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Many people have student loan debt today… and lots of it. Americans owe a whopping $1.77 trillion (including federal and private loans), and the average balance is over $40,000.

Whether you’ve just received notice of your student debt for the first time or have been paying it down for years, it can be hard to live with a loan balance hanging over you. And it can be challenging to fit student loan payments into your budget. So, how do you live (and thrive) with the payments and the stress of student loan debt?

Keep reading, for starters. This guide will help you understand student loan debt solutions, how student debt impacts your financial situation, and how to budget well when you have student loans. You’ll also learn strategies for avoiding default and maintaining a healthy lifestyle. While it may feel tough right now, student debt doesn’t define you, and you can get through this.

Understanding Student Loan Debt

Your student loans can affect your financial present and your future. Right now, you might find it hard to make regular payments from month to month. Carrying student loan debt over time can also have a significant impact.

The Impact of Student Loans on Your Financial Future

Student loan debt could affect the following areas:

•  Your ability to qualify for a loan, such as a home loan, due to student loans affecting your debt-to-income ratio (DTI) — DTI is the relationship between your debt and income

•  Your ability to save for retirement

•  Your credit score (if you fail to make on-time student loan payments)

•  Your net worth (the value of the assets you own, minus your liabilities)

•  Your marriage or family life, possibly delaying your plans

Different Types of Student Loan Repayment Plans

As you focus on minimizing the impact that student loans have on your finances, it can be wise to consider the different types of student loan repayment plans. For federal student loans, they include fixed repayment plans:

Standard Repayment Plan: The Standard Repayment plan is a federal fixed repayment plan option. In this plan, you repay your loans for up to 10 years, or between 10 and 30 years for consolidation loans. (Consolidation loans mean converting your federal student loans into one payment.)

Graduated Repayment Plan: The Graduated Repayment plan begins with lower payments and increases every two years. You can make payments for up to 10 years, or between 10 to 30 years for consolidation loans.

Extended Repayment Plan: The Extended Repayment plan allows you to repay your loans over an extended period. You make payments over 25 years with this plan, which for many people is a valuable student loan debt solution.

Student loan servicers also offer income-based repayment, including the following plans:

•  Saving on a Valuable Education (SAVE); the SAVE Plan replaces the REPAYE program.

•  Pay as You Earn (PAYE)

•  Income-Based Repayment (IBR)

•  Income-Contingent Repayment (ICR)

Each option has different features, but generally, after you make payments for a certain number of months, the government will forgive the remaining balance.

Consider using the Federal Student Aid Loan Simulator to help you estimate your monthly student loan payments, which can help you find a loan repayment option that meets your needs and goals. You might find a program that feels like less of a financial stretch for you.
💡 Quick Tip: Some student loan refinance lenders offer no fees, saving borrowers money.

Take control of your student loans.
Ditch student loan debt for good.

Create a Budget to Manage Student Loan Debt

Another helpful step when you are dealing with student loan debt is to find a budget that works well for you. There are many different types of budgets out there, and likely more than one could help you create a realistic plan that leaves room for some fun little splurges now and then. Most budgets involve the following steps:

1.   Write down your monthly income. How much do you bring in per month? This doesn’t necessarily just apply to your salary — include alimony, freelancing (like dog-walking or driving a rideshare), dividends, and other income you make.

2.   Write down your monthly expenses. What types of expenses do you have during the month, including your student loan payments? How much are you spending on a car loan, rent, or mortgage payment? What about utilities, insurance, clothing, and entertainment?

3.   Subtract your expenses from your income. This is a good way to calculate whether you lose money through your expenses or whether you have enough income to cover your expenses.

4.   Create a budget. Develop a budget so you know how much you should spend each month, plus the expenses you can’t get around, including food, shelter, and, yes, student loan payments. You might try the popular 50/30/20 budget, which has you allocate 50% on your take-home pay to the needs in life (which includes minimum loan payments); 30% to the wants in life (dining out, gym memberships, travel…the fun stuff); and 20% to saving. When you are repaying student loans, that last 20% may need to be allocated to debt for a while. And that 30% towards wants might have to face a bit of belt-tightening, too.

Strategies for Avoiding Default on Student Loans

If you fail to make payments on student loans, you may default on them. The level of default depends on the type of loan you receive.

Why is defaulting on student loans a big deal? And how does defaulting on student loans affect your financial picture? Here are details:

•  Your entire unpaid balance, with student loan interest, becomes due.

•  You no longer receive deferment or forbearance, and you also lose eligibility for other benefits, including repayment plan options.

•  You cannot receive additional federal student loans.

•  Credit bureaus will hear about the default, which can lower your credit score and take years to repair.

•  You may not be able to purchase or sell assets (such as real estate).

•  The government may withhold your tax refunds or federal benefits.

•  You may suffer from wage garnishment, meaning your employer directs some of your pay to your student loan debt. In addition, you may be liable for attorney and collection fees associated with the process.

Yes, this can be frightening to think about, but remember that there are ways to move forward and avoid these scenarios. Among the solutions to student loan debt can be staying organized, managing what you owe, and keeping track of loan payments.You might use a tracking system such as Google Docs to keep track of your payments, or set up alerts in your phone. There are also apps and websites available to help you keep up-to-date on where you stand with your student loan debt and your payments due.

Let lenders know when you change your address so they don’t lose track of you and you lose track of your loans. You can also consider consolidating your federal student loans so you have just one simple payment to make each month. Keep in mind, though, these two points:

•  When you refinance federal student loans with a private loan, you forfeit access to federal benefits and protections, such as deferment and forbearance.

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

Utilize Resources for Managing Student Loan Debt

Here are some resources that may help you manage your student loan debt better:

•  Ask your student loan servicer for more information about solutions to student debt. They may help you learn more about smart ways to pay off student loans.

•  Tools and apps can help you track and manage student loans, often offering financial literacy and debt management educational resources. Test out a few options for solutions for student loan debt:

◦  DebtPayoffPlanner.com

◦  Chipper.app

◦  Changed at gochanged.com

•  If you are still feeling overwhelmed by your student debt, know that you don’t have to tough it out. Explore talking with a credit counselor who has expertise in the area of student loans. You might contact the National Foundation for Credit Counseling (NFCC) to start. Beware potential scammers who charge money upfront and/or promise to make your debt disappear with no strings attached.

Maintain a Healthy Financial Lifestyle with Student Loan Debt

You may at times feel frustrated or worse with the fact that you have student loans to pay back. Plenty of people do. But remember that this is a phase you are moving through, akin to paying down a mortgage on a house or a car loan.

Spend some time and energy on what you might call financial selfcare. Building a healthy financial lifestyle starts with taking time to establish your money goals. It can make sense to start in the short-term with what you want to accomplish regarding your student loans. For example, you may want to put these solutions to student debt in your sights:

•  Put together a budget

•  Balance student loan payments with other financial goals

•  Build an emergency fund while repaying student loan

•  Strategize to build your credit score with on-time student loan payments

•  Consider ways to make your student loans more manageable, as outlined above.

If you think you might want to pay off your student loans quickly, you can apply any additional funds available and use either the debt snowball (where you pay off the smallest student loan first) or debt avalanche methods (where you pay off the student loan with the highest interest rate first). Once you pay those off, you move to the loan that has the next-largest balance or interest rate, respectively.

You can then move on to longer-term goals, and build your financial literacy as you learn about, say, how to save for a down payment on a house or your retirement. Debt can be stressful, but remember that there is a long road ahead of you. There’s time to eliminate your student loans and put your other plans in motion. In other words, with some time and energy invested, you’ve got this.

The Takeaway

Having student debt can be stressful, but it’s important to remember that living with student loan debt doesn’t have to crush your dreams and plans. Millions of people work to pay off their loans every month. You have options in terms of how you budget your funds, how you repay your loans, and whether or not to look into refinancing, forgiveness, and other ways to deal with your debt.

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

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How do you cope with student loans?

The first step in managing student loan debt is not to ignore it; that could hurt your credit score and force you to pay penalties and fees. Understand your loans — are they federal or private student loans? What is your current payment structure? Learn everything you can, and research the many repayment options you likely have. Also, explore different budgeting methods to take control of your finances. Meet with a reputable nonprofit credit counselor if you feel you’d benefit from further support.

What is the average student debt?

The current average balance per person for student loans is about $40,500.

How do people live on student loans?

Having a comfortable lifestyle while still making student loan payments is possible. However, budgeting well is important, so you know how much you can allocate toward expenses and areas of your life.

Photo credit: iStock/Rockaa

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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Source: sofi.com

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If you default on your federal student loans, the government can typically force you to pay without a court order through administrative wage garnishment. With this process, your student loan servicer is able to collect 15% of your paycheck to automatically go towards loan repayment.

Wage garnishment can happen if you’ve missed payments on federal student loans for at least nine months (and haven’t entered an agreement with your lender to pay them back), and may continue until your loan is paid in full or the default status is resolved. Your wages can also be garnished if you default on private student loans, but the process works differently.

Learn what you can do to avoid wage garnishment on your student loans, plus how to get help with student loan garnishment once it has started.

What Is Administrative Wage Garnishment?

Administrative wage garnishment (AWG) is a debt collection method at the federal level. A federal agency can require a non-federal employer to withhold money from an employee’s paycheck to pay for a debt.

Typically, an employer may withhold up to 15% of your wages to repay a defaulted student loan. However, if you have multiple loans in default with different companies or have an existing child support order, garnishment can increase to 25%.

For federal student loans, you must have missed 270 (or nine months of) payments before your loan goes into default and the government can garnish your wages. The time-frame for default and garnishment can vary for private loans, and will depend on the policy of the lender.

With federal student loans, wage garnishment can take place without your servicer taking you to court. With private student loans, on the other hand, most states require lenders to obtain a court order to garnish your wages if you default on a loan.

Generally, wage garnishment can continue until your loan balances plus interest and fees are paid back, or your loan is removed from default.

An important note about federal student loans: The U.S. Department of Education is providing a temporary “on-ramp” to repayment between October 1, 2023 and September 30, 2024 to protect federal borrowers from the worst consequences of not making their student loan payments. During this transition period, servicers aren’t reporting missed, late, or partial payments as delinquent. In addition, loans will not go into default.

For borrowers who defaulted on their loans prior to March 13, 2020, the Education Department has created a Fresh Start program , which temporarily offers special benefits for borrowers to help them get out of default (more on this program below).
💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

How Does Administrative Wage Garnishment Affect Student Loans?

If your federal student loan goes into default, the Education Department (the lender) is required to send you a notice of wage garnishment by mail to the last known address 30 days before wage garnishment starts. This notice must inform you of the nature and amount of the debt and the agency’s intention to initiate garnishment.

You’ll be given the option to establish a voluntary repayment agreement as well as to request a court hearing.

If you don’t do either, wage garnishment will start. Your employer is required to comply with a wage garnishment request from the government. You’ll continue having money garnished from your paycheck until your loan is paid in full or has been removed from default.

If you request a hearing within the 30-day window, the government isn’t allowed to take money from your paycheck until the hearing is over and a decision is made.

With private student loans, wage garnishment follows a different process. For starters, private lenders may consider your loan in default after you’ve missed payments for three (rather than nine) months, though the time frame varies by lender. Once you default, a private lender may assign your loan to their collections department or sell your loan to a third party debt collection agency. The lender or collector must then sue you, take you to court, and receive a court order before they can garnish your wages.

Recommended: Understanding Student Loan Requirements

How to Protect Yourself From Student Loan Wage Garnishment

Making your student loans payments on time and in full is the simplest way to protect yourself from student loan wage garnishment.

If you’re having trouble keeping up with your payments, the best time to take action is when you begin missing student loan payments and before you actually default on the loan. At this point, you’ll want to reach out to your loan servicer to discuss options that can help keep your loan in good standing. Here are some to steps that can help:

•   Look into deferment and forbearance. The federal government has several deferment and forbearance options available, and some private lenders also offer forbearance programs. Keep in mind, though, that interest will likely still accrue on your loans during the deferment or forbearance period, which can make your loan more expensive in the end.

•   Switch repayment plans to get a lower monthly payment. The Education Department offers a number of different repayment plans, including long-term plans that can last up to 30 years. You may be able to lower your monthly payment if you opt for a longer repayment term. Extending your repayment term generally means paying more in interest overall, though.

•   Request an income-driven repayment plan. Income-driven repayment plans let you pay a percentage of your discretionary income toward federal loans for 20 to 25 years, at which point the remaining loan balances are forgiven. For some people, payments on an income-driven repayment plan can be as low as $0 per month.

•   Refinance your student loans for a cheaper rate. If you can qualify for a lower interest rate, refinancing your student loans with a private lender can lead to lower monthly payments. If you have multiple loans, it can also simplify repayment by consolidating them into one loan. Just keep in mind that refinancing federal loans with a private lender means giving up federal protections like deferment, forbearance, and access to income-driven repayment plans.

💡 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.

Take control of your student loans.
Ditch student loan debt for good.

Stopping AWG Orders

If your loans are already in default, you’ve received notice of wage garnishment, or you’re currently having your wages garnished, here are four steps you can take to remedy the situation.

1. Negotiate a Loan Settlement

You may be able to negotiate a loan settlement with a collections agency. Consider offering a lump sum or series of installment payments, and be sure to mention any specific financial hardships or medical issues you’re experiencing. A private lender or debt collector may be willing to settle the loan for less than the amount owed, such as principal and 50% interest or 90% principal and interest, or waive the collection fee (which may be 10% to 15% of the loan balance).

It is generally difficult to negotiate a loan settlement deal with federal student loans. Because federal loan servicers have multiple ways to recoup their money, including AWG, they have less incentive to negotiate with borrowers. You can only qualify in extenuating circumstances, and you’ll likely still have to pay the majority of your debt.

2. Consolidate Defaulted Student Loans

If you have a federal loan already in default, you might consider loan consolidation. This allows you to pay off defaulted federal loans with a new loan (called a Direct Consolidation Loan) and new repayment terms. To consolidate a defaulted loan, you need to either agree to repay your new loan under an income-driven repayment plan or make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before consolidation.

Keep in mind that eligible borrowers will be able to use the Fresh Start program to get out of default without having to consolidate.

Also note that if you want to consolidate a defaulted loan that is being collected through wage garnishment, you can’t consolidate the loan unless the wage garnishment order has been lifted or the judgment has been vacated.

3. Enter Fresh Start or a Loan Rehabilitation Program

Normally, one of the main ways to get out of federal student loan default is by rehabilitating your loans. Right now, however, loan rehabilitation has been temporarily replaced by the Fresh Start program.

Fresh Start is a short-term, one-time program to provide relief for borrowers with defaulted federal student loans. Fresh Start automatically gives you some benefits, such as restoring access to federal student aid (including federal loans and grants). To use Fresh Start to get out of default and claim the full benefits of the program, you must contact your loan holder.

After September 2024, when Fresh Start ends, loan rehabilitation will be an option again. Loan rehabilitation is a program offered by the federal government that involves entering into a repayment agreement to get your loan out of default and back into good standing. If you make a certain number of consecutive payments on time under the rehabilitation agreement, you can get your loan out of default and avoid wage garnishment. Contact your loan holder for more information.

Private lenders typically don’t offer a formal loan rehabilitation option. However, if you’ve defaulted on your private loans, it’s worth reaching out to your lender and see what payment assistance programs they provide.

4. Dispute the Wage Garnishment

If you receive a wage garnishment notice from the federal government, you have the right to dispute the notice and request a hearing, in writing, within 30 days.

This could be a good option if you do not agree that you owe the student loan debt you’re being asked to pay, disagree with the amount, or believe you weren’t properly notified about the garnishment.

You may also ask for a hearing if you believe that wage garnishment could create an extreme financial hardship in your life, or if you have been employed for less than 12 months after losing a previous job.

If any of these scenarios ring true, be sure to make a request for a hearing in writing and that the letter is postmarked no later than 30 days from the date the wage garnishment notification was sent. You’ll also want to include proof to support your objections to the debt or the garnishment.

Student Loan Refinancing Tips

If you’re in danger of wage garnishment, refinancing your loans could be a way to get back on top of repayment. Refinancing involves getting a new student loan with a private lender and using it to pay off your existing federal or private student loans.

Refinancing can potentially allow you to lower your monthly payment 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.)

If you decide refinancing is right for you, it’s a good idea to assess your credit health, research lenders, and shop around for the best rates. If a lender offers a prequalification tool, consider taking advantage — these applications require only a soft credit inquiry on your credit report. Getting prequalified can help you see the rates and loan terms you might qualify for if you refinanced.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How are administrative wage garnishments used?

Administrative wage garnishment is a debt collection process that allows a federal agency to order a non-federal employer to withhold up to 15% of an employee’s disposable income to pay a past-due (non tax) debt owed to the agency. For federal student loans, you typically must miss nine months of payments before the government can begin wage garnishment.

What happens if you get your wages garnished?

Wage garnishment happens when a court (or federal agency) orders that your employer withhold a specific portion of your paycheck and send it directly to the creditor or lender until your debt is resolved. Common sources of wage garnishment include child support, consumer debts, and student loans. Your wages will be garnished until the debt is paid off or otherwise resolved.

How do you respond to a wage garnishment?

First, you’ll want to carefully read the judgment to verify that all of the information is accurate. If you believe the garnishment was made in error, you can file a dispute.

If the garnishment is justified, it’s a good idea to call the creditor or loan servicer to see if you can work out a payment plan that brings the loan back to good standing and allows you to pay it off in a way that works with your budget. Or, you can simply accept the wage garnishment and pay off the debt in the installment plan instructed by the judgment.

Photo credit: iStock/fizkes

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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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Source: sofi.com

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Whether you’re in the market for a new student loan or looking to lower your current student loan payments, there may be a federal loan program available to help.

Student loan programs sponsored by the federal government are available to any eligible borrower (not just federal employees) and don’t always require a credit check. They also come with some advantages over private student lending options, such as income-based repayment plans, forgiveness programs, and (in some cases) lower interest rates.

Whatever stage you’re at in your education or borrowing journey, here’s what you need to know about federal student loan programs.

Why Consider Federal Loan Programs?

The federal government offers student loan programs for undergraduate students, graduate students, as well as those who are in the repayment phase of their student loan journey. These programs include:

•   Direct Subsidized Loans With Direct Subsidized Loans, which are available to students who demonstrate financial need, the government pays all the interest that accrues on the loan during school and for six months after graduation.

•   Direct Unsubsidized Loans Direct Unsubsidized Loans are available to eligible undergraduate, graduate, and professional students and are not based on financial need. With these loans, students are responsible for repaying all interest that accrues on the loan.

•   Direct PLUS Loans Graduate or professional students (and parents of undergraduate students) can tap into Direct PLUS Loans. Eligibility isn’t based on financial need, but you must undergo a credit check. These loans have higher interest rates and fees than Direct Unsubsidized Loans, but you can borrow more money — up to your total cost of attendance, minus other aid received.

•   Direct Consolidation Loans Direct Consolidation Loans allow you to combine your eligible federal student loans into a single loan with one loan servicer. This can simplify repayment. However, it won’t lower your interest rate.
💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

Take control of your student loans.
Ditch student loan debt for good.

Benefits of Federal Loan Programs for Students

Federal loan programs offer a number of benefits for college students. Here are some to keep in mind.

•   Payments not due until six months after graduation: Students don’t need to make any payments on their student loans while they are in school at least half-time or during the post-graduation grace period, which is six months.

•   Fixed interest rates: Federal student loans have fixed interest rates that are often lower than student loans from private lenders. For federal loans first disbursed on or after July 1, 2023, and before July 1, 2024, the rate is 5.50% for undergraduate Direct Subsidized and Unsubsidized Loans; 7.05% for Direct Unsubsidized Loans for graduate students; and 8.05% for Direct PLUS Loans.

•   Subsidized options: If you have financial need, the government may offer you a subsidized loan, which means the government pays the interest while you’re in school at least half-time and for six months after you graduate.

•   No credit checks for certain loans: You don’t need a credit check to qualify for Direct Subsidized or Unsubsidized Loans.

Federal Loan Programs to Consider After You Graduate

Once you graduate and need to begin paying back your federal student loans, the government offers a number of programs that can make repayment more manageable. Here’s a look at some of your options.

Federal Student Loan Repayment Plans

The Education Department offers a number of different repayment plans, including long-term plans that can last up to 30 years. You may be able to lower your monthly payment if you opt for a longer repayment term. Extending your repayment term generally means paying more in interest overall, though.

Fixed repayment plans include the Standard, Graduated, and Extended plans. Here’s a look at how they compare.

Fixed Repayment Plan Eligible Loans Monthly Payment Amount
Standard Plan Direct Subsidized and Unsubsidized Loans; Subsidized and Unsubsidized Federal Stafford Loans; PLUS loans, Consolidation loans Payments are a fixed amount that ensures your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans)
Graduated Plan Direct Subsidized and Unsubsidized Loans;
PLUS loans; Consolidation Loans 		Payments start out lower and then increase, usually every two years. Payment amounts ensure you’ll pay off loans within 10 years (within 10 to 30 years for Consolidation Loans)
Extended Plan To qualify, you must have more than $30,000 in outstanding Direct Loans (or FFEL Program loans) Payments can be fixed or graduated and will ensure that your loans are paid off within 25 years

Income-Driven Repayment Plans

Income-driven repayment (IDR) plans aim to make student loan payments more manageable by tying them to the borrower’s income. They allow you to pay a percentage of your discretionary income toward federal loans for 20 to 25 years, at which point the remaining loan balances are forgiven.

The Saving on a Valuable Education (SAVE) Plan is the newest and one of the most affordable repayment plans for federal student loans. For some borrowers, payments can be as low as $0 per month.

Here’s a look at how the four IDR federal loan payment programs stack up.

Income-Driven Repayment Plan Eligible Loan Types Monthly Payment Amount
SAVE Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans (that do not include parent PLUS loans) 10% of discretionary income
PAYE Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans (that do not include parent PLUS loans) 10% of discretionary income but never more than what you would pay under the 10-year Standard Repayment Plan
IBR Direct Subsidized and Unsubsidized Loans; Subsidized and Unsubsidized Federal Stafford Loans; Direct and FFEL PLUS Loans (made to students); Direct or FFEL Consolidation Loans (that do not include parent PLUS loans) Either 10% or 15% of discretionary income but never more than what you would pay under the 10-year Standard Repayment Plan
ICR Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans Either 20% of your discretionary income or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income (whichever is lower)

Student Loan Forgiveness Programs

In addition to the loan forgiveness associated with IDR plans, the federal government offers other federal loan forgiveness programs, including Public Service Loan Forgiveness (PSLF), which is for public-sector workers. The PSLF program allows you not to repay the remaining balance on your Direct Loans as long as you’ve made the 120 qualifying monthly payments under an accepted repayment plan and worked for an eligible employer full-time.

There is also a separate forgiveness program just for teachers, as well as one borrowers with permanent disabilities.

Federal Student Loan Consolidation Program

If you have multiple federal student loans, you can consolidate them into a single new loan (called a Direct Consolidation Loan) with new repayment terms. This can simplify the repayment process, since you’ll only have one payment and one loan servicer to keep track of.

Federal loan consolidation also allows some borrowers (such as those with Federal Family Education or Perkins Loans) to access repayment and forgiveness programs that they otherwise are ineligible for.

The federal student loan consolidation program does not lower your interest rate, however. Your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next one-eighth of 1%.

Your new loan term could range from 10 to 30 years, depending on your total student loan balance. If you extend your loan term, it can lower your monthly payments but the total amount of interest you’ll pay will increase.

It’s also important to note that when loans are consolidated, any unpaid interest is added to your principal balance. The combined amount will be your new loan’s principal balance. You’ll then pay interest on the new, higher balance. Depending on how much unpaid interest you have, consolidation can cost you more over the life of your loan.

Recommended: Student Loan Consolidation vs Refinancing

Factors to Evaluate Before Refinancing

Refinancing is the process of taking out a new student loan from a private lender (ideally with better rates and terms) and using it to pay off your existing federal and/or private student loans. Generally, refinancing only makes sense if you can qualify for a lower rate. Here are some things to consider before you explore refinancing your student loans.

Current Interest Rates and Loan Terms

Refinancing can potentially allow you to lower your monthly payment by getting a lower interest rate than what you currently have, extending your loan term, or both. Keep in mind, though, that lengthening your loan term may mean paying more in interest over the life of the loan.

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.

Potential Savings Through Refinancing

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. A lower rate 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 or you have higher-interest federal student loans.

Impact on Loan Forgiveness Options

Refinancing federal loans makes them ineligible for federal forgiveness and protections. If you think you may benefit (or are currently working towards) public service, teacher, IDR, or other federal forgiveness program, it may not be a good idea to refinance your federal student loans. Doing so will bar you from getting your federal loans forgiven.

Refinancing also makes your loans ineligible for government deferment and forbearance programs, which allow you to temporarily postpone or reduce your federal student loan payments. However, many private lenders offer their own deferment and forbearance programs.

💡 Quick Tip: It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.

The Takeaway

Federal loan programs, including loan consolidation, graduated repayment plans, income-driven repayment plans, and forgiveness programs can make repaying your federal student loans more manageable after you graduate.

If you have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans, however, it can also be worth looking into private 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

Does it make sense to refinance student loans?

Refinancing student loans can make sense if you are able to qualify for a lower interest rate through a new lender. This can help you save money, potentially thousands over the life of your loan. A lower rate can also help you pay off your loan faster, or lower the amount you pay each month.

Keep in mind that refinancing federal student loans with a private lender means giving up federal protections and relief programs.

Under what circumstances would you want to consider refinancing a debt?

You might consider refinancing a debt if your financial situation has improved since you originally got the loan and can now qualify for a lower rate. Refinancing also allows you to extend your loan term, which can lower your payments. Keep in mind, however, that a longer term generally means paying more in overall interest.

Which is a downside of refinancing out of federal student loans?

The biggest downside of refinancing your federal student loans is forfeiting federal protections, such as income-driven repayment plans and loan forgiveness options.

Photo credit: iStock/Drazen Zigic

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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Source: sofi.com

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When paying back your student loans, certain repayment strategies require a 10-day payoff letter. This is a document or statement that you can obtain through your original lender. It has the final loan amount needed to fully pay off your loan at a given time, and how to make the final payment and close the account.

Your 10-day payoff amount is typically more than just your current loan balance. For this reason, getting a 10-day loan payoff statement is the best way to find out how much you need to pay to fully satisfy the loan, including all accrued interest.

You typically need a 10-day payoff statement if you want to pay off your loan early or refinance your student loans. Here’s how to get it, what it contains, and other times when it might be required.

What Is a 10-Day Payoff for Student Loans?

Even if you understand the basics of student loans, you might not be clear on what a 10-day payoff letter is and why you would ever need one.

Used with many types of loans, a 10-day payoff statement tells you the amount you owe toward your loan in order for the loan to be closed and marked as “paid in full.”

A payoff statement is not the same thing at your current loan balance. Since interest is still charged on the loan in the days leading up to the actual payoff date, your lender will add 10 days’ worth of interest to your final payoff amount. Lenders can also calculate other time frames, like a 15- or 30-day payoff amount, if needed.

Depending on whether you have federal or private loans, your 10-day payoff letter might look visually different. Generally, it will contain your full name, student loan account number(s), outstanding balance, accrued interest, any fees, total payoff amount, a “good-through” or “good-until” date, and instructions on how to pay off your current loan.

The final payoff amount that’s listed includes interest for a 10-day period, and it might also include any unpaid fees. If your loan isn’t paid off in full by the “good-through date,” you’ll need to request another 10-day payoff from your current lender for the most accurate amount.

If after weighing the pros and cons of refinancing, you determine that a refinance will be to your advantage, you’ll likely need to get a 10-day payoff letter from your current lender or loan servicer.
💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.

Take control of your student loans.
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When You Need a 10-Day Payoff Letter

Here’s a look at three reasons why you might need a loan payoff letter.

•   You’re paying off your loans: If you’re able to put a chunk of money toward student loans to close out your debt ahead of schedule, you’ll need a 10-day payoff letter to get your true final amount due. That way, you’ll be able to make a final payment that fully satisfies the loan.

•   You’re refinancing your student loans: If you opt for a student loan refinance, your refinance lender will likely require a 10-day payoff letter. This informs them of how much they need to send to your current lender, and by what date, to satisfy the debt.

•   You’re buying a home: Mortgage lenders might ask to see your 10-day loan payoff amount to accurately determine your debt-to-income (DTI) ratio. Your DTI informs lenders about whether you can realistically afford taking on a home loan.

How to Request a 10-Day Payoff Letter

Despite having access to your loan details through a monthly statement or your servicer’s website, your actual 10-day payoff amount is likely different from the current amount shown on your account.

Fortunately, accessing this information is relatively easy, whether you have federal or private student loans.

For Federal Student Loans

As a federal student loan borrower, your federal student loan account was assigned to one of five federal loan servicers. To find your servicer, simply log in to your StudentAid.gov account, and go to “My Loan Servicers” from your dashboard.

Once you know who your servicer is, you can contact them to request a 10-day payoff letter.

Servicer Support Phone Number
Aidvantage 1(800) 722-1300
Edfinancial 1(855) 337-6884
ECSI 1(866) 313-3797
MOHELA 1(888) 866-4352
Nelnet 1(888) 486-4722

For Private Student Loans

To get a 10-day payoff letter for a private student loan, you’ll want to contact your current lender. Keep in mind that your private loan might have been sold to a new lender since you first accepted it.

If you’re unsure about who your lender is, you can request a copy of your credit report at annualcreditreport.com . Your credit report will list all of your past and present debt accounts, including private student loans, and the entity that owns the loan.

After identifying your lender, you can contact their borrower support phone number to get a 10-day payoff statement.

What Is the Loan Refi Timeline After a 10-day Payoff?

The way student loan refinancing works is that you take out a new loan (ideally with a lower rate and/or better terms) and use it to pay off your current student loan(s). This doesn’t happen right away, however. There is generally a 10 day pay-off process.

To make sure your new lender fully pays off your old loan (and you won’t need to make any further payments on that loan), you’ll need a 10-day payoff letter. Once you’ve obtained your 10-day payoff amount and provided the information to your new lender, you’ll want to be sure to sign your loan agreement on the same day.

Once you sign the agreement, here’s a general idea of what the 10-day refi timeline may look like:

•   Days 1 to 3: A three-day cooling-off period is required by law. During this time, your new lender cannot send your payoff check. This is just in case you change your mind about the refinance loan and exercise your right to cancel.

•   Day 4: The refinancing lender will send a payoff amount in one lump sum, either as a mailed check or electronically, to your current lender or servicer. Typically, you’ll receive a welcome packet from your new lender soon after that.

•   Day 10: Upon receiving the payoff amount in full, your current lender will mark the loan as “paid” and close it.

Your first payment on the new loan will likely be due 30 to 45 days after the date your refinance lender sent the payoff amount to your current lender.
💡 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.

The Takeaway

A 10-day payoff letter tells exactly how much money you would need to pay immediately to fully satisfy your student loan debt. Refinance lenders usually require a payoff letter so they can fulfill the right payment amount on your behalf — no more, and no less, than your original lender requires to fully pay off your debt.

Knowing this final amount is also useful if you want to pay off your student loans ahead of schedule. You may also be required to submit a 10-day student loan payoff lender when you’re applying for a mortgage.

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 do I get a 10-day payoff quote?

Depending on your lender, you may be able to request a 10-day payoff letter by signing into your account online. If not, you will need to call or email your current lender or loan servicer and request a 10-day payoff statement.

Why is my payoff quote so high?

Your 10-day student loan payoff amount is typically higher than your current principal balance due to added interest. Because interest is still charged on the loan in the days leading up to the actual pay-off date, your lender will include 10 days’ worth of interest to your final payoff amount.

What is on a 10-day loan payoff?

A 10-day loan payoff letter or statement will typically include:

•   Student loan account number(s)

•   Outstanding balance

•   Accrued interest

•   Any fees

•   Total payoff amount

•   A “good-through” date

•   Instructions on how to pay off your current loan

Photo credit: iStock/andresr

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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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Source: sofi.com

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The average barber’s salary is $52,123 a year, according to the latest data from ZipRecruiter. But barber salaries can range from about $17,500 to more than $86,000.

How much money you can make as a barber may depend on several factors, including education, certifications, experience, and where you’re located. Here’s a look at what barbers do and how they get paid.

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What Are Barbers?

A barber’s main job is to cut and style hair, usually for male clients. Barbers also may trim or shave facial hair, fit hairpieces, and provide hair-coloring services.

To become a barber, you must obtain a license in the state where you plan to work. Licensing qualifications can vary, but you’ll likely have to meet a minimum age requirement, have a high school diploma or equivalent, and have graduated from a state-licensed barber program. You may also have to pass a state licensing exam.

A barbershop often doubles as a social hub where men can go to swap stories and catch up on the latest news while they enjoy a little personal care. If mingling with clients all day isn’t your thing, you may want to check out jobs with less human interaction.
💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

How Much Do Starting Barbers Make?

An entry-level salary for a barber can range from $8.41 to $41.35 or more an hour, according to ZipRecruiter. Brand-new barbers tend to earn the highest hourly wages in New Jersey, Wyoming, and Wisconsin.

Recommended: What Trade Jobs Make the Most Money?

What Salary Can a Barber Expect to Make?

Barber jobs in the U.S. can pay anywhere from $17,500 to $86,000 or more, according to ZipRecruiter data. How much you can expect to make may depend on several factors, including how many hours you work and how many clients you serve; if you live in a region with more competitive pay; and if you work on commission, rent a chair at a shop, or own your own barbershop.

Here’s a look at the average barber’s income by state.

State Average Salary for a Barber
Alabama $49,572
Alaska $53,033
Arizona $50,968
Arkansas $40,073
California $46,632
Colorado $50,860
Connecticut $47,890
Delaware $48,177
Florida $40,869
Georgia $46,181
Hawaii $51,460
Idaho $44,515
Illinois $46,962
Indiana $52,044
Iowa $47,980
Kansas $44,493
Kentucky $42,214
Louisiana $44,134
Maine $45,672
Maryland $46,693
Massachusetts $53,224
Michigan $42,137
Minnesota $50,551
Mississippi $47,266
Missouri $45,239
Montana $50,200
Nebraska $45,804
Nevada $50,144
New Hampshire $54,449
New Jersey $53,861
New Mexico $50,829
New York $60,841
North Carolina $43,866
North Dakota $52,473
Ohio $49,290
Oklahoma $44,358
Oregon $52,559
Pennsylvania $55,714
Rhode Island $48,681
South Carolina $44,791
South Dakota $49,593
Tennessee $47,059
Texas $44,130
Utah $46,849
Vermont $60,007
Virginia $47,628
Washington $53,744
West Virginia $43,029
Wisconsin $52,882
Wyoming $53,101

Source: ZipRecruiter

Recommended: Highest Paying Jobs by State

Barber Job Considerations for Pay and Benefits

A barber’s compensation is traditionally set up in one of two ways:

•   Renting a chair or booth: Barbers who rent a chair at a barbershop pay the owner or franchise a fee for the space where they work, but they keep the rest of what they earn. This can give barbers more control over their work schedule and the services they choose to offer.

•   Earning a commission: Barbers who work on commission are paid a percentage of what they earn (typically between 40% to 70%). Or they could receive a predetermined hourly wage or salary plus a bonus commission. New barbers may choose to work a few years on commission to gain knowledge of how the business works and build a clientele, and then switch to renting a chair.

In addition, barbers can earn tips, usually about 15% to 20% of the price of a haircut or other service provided. Online tools like a money tracker app can help you keep track of your spending and saving from month to month.

Pros and Cons of a Barber’s Salary

As with any job, there are pros and cons to working as a barber, including:

Pros

•   Attending a barber school can take less time (usually a year or less) and is far less expensive than getting a college degree. Tuition is about $14,000 on average (not including books and supplies), but costs can range from about $4,000 to $25,000, depending on the program. Financial assistance may be available through federal or private student loans, grants, and scholarships.

•   Job prospects for barbers are good. According to the U.S. Bureau of Labor Statistics, employment for barbers is projected to grow by 7% over the next decade, which is faster than the average for all occupations.

•   Popular barbers often can work the hours they choose while serving clients who appreciate their creativity — and reward them with their loyalty and generous tips. If you like the idea of becoming an entrepreneur, you may even decide to start your own business someday.

Cons

•   It can take time to build a reputation and a reliable list of repeat customers. In the meantime, you may experience some income instability, and tips may vary from one client to the next. This could make budgeting and spending difficult at times.

•   As a barber, you may not receive the same employee benefits that other careers generally offer, including health insurance, a 401(k) or similar retirement plan, paid sick leave, or vacation pay. You might have to work nights, weekends, or a fluctuating schedule that makes it hard to plan your social life. And you may have to pay for your own work tools.

•   You might also want to consider how long your career as a barber might last. Though it can be a fulfilling job, the work can be hard on your neck, back, hands, and feet.
💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

The Takeaway

Your income potential as a barber will likely depend on where you work and the loyalty of your clientele. If you’re a creative and skilled stylist who likes keeping up with the latest trends, and you have good social skills, being a barber could be a great career choice. It also can help to have some business skills, as you may face unique challenges when it comes to managing your income, tracking your cash flow, planning for retirement, and paying taxes.

FAQ

Can you make $100,000 a year as a barber?

Once you establish yourself and build a solid clientele, you may be able to earn six figures as a barber. Your success, though, will likely depend on how in demand you are, how willing you are to travel or work long hours, the clientele you cater to, and if you own your own shop.

Do people like being a barber?

Though barbering can be hard work, barbers on Payscale.com gave their job an average of 4.2 stars out of 5. If cutting hair and providing other personal care services is your passion — and you’d enjoy building a bond with your clients — you could find a career as a barber is right for you.

Is it hard to get hired as a barber?

According to the U.S. Bureau of Labor Statistics, the job outlook for barbers should be solid for at least the next decade. If you get the proper training, become a licensed barber, and can demonstrate that you have the skills and demeanor for the job, it shouldn’t be too hard to find work.

Photo credit: iStock/dusanpetkovic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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

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.

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Source: sofi.com

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Some federal student loans can indeed be forgiven after 20 years. Borrowers can access forgiveness through income-driven repayment (IDR) plans and other options. These programs can make a significant difference for those who are working their way through their debt and the stress that can accompany it.

In fact, in January 2024, the Biden administration revealed that it successfully canceled nearly $5 billion in student debt for 74,000 borrowers. Of these borrowers, 30,000 received forgiveness under an IDR plan.

Getting your loans forgiven through this process isn’t as immediate and sweeping as what President Biden had originally proposed (more on that in a moment) to assist those with student debt. However, the new program effectively forgives student loans after 20 years. Here’s what to know about IDR plans and other paths to student loan forgiveness.

Forgiveness With Income-Driven Repayment Plans

First, to address what you may have heard about on the news: Yes, the Supreme Court decided in the summer of 2023 to strike down President Biden’s cancellation relief plan of up to $20,000 in forgiven federal loans.

However, there’s the $5 billion in forgiveness mentioned above, and there’s still help to be accessed. Income-driven repayment plans help make your installments more manageable by stretching your term and reducing how much you owe each month. They also forgive federal student loans after 20 years or 25 years of payments, depending on the plan.

There are four IDR plan options, and each recalculates your required payment amount based on your family size and discretionary income.

•   Saving on a Valuable Education (SAVE) Plan. The SAVE Plan sets your monthly payment at 10% of your discretionary income over 20 years for loans that went toward your undergraduate education. If you borrowed any federal loans for graduate school, you’ll be eligible for forgiveness after 25 years.

Also, as of summer 2024, there is the possibility that some borrowers will pay just 5% of their discretionary income and have their loans forgiven at the 10-year mark. Research the details to see if you might qualify.

•   Pay As You Earn (PAYE) Plan. The PAYE Plan also has payments at 10% of your discretionary income, but payments are capped. They must be lower than what you’d pay on a 10-Year Standard Plan. The repayment period is for 20 years.

•   Income-Based Repayment (IBR) Plan. IBR plans calculate your monthly payment at 10% of your discretionary income for a 20-year term. However, if you followed your loans before July 1, 2014, your payment is 15% of your discretionary income for 25 years.

•   Income-Contingent Repayment (ICR) Plan. Borrowers on ICR have the highest payments in relation to their income. The ICR Plan sets payments at 20% of discretionary income for 25 years before you’d qualify for forgiveness.

Depending on your situation, you might qualify for a monthly payment of $0. After completing all payments under your IDR plan, the remaining balance on your eligible loans is forgiven. Note that based on current IRS guidelines, the canceled amount through an IDR forgiveness might be considered taxable income.

These programs can help you end your federal student loan payments and apply the money that’s freed up to other financial priorities.
💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

Eligibility Criteria for Income-Driven Repayment Plans

There are a few requirements to meet eligibility requirements, depending on the IDR plan you’re interested in. First, some points to know:

•   Only Direct Loans that were borrowed by the student are eligible for any IDR plan.

•   Borrowers with other federal non-Direct Loans, like Federal Family Education Loan (FFEL Program Loans) or Parent PLUS Loans, must first convert their loan into a Direct Consolidation Loan to access IDR.

•   Parents who do this for their Parent PLUS Loans are only eligible for the ICR Plan after consolidation.

•   Only new borrowers can enroll in PAYE. New borrowers are those who didn’t have a pre-existing federal loan balance upon receiving a federal loan on or after October 1, 2007, and received their loan disbursement or Direct Consolidation Loan on or after October 1, 2011. You must meet both requirements for PAYE.

•   Your loans must also be in good standing and not in default. If you have defaulted loans, you must get them out of default before enrolling in IDR. One way to do so is by participating in the Fresh Start program.

•   Once you’re enrolled in an IDR plan, you must recertify your income and family size information every year. If your income drops during the year, you don’t have to wait until your due date to recertify. Instead, you can recertify immediately and have your monthly payment adjusted accordingly.

•   If you’re interested in applying for an IDR plan, submit an online application by logging into your StudentAid.gov account, or by contacting your loan servicer.

Note: You can use Student Aid’s Loan Simulator to see how much your payments might be under each IDR plan.

Pros and Cons of IDR Repayment Plans

An IDR plan is a nuanced repayment approach that has its share of benefits and disadvantages. Below is a quick overview of the pros and cons of these federal programs.

Pros:

•   Helps you access impactful loan forgiveness programs.

•   Might lower your monthly payment, possibly to $0 per month.

•   Frees up cash flow in your budget for other expenses.

•   Doesn’t require good credit.

Cons:

•   You’ll pay more interest over time.

•   Requires annual income and family size recertification.

•   You might owe taxes on the amount forgiven by the IDR plan.

•   It technically keeps you in debt longer.
💡 Quick Tip: If you have student loans with variable rates, you may want to consider refinancing to secure a fixed rate in case 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.

Federal Programs That Forgive Student Loans Sooner

Federal student loans aren’t just forgiven after 20 years or longer. There are other cancellation programs you can reach in less time, depending on your employment or loan type.

•   Public Service Loan Forgiveness is available to full-time public service employees at eligible jobs. It lets you reach loan forgiveness after 120 qualifying payments while on an IDR plan. This means you could qualify for federal loan forgiveness in 10 years, instead of 20 years or longer.

•   Other cancellation programs include Teacher Loan Forgiveness (TLF) which cancels up to $17,500 in federal Direct and Stafford Loans. To qualify for TLF, you must complete five years of full-time and consecutive teaching service with a qualifying educational agency or low-income school.

Recommended: What Percentage of Your Income Should Go to Student Loans?

Plan for the Future

Understanding the basics of student loans, including your repayment options, can make managing your debt smoother. Remember, student loans aren’t forever; they are a financial phase you are moving through, as you would with a mortgage or car loan.

•   Make interest-only payments. If you have unsubsidized student loans, they accrue interest as soon as the loan funds are disbursed. To avoid interest capitalization (i.e. interest added to your principal balance) later, consider making interest-only payments while you’re in school.

•   Put cash windfalls toward your loans. If you can afford to, redirect cash windfalls (say, a tax refund, cash gifts, or annual performance bonus) toward your student debt. This can go a long way at paying them off sooner.

•   Ask about employer student loan assistance. Some companies help their employees pay off their student debt faster, by matching all or a portion of an employee’s monthly loan payment. Talk to your human resources department to see if your employer offers this benefit.

•   Private education loans don’t qualify. Remember that private student loans aren’t eligible for federal loan forgiveness or other programs. If you’re struggling with your private loan payments, reach out to your lender ASAP to learn about your options.

Refinancing Options

Another alternative repayment option is a student loan refinance. This involves having a private lender pay off one or more of your existing federal loan balances and then create a new loan for the amount it paid on your behalf. The refinanced student loan will have a new rate, term, and features, and you’ll make your payments to your new lender.

Some advantages of refinancing student loans include potentially finding a lower interest rate, simplifying your repayments, and/or decreasing your monthly payment, but there are also downsides.

•   If you refinance federal loans, they’re no longer eligible for federal benefits and protections, such as loan forgiveness programs or forbearance. So, before refinancing, ensure you won’t need these federal benefits in the future.

•   Also, if you refinance for an extended term, you will likely pay more interest over the life of the loan. It’s important to consider how this may impact your overall financial picture.

If refinancing does seem as if it might be a good path for you, compare rates from a handful of lenders, and review the terms and costs carefully, perhaps using an online student loan refinancing calculator.

The Takeaway

Putting money toward student loans can have a dramatic impact on your day-to-day cash flow. And, if you’re like many student loan borrowers, you’re eagerly looking forward to paying off your debt. Getting forgiveness of student loans after 20 years might sound painfully long. But with some federal plans, you might get out from under that debt sooner, reduce your payments to as low as $0, and/or get any remaining balance canceled anyway. It’s important to research your options and the qualifications so you can move past student loan debt as soon as it makes sense for your particular situation.

This prospect alone is worth talking to your federal loan servicer to see if you qualify for enrollment.

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.

Photo credit: iStock/hobo_018

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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.

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.

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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Getting into law school is competitive, especially if you’re aiming for a top-tier school. To make yourself the strongest candidate possible, you may be wondering about the best major for law school.

However, there’s no single path to law school admissions nor one best pre-law major; law students typically have a variety of academic backgrounds. Choosing a major that will equip you with the skills to succeed in law school — as well as help you earn good grades — is more important than selecting a specific pre-law field.

As you consider what undergrad degree to pursue for law school, read on for some help making your decision, including what are the most popular majors among law school students..

Do Law Schools Really Care About Your Major?

While law schools care about your GPA and LSAT scores, they don’t require you to study a specific major as a student. According to the American Bar Association (ABA), students from almost every academic discipline are admitted to law school.

According to the ABA, you may choose to major in subjects that are considered to be traditional preparation for law school, such as history, English, philosophy, political science, economics or business. Another option is to focus your undergraduate studies in areas as diverse as art, music, science and mathematics, computer science, engineering, nursing or education, if that’s what appeals to you.

Law schools want to see that you’ve challenged yourself as an undergraduate student. They also may appreciate relevant professional experience that you gained from an internship or job following graduation.
💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

How Should You Choose Your Pre-Law Major?

Rather than choosing a specific pre-law major, pursue a course of study that you find both interesting and challenging. Taking a range of difficult courses can prepare you for law school and help you develop skills you’ll need as a lawyer.

According to the ABA, some core skills to prioritize developing prior to law school include:

•   Problem solving

•   Critical reading

•   Research, writing, and editing

•   Oral communication and listening

•   Organization

•   Relationship building and collaboration.

By honing these skills through your courses, extracurriculars, and professional experiences, you’ll become a stronger candidate for applying to law school. Having some background knowledge and exposure to the law can also be helpful in your quest for law school admission. You might be able to gain this knowledge from legal courses, an internship, or post-graduation work.

Recommended: Private Student Loans Guide

What Are the Most Popular Majors of Law School Applicants?

While there’s no single best major for getting into law school, some majors are popular among students accepted to law school. Here are some of the most popular pre-law majors, based on 2023 data from the Law School Admission Council (LSAC).

Top 10 Most Popular Pre-Law Majors

Here’s a look at the college major choices that many prospective law school students pursue:

1.    Economics: In 2023, 3,149 economics majors applied to law school, and 80% succeeded in getting in. As an economics major, you’ll likely study the global economic conditions that often play a major role in legal policy and reform.

2.    History: Among the 2,763 history majors who applied to law school in the 2023 enrollment year, 79.7% were accepted. Majoring in history can help give you the background knowledge, research experience, and writing skills that are helpful for law school.

3.    Philosophy: More than three-quarters (77.9%) of the 2,454 philosophy majors who applied to law school were admitted. Whether you focus on ethics, political philosophy, or another area, you’ll gain analytical, argumentation, logic, and communication skills that will benefit you as a future lawyer.

4.    English: English majors also tend to have a good shot of getting into law school. In total, 2,688 English degree holders applied, and 76.6% were admitted. The writing, editing, research, and communication skills you hone as an English major can be useful for the study and practice of law.

5.    Finance: About 76% of the 1,735 finance majors who applied to law school got it in. As a finance major, you might study business economics, accounting, and other related topics.

6.    Political Science: Political science is one of the most popular majors among law school applicants, as 13,659 political science majors applied to law school. Of that group, 75.3% were admitted. Studying political theory and system of government can help prepare you for a career in any specialty of the law.

7.    Psychology: Psychology majors also had a high acceptance rate at 72.9% out of 4,153 applicants. Studying human behavior can be helpful in many types of law.

8.    Arts and Humanities: Among the 2,493 arts and humanities majors who applied to law school, 72.3% were accepted. This large category could include a number of specialties, such as music, art, literature, and languages.

9.    Communications: If you want to study public speaking, journalism, public relations, or another communications field, you may be glad to find out that 69% of the 1,634 communications majors who applied to law school got in.

10.    Sociology: Rounding out the list of popular pre-law majors is sociology, or the study of social theory, policy, religion, human behavior, and related topics. According to the LSAC, 2,007 sociology majors applied to law school and 68.8% gained acceptance.

💡 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.

Is Pre-Law a Major?

Pre-law is not a major at some schools, but you may work with a pre-law advisor as an undergraduate student. If you’re interested in going to law school, a pre-law advisor can help you select courses that will teach you about law. They might also have suggestions for paid or unpaid internships and other ways to expose yourself to the legal profession.

If your school does offer a pre-law major, your schedule might involve courses on law and other classes that build your analytical, reasoning, research, and writing skills. However, if you are in another program, you don’t necessarily have to rush to switch majors.

Choosing a challenging major that you enjoy, while also cultivating the skills that will help you succeed in law school, may be a better option than a pre-law major.

Recommended: Basics of Student Loans

The Takeaway

If you’re interested in pursuing a law career, there’s no single college major that you have to choose, since admissions officers accept students from a wide range of academic backgrounds. It can be wise to pick a major that you find interesting and that will also develop skills and knowledge that will help you succeed as you continue your studies.

Along with planning your academic journey, you might start thinking about the best way to finance law school. Grants, scholarships, federal financial aid, and private student loans can help you cover your cost of attendance.

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.

Photo credit: iStock/AzmanL

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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Source: sofi.com

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What can employers do to make sure their financial benefits attract and serve a truly diverse workforce?

It’s a question that has become increasingly relevant since the Covid-19 pandemic shed a harsh light on the pervasive economic inequalities embedded in society and the workplace. While there have been gains in the average wealth of all demographic groups since 2019, the racial wealth gap remains stubbornly wide.

According to Federal Reserve data from the second quarter of 2023, Black families had about $986,000 less wealth, on average, compared with white families, while Hispanic families had about $992,000 less wealth, on average, than white families. Put more starkly: Black and Hispanic families had 24 cents for every $1 of white family wealth.

Even when they attend and graduate from college, minorities still face an uphill financial climb. According to the Education Data Initiative, Black college graduates owe an average of $25,000 more in student loan debt than white college graduates. Four years after graduation, black students owe an average of 188% more than white students borrowed.

And while women have increased their presence in higher-paying jobs traditionally dominated by men, the gender pay gap hasn’t gone away: On average, women are paid 83.7 percent as much as men, which amounts to a difference of $10,000 per year. The gaps are even larger for many women of color, according to the U.S. Department of Labor.

Given these realities, it’s important that diversity, equity, and inclusion (DE&I) programs and financial wellness initiatives are effectively combined to help address the problems of economic inequality throughout every segment of your workforce.

By helping underrepresented employees turn wages into long-term wealth, companies can play a pivotal role in driving financial success that impacts future generations and results in systemic change.

Where Do Financial Wellness and Diversity, Equity, and Inclusion Intersect?

These days, many employers of all sizes have a DE&I strategy or program in place to increase inclusion and remove bias and discrimination in the workplace. Financial wellness benefits are also growing in popularity as a way to attract, retain, and add value to employees.

While companies may actively promote both financial wellness and DE&I, they often overlook the potential synergy between the two. Understanding how these two human resource pillars work together can help amplify the relevance, effectiveness, and success of both programs throughout your workforce.

Traditionally, financial well-being programs have focused on long-term savings and investing for retirement. But it’s becoming increasingly apparent that this approach doesn’t meet all the needs of an increasingly diverse workforce.

Depending on the individual, financial success can come in many forms, not just having enough for retirement. Success might also include paying off debt, saving for emergencies, or buying a first home. Understanding your workforce and its diverse needs — as well as understanding the importance of a broad-based definition of financial well-being — helps put you at the nexus of your DE&I and financial wellness goals.

Recommended: How to Support Your Low-Wage Workforce

Can Financial Well-Being Initiatives Enhance Diversity, Equity, and Inclusion in Your Workforce?

The answer is an overwhelming yes — as long as your financial well-being programs are designed to be customizable for employees on different financial footings with a range of financial goals and stresses. Here are some steps you can take to integrate your financial well-being and DE&I programs.

Ensure Fair Pay for All Employees

This may seem like a basic concept, but it still needs plenty of attention. Doing everything you can to close the race and gender pay gaps in your organization shows your commitment to both DE&I and financial well-being — and to making them work together.

Recommended: How Employers Can Help Close the Racial Wealth Gap

Embrace Flexible Financial Contribution Programs

Personalized, relevant financial benefits can help you meet your employees where they are in terms of financial challenges and goals. When you offer a range of financial well-being benefits, you give employees the power to choose the financial programs that can help them the most.

The pandemic highlighted for many people the need for short-term, goal-oriented savings as well as long-term investing. Programs that can resonate strongly with today’s diverse workforce and its many needs include: emergency savings accounts; student loan repayment programs, including 401(k) matches for employees paying off student loans; budget counseling, and debt management tools. Established college tuition reimbursement and retirement savings programs are also vital parts of a holistic financial wellness program.

Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?

Get Creative

Don’t be afraid to think out of the box when it comes to expanding financial well-being programs so that you can include all employees. Many employers are reimagining traditional approaches to leaves and paid time off — for example, allowing employees to transfer unused PTO balances into accounts like emergency savings or 529 tuition savings plans.

Creativity is also important when it comes to education efforts. Simply offering new programs is not enough. Education efforts should be accessible, interactive, and customized so that each employee can find the information they need and act on it.

SoFi at Work has noticed that some employers are adopting a “learning journey” approach that allows workers to choose their own paths depending on where they are on their journey towards their individual financial goals and aspirations.

Recommended: Are Your Benefits Helping Women — Especially Moms — Achieve Financial Wellness?

Choose Credible Partners for a Sustainable Program

To provide this extra support and guidance across a broad spectrum of financial needs, you’ll need to choose credible partners that can provide expertise, platforms, and cost-effective services in specific areas. Good partners can help you launch personalized and sustainable programs that are accessible in the short-term, but also build the foundation for your department’s long-term goals.

The Takeaway

Employers can play a key role in ensuring that all employees have the same opportunities for financial success and control of their own financial futures. Democratizing financial well-being can not only create a more diverse and inclusive workplace, but ultimately a more equitable future for all of us.

SoFi at Work can help. We provide the benefits platforms and education resources that can enhance financial wellness throughout your workforce.

Photo credit: iStock/pixdeluxe


Products available from SoFi on the Dashboard may vary depending on your employer preferences.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). The Student Debt Navigator Tool and 529 Savings and Selection Tool are provided by SoFi Wealth LLC, an SEC-registered investment adviser. For additional product-specific legal and licensing information, see SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2023 Social Finance, Inc. All rights reserved. Information as of November 2023 and 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.

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Source: sofi.com

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When it comes to their kids, many of your employees may be willing to put their retirement on the line.

As HR pros focus on workforce planning, understanding the burden that college costs impose on most employees is a key component for successful financial wellness programs.

Paying for college is a daunting challenge, and even financially savvy parents can become overwhelmed and confused by the college financing process. That’s where employer-sponsored education efforts can help. Employers who understand the following common college financing traps can better plan programs to alleviate the stress of paying for college and improve financial wellness overall.

Trap One: Prioritizing Their Children’s Education Over Their Own Retirement

By now, it’s become a financial wellness mantra: Parents should prioritize their retirement savings before saving for or paying for a child’s college education. After all, the thinking goes, students can borrow for education costs, but parents can’t borrow money to pay for retirement. And if parents don’t properly prepare for retirement, their children may end up supporting them in their later years, jeopardizing their future finances.

But with ever-rising tuition costs and the increasing burden of student debt, it may be harder for your employees to follow that tried-and-true advice. The cost of college has more than doubled over the past four decades — and student loan borrowing has risen along with it. Americans collectively owe more than 1.7 trillion in student loan debt, according to the Federal Reserve .

Trying to ease the burden on their children, your employees may be raiding their future. Among people aged 25 to 80 who are saving for both retirement and future college expenses, 58% say they are delaying retirement, and 41% say they have withdrawn money from their own retirement funds to pay for a child’s (or other relative’s) tuition, according to a July 2023 survey by the Society of Actuaries .

When an employee delays retirement to catch up on missed retirement savings or pay off education loans, it can be costly to an organization. What’s more, if paying for college forces an employee to work longer than they want to, the result may be a less productive, less engaged worker.

Recommended: SoFi Survey: The Future of Financial Well-Being at Work

Trap Two: Mismanaging PLUS loans

Parent Loans for Undergraduate Students (PLUS loans) are underwritten by the federal government and allow families to borrow without the same credit checks and other limits imposed on other types of lending. Because these loans are in a parent’s name, your employees may naturally gravitate to them as a way to help their children avoid debt.

But there are drawbacks. Unlike federal student loans, there are no limits on the amount parents can borrow as long as it doesn’t exceed education costs. To qualify for a PLUS loan, parents need only pass a check for an “adverse event” such as a recent bankruptcy filing or foreclosure. There is no consideration of the borrower’s ability to repay the loan. Given the often astronomical costs of attending a four-year college, your employees may quickly find they have taken on more debt than they can comfortably handle.

In addition, PLUS loan interest rates, set by the government each year, are usually significantly higher than student-held federal loans (8.05% for 2023-2024 versus 5.50%) and sometimes higher than some private college loans.

If parents default or consolidate their PLUS loans, or if they receive a forbearance or a deferment, the interest that continues to accrue is capitalized. That means that principal and payments can become even more unaffordable for employees. In addition, if the loans go into default, the government can garnish wages, Social Security checks, and tax refunds.

Recommended: Preparing for College Resource Guide for Parents

Trap Three: Avoiding College Financing at All Costs

Another common mistake lurks on the opposite side of the spectrum. In an effort to avoid college debt of any kind, parents who have some, but not enough, college savings may decide to forego saving for retirement, dip into retirement savings, or use home equity to pay tuition bills as they come.

Withdrawing 401(k) savings can result in significant penalties, taxes, and, importantly, lost principal and earnings. Cash-out home refinancing can lead to higher and perhaps unaffordable mortgage payments. Even putting retirement savings on hold when the year’s tuition is due can translate into large gaps in savings goals, depending on the number and ages of children attending college.

These are all understandable mistakes. As we saw above, an overreliance on debt to pay college bills can seriously jeopardize financial well-being. But so, too, can dismissing the strategic use of financial aid and loans to finance college costs.

For instance, your employees may neglect filling out the Free Application for Federal Student Aid (FAFSA), figuring that they earn too much to qualify for federal financial aid. According to Sallie Mae’s How America Pays for College 2023 report, 71% of families filed the FAFSA for the 2022-2023 academic year, down from 86% in 2016-2017.

These parents may not realize that without the FAFSA, the student will not be awarded federal subsidized and unsubsidized loans, which can be attractive for their low rates and, in the case of subsidized loan, help from the government in paying interest.

More importantly, many schools require students to submit a FAFSA to be eligible for merit-based scholarships and grants, even though these funds are awarded according to the student’s academic record and other achievements, not financial need. Merit-based aid does not have to be repaid and is usually awarded to undergraduates for the full four years.

While too much debt is never smart, a prudent and affordable mix of well-structured student debt can help parents avoid sacrificing retirement savings, home equity, and other long-term savings to pay for college now.

Employer-sponsored college financing education and one-on-one college counseling can help ensure parents understand the complexities of financial aid and student borrowing so they can balance long-term and current financial needs and goals.

The Takeaway

Employers who help parents avoid these common college financing traps may help alleviate what is fast becoming one of the largest sources of financial stress in your workforce.

SoFi at Work can help with student loan repayment platforms, extensive education efforts, plus a lending suite of student, graduate student, MBA, and parent loans. For organizations that are looking to help their employees get ahead on their education financing goals, SoFi at Work also offers a 529 College Savings Program, which can be integrated into any payroll system.

Photo credit: iStock/Orbon Alija


Products available from SoFi on the Dashboard may vary depending on your employer preferences.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). The Student Debt Navigator Tool and 529 Savings and Selection Tool are provided by SoFi Wealth LLC, an SEC-registered investment adviser. For additional product-specific legal and licensing information, see SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2023 Social Finance, Inc. All rights reserved. Information as of November 2023 and 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.

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.

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Source: sofi.com