and personal obligations. While the degree can allow for growth in a variety of fields, there can be an emphasis on the energy sector.

Total tuition: $36,000

Southeastern Louisiana University

If you’re interested in combining online executive MBA curriculum with in-person learning, Southeastern Louisiana University offers that balance in its 17-month program. The program is 40% online and 60% face-to-face, with classes on Saturdays only. The program offers three options: general MBA with accounting and financing electives, general MBA with business electives, or MBA with a healthcare concentration. The MBA program has small classes, and is accredited by the AACSB.

Total tuition: $20,676

Top Overall Online MBA Programs

Maybe you just completed your undergraduate degree and want to move straight into your MBA program, and you’re looking for the cream of the crop. Here are some of the top online MBA programs for you to consider.

Yes, they may be more expensive than other options, but exploring scholarships, grants, and loans can help you afford this degree.

Arizona State University

Arizona State University’s W.P. Carey School of Business offers several different MBA programs, including full-time, online, executive, professional flex, and fast-track. The program offers diverse concentrations, including business data analytics, entrepreneurship, finance, and international business. The online MBA has been rated a top-ten program by U.S. News & World Reports.

Total tuition: $66,266

Pennsylvania State World Campus

PennState’s World Campus’ Smeal College of Business offers flexibility in how you build your personal MBA program. There are 20 possible concentrations with the program, including advanced accounting, international affairs, and strategic leadership. There is a three-day residency to kick off the program in person, as well as other sessions throughout.

Total tuition: $59,904

Rochester Institute of Technology

Rochester Institute of Technology’s Saunders College of Business offers a highly-recognized Executive Master of Business Administration degree. It’s designed to accelerate the careers of high-performing professionals. The program, which covers the same learning as the on-campus courses, has been recognized as a top-ten option by U.S. News & World Report.

Total tuition: $78,000

The Takeaway

Online MBA programs can be one way for students to gain skills desirable for a future career in business. They can offer more flexibility than traditional in-person MBA programs because lectures can generally be viewed on the student’s schedule.

But even paying for an online program can be costly. Some students may turn to student loans to finance all or a portion of the cost of tuition.

Some students may find that later refinancing their loans can help make their education costs more manageable. However, it’s worth noting that when you refinance federal loans with private loans, you forfeit federal benefits and protections. In addition, if you refinance for an extended term, you may pay more in interest over the life of the loan. For these reasons, it’s wise to think carefully to uncover the best fit for your debt repayment.

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/Miljan Živković

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.