Increasing numbers of states and cities are offering “reverse scholarships” designed to attract young, well-educated residents by helping them pay off their student loans. The only catch is that you have to live there.

While alleviating some of your debt is a tempting incentive, many of the states and cities that pay off student loans may not be the most desirable or exciting places to live. Many areas have been experiencing a declining population and a phenomenon known as “brain drain” — an exodus of highly educated professionals. Areas with a shrinking population have fewer economic opportunities and employment options.

In an attempt to bring back or retain young talent, college graduates who are willing to relocate there are being offered targeted loan forgiveness.

If you’re looking for a change of scenery and want to repay your student loans faster, here are eight states and cities that pay off student loans.

1. Counties in Rural Kansas

The 95 Kansas counties that make up the “Rural Opportunity Zone” (ROZ) offer up to $15,000 in student loan debt forgiveness to eligible applicants, and/or a state income tax exemption for up to five years.

To be eligible for this program, you must be a new, full-time resident of a participating ROZ county and have an active student loan balance. Unlike other participants on this list, you don’t need to specialize in a specific area to qualify, but you do need an associate’s, bachelor’s, or postgraduate degree.

Besides significant financial incentives, the cost of living in rural Kansas is 13.5% less than the national average, making it a more affordable place to live than metropolitan areas. For outdoor enthusiasts, it also offers plenty of access to parks and outdoor activities like hiking, biking, and more. If you enjoy living in a quiet, relaxed pace of life, and looking for a change of scenery, this opportunity may be the right fit for you.

Before you pack your bags, however, you should know that Rural Opportunity Zones were established as a way to incentivize new, well-educated people to move to communities that are experiencing depopulation. Relocating there may come with challenges like a lack of services or employment opportunities.

2. Hamilton, Ohio

If you graduated from a STEAM program (Science, Technology, Engineering, the Arts, or Mathematics) within the last 7 years, the Hamilton Community Foundation encourages you to apply for their Talent Attraction Program Scholarship.

Successful applicants could receive up to $15,000 awarded in $300 monthly installments to go towards the repayment of their student loans. To take advantage of this scholarship, you have to relocate to Hamilton, and work within the Butler County area or hold a full-time remote position. Those who move out early or stop working before the end of the program will lose out on any future payments.

Like other cities in the midwest, living in Hamilton is much more affordable than in other parts of the US. Lowering your living cost can help you control your finances, live a more comfortable lifestyle, and start saving for retirement.

3. Maine

If you graduated college after 2008 and you’re willing to live and work in Maine, the Pine Tree State will reimburse your student loan payments.

The Opportunity Maine Tax Credit gives qualifying graduates an income tax credit amount that can be applied to their student loan payments. The income credit amount and eligibility vary, depending on your degree and your graduation year.

For example, if you graduated after 2016 with a Bachelor’s degree in STEM (science, technology, engineering, or math), you’ll receive a fully refundable tax credit. After applying the credit to your income tax, the State of Maine will mail you a check for the remaining credit amount.

With a declining population and a predominantly older demographic, Maine is looking for ways to attract young, new residents. While places like Portland are more youthful and offer better access to jobs, other cities in Maine can feel more like retirement communities than vibrant hubs for young graduates.

However, if you’re a nature lover and don’t mind a slower pace of life, moving to Maine has its perks. The low cost of living, access to affordable housing, and picturesque scenery make it an attractive place to live. Maine is also known for its stunning coastline, forests, and delicious seafood.

4. Michigan

The state of Michigan offers one of the most generous reverse scholarships in the country. The Michigan State Loan Repayment Program (MSLRP) provides eligible applicants with up to $300,000 in tax-free funds to repay their student loan debt over a period of up to ten years.

To qualify for this program, you need to be a medical, dental, or health-care professional and work full-time in a Health Professional Shortage Area (HPSA) at a non-profit clinic for at least two years. Participants also need to work a minimum of 40 hours per week, for at least 45 weeks per year.

Living in Michigan comes with several benefits like an affordable cost of living, beautiful natural landscapes, the Great Lakes, festivals, and a recovering economy. You also have your choice between small-town living and urban living, depending on what you enjoy.

However, before moving there you should do your research and weigh the pros and cons. Michigan is also known for its harsh winters, poor transportation infrastructure, and high car insurance costs.

5. Maryland

Maryland SmartBuy 3.0  program helps homebuyers purchasing a property in Maryland pay off thousands of dollars in student debt. Eligible borrowers receive up to 15% of the home purchase price (up to a maximum of $20,000) to pay off their outstanding student loans.

To qualify, you must have existing student debt of at least $1,000, and purchase your home through an approved Maryland SmartBuy lender. Additionally, the program requires that the full student debt of at least one of the borrowers be paid in full at the time of purchase. There are other criteria you must meet to qualify, so make sure you check the full eligibility requirements.

The state of Maryland also offers eligible physicians and physician assistants up to $50,000 in loan repayment funds through the State Loan Repayment Program (SLRP). Recipients must commit to working 2 years in a health professional shortage area (HPSA) or a medically underserved area (MUA).

Maryland has one of the best healthcare systems in the country, making it an appealing place to work for physicians and other healthcare professionals with student loans. It’s also close less than 200 miles away from major cities like New York, Washington DC, and Philadelphia.

6. Delaware

The State Loan Repayment Program (SLRP) in Delaware offers dental and medical professionals loan repayment assistance ranging from $30,000 to $100,000. The amount each applicant is eligible to receive depends on their qualifications, with advanced-level applicants receiving up to $100,000 in loan assistance.

Applicants must commit to working full-time for at least two years in a medically underserved area of Delaware to take advantage of this program.

Delaware is among the many areas in the US that are experiencing a shortage of healthcare professionals. Filling these vacancies helps you cover the cost of your education loans while you’re gaining valuable experience in the healthcare field.

If you’re considering relocating to the Diamond State, there are plenty of incentives apart from financial ones. Living in Delaware gives you access to its many national parks, beaches, and major cities like Washington DC, and Philadelphia. Delaware is also known for its low property taxes and it’s one of the only five states with no sales tax.

7. Texas

Texas has a number of loan assistance programs designed to attract lawyers, teachers, and health care providers. There are several programs to choose from, depending on your profession:

• Physician Education Loan Repayment Program (PELRP)
• Nursing Faculty Loan Repayment Assistance Program
• Teach for Texas Loan Repayment Assistance Program

The amount eligible participants are entitled to, varies between $2,500 and $60,000, depending on your profession and other criteria.

Besides its famous barbeques and live music, moving to Texas comes with a pretty significant perk: tax-free income. Texas is also home to some of the biggest and most vibrant cities in the US, like Austin, Houston, and San Antonio. The cost of living in Texas is another incentive to move there if you’re trying to save money — it has the 18th lowest cost of living in the country.

8. Niagara Falls, New York

The City of Niagara Falls offers graduates up to $6,984 in student loan assistance.

In exchange, applicants must live in a targeted neighborhood in Niagara Falls for a two-year period and show proof of good standing with the loan agency and their landlord or mortgage company. The target neighborhood is within walking distance of Niagara Gorge and Niagara Falls State Park.

Eligible candidates must have a bachelor’s degree, a two-year technical degree, or be pursuing a postgraduate degree at the time of application.

Niagara Falls has a suburban feel, affordable housing, and a lower cost of living than many other cities in the country. However, the city’s population has been declining for several years. Make sure to carefully research job opportunities and other important factors before moving there.

Other Tips to Pay Off Your Student Loan Debt

As financially enticing as it may be, moving to one of the states and cities that pay off student loans is not the only way to pay off your student loan debt faster. If these destinations aren’t attractive to you, you have other options.

The post 8 States and Cities That Help Pay Off Your Student Loans  appeared first on FinMasters.

How Many People Default On Their Student Loans?

7.3% of student loan holders were in default in 2022. Student loan defaults were frozen as part of the COVID-19 student debt relief package, which has been extended multiple times.^[1]

How Long Does It Take to Pay Off Student Loans?

Although the ideal timeline for a borrower to pay off the loan debt would be 10 years, most borrowers need up to 20 years to pay it off, while some take over 45 years to repay student loans. There are people that are 65+ still paying off student loans, though some went back to school later in life.^[1]

How Many People Get Student Loan Debt Forgiveness?

Out of a total of 779,785 received applications for forgiveness, 190,869 have been approved while 464,724 of them are still pending. A total of 109,373 applications have been denied, and 14,819 have been closed.^[2]

Which University Has the Most Student Debt?

Northwestern University has the most student debt among the top 20 universities in the U.S. with an average of $35,129 per student.^[4]

An Intractable Crisis

The student debt crisis has been growing for decades. It’s rooted in a simple historical fact: the cost of education has increased much faster than average earnings, especially for young people. While the workforce increasingly demands higher levels of education, the rewards tend to be delayed.

The soaring cost of education makes it essentially impossible for most American high school students to attend college without debt.

Georgetown University’s Center on Education and the Workforce notes in a recent report that “It takes longer today than in the past for young people to latch on to good jobs. That’s because young people need more education and training than they once did to get a job that pays middle-class wages.”

Despite this reality, federal student loans begin accruing interest immediately upon graduation. That means that by the time many young graduates achieve their earning potential, their loans have mushroomed to unmanageable proportions.

This situation is clearly unsustainable. With the workforce demanding ever-higher levels of training, pricing young people out of higher education is a one-way road to economic disaster.

Policy solutions are needed. The current proposals for debt relief are a start but do not address the fundamental imbalance between education costs and earnings in the first decade of work.

For individual students or recent graduates, of course, policy solutions are not likely to come in time. All we can do is arrange our affairs as well as we can and make the most of a bad situation. If you are starting college or have a child who is starting college, start with this guide to college without debt. If you’re struggling to pay student debt, try these 13 Tips for How to Pay Off Your Student Loan Debt.

The post What Is the Average Student Loan Debt? 2024 Student Loan Debt Statistics appeared first on FinMasters.

And if you’re tying yourself in knots trying to decide whether to undertake that much debt for a college degree, well, you’re not alone there, either. Substantial amounts of student loan debt can wreak havoc on fragile finances, especially when the economy is in a state of upheaval and you’re new to your career field. 

Moreover, not everyone is able to make regular student loan payments as called for in their loan servicing documents. For whatever reason—illness, disability, an inability to secure and hang on to a job with a high enough salary to cover those monthly loan payments—you could wind up not being able to make your minimum monthly payments, and there can be serious consequences for that. 

Student loans are often sold to the general public as an investment in your education and in your future. Assuming the truth of that statement, then the responsible thing for any potential lender to do is ask some hard-hitting questions, just like you would for any other investment. What kind of return on that investment can you expect? And what’s the risk of carrying that much debt? 

Here are the critical things to consider before taking out a student loan. 

We often think taking out a student loan is the only way to pay for college, but that isn’t always the case. Read more about college without debt.

Your Actual Need for a Student Loan

Before taking out a student loan or comparing terms from private lenders, figure out if you actually need a loan in the first place. 

First, estimate the costs of your chosen school. Include living expenses, books, supplies, equipment, and activity fees. You’ll also need to have funds sufficient to cover monthly bills that you’d have to pay no matter where you study, such as mobile phone bills, car maintenance, or other transportation expenses. 

Compare the estimated annual total with your non-loan-based financial aid and other resources, including funds your parents or other family members might have paid into over the years and any savings you’ve accumulated. The gap between those two numbers—estimated expenses and non-loan funds—is what you’ll have to borrow. 

If that sum is daunting to you, pay attention to that intuition and consider it a warning bell. Carrying substantial debt right after graduation can be a heavy financial burden. But before you decide either way, first evaluate your school choice. Is there a less expensive institution that can still help you meet your educational and career goals? If so, consider whether you’d be better off there, financially but also mentally and practically. 

Many college students underestimate what they’ll need to spend. Read more about the hidden costs of college.

Consult With Your Financial Aid Advisor 

The greatest asset you have in evaluating your student loan needs may be ready to help you from the moment you’re accepted, possibly even earlier. 

Your college’s financial aid office has a single mission: to help you understand your options for funding your college education and to help you apply for and get the funds you need. A financial aid advisor has the experience and expertise necessary to help guide you through the entire financial aid process. 

When should you first talk to your advisor? The earlier you make contact, the better, as this will help you take advantage of non-loan funding sources such as grants and scholarships. Maximizing the amount of time you have to apply for and secure these funding opportunities will help minimize the amount of any student loan you eventually require. And the lower your loan amount, the better for you when your repayment obligations begin after graduation. 

Make an appointment with your adviser, and then prepare a list of questions. Let your advisor know your goal is to minimize the loan funds you’ll need to pay for your education. Explore all the possible paths to that goal with the adviser. Use your meeting notes to create a checklist of deadlines with advance reminders so you won’t miss out on a potential source of funding. 

Your choice of college can have a significant impact on your costs and the amount of debt you take on. Read more about the impact of where you go to college.

Know About the Different Types of Student Loans

Students can take out loans to cover their educational expenses from several different kinds of lenders. At the broadest level, you can choose between federal and private loans: 

• Federal loans originate with the federal government as the lender. 
• Private loans are issued by non-governmental entities, such as banks, financial institutions, and other private organizations. 

There are also three major types of direct federal student loans you can use to pay for undergraduate or graduate-level educational expenses:

• Direct Subsidized Loan: Available to eligible students at the undergraduate level. Applicants must show financial need to qualify. These loans do not accumulate interest while you’re enrolled in school because the federal government pays the interest during that time. 
• Direct Unsubsidized Loan: Eligible students at the undergraduate, graduate, and professional-degree levels may apply for an unsubsidized loan and do not have to show financial need. Unsubsidized loans begin to accrue interest while you’re still in school. 
• Direct PLUS Loan: Graduate and professional-degree students may apply for the PLUS loan, as may parents of undergraduate students who are listed as dependents on their parents’ tax returns. This loan is designed to help eligible applicants pay for educational expenses that aren’t covered by the student’s other financial aid sources. Applicants are required to submit to a credit check and may have to meet additional criteria if that credit check reveals negative items. Borrowers do not have to show financial need. 

In addition, you can use a Direct Consolidation Loan to consolidate, or combine, all of your existing federal student loans into one loan with an interest rate based on the average of the rates of all your loans. This simplifies repayment and administration and might even reduce your costs. 

Understand The Pros and Cons of Available Loan Types

The terms and conditions of private and federal loans can differ widely. It’s important to make sure you read the fine print for any loan you apply for before you sign those documents and return them. 

For example, federal loans don’t require repayment to begin until after you graduate, leave school for any other reason, or drop to below half-time status. On the other hand, private lenders may require borrowers to begin repayment while they’re still in school, although some may permit borrowers to defer repayment until after graduation. 

Moreover, interest rates for federal student loans are fixed and can be lower than the rates for private loans, which can be either fixed or variable. It might not seem like a huge difference when you’re just beginning to prepare for college life, but even a slight variation in interest rates can cause your monthly payments to change significantly. 

Finally, federal student loans are eligible for federal consolidation loans as well as potential loan forgiveness in exchange for public service commitments. Federal loans also offer several types of repayment programs, including a plan that ties the amount of your repayment obligation to your income. Private lenders may or may not offer similar programs, so be sure to ask. These features may not apply to your situation, but they can provide attractive benefits for some students. 

Explore Federal Loan Options First 

While there are circumstances where private loans are a great solution, it’s generally better for applicants to pursue federal loans first. The interest rates tend to be a bit lower, and you may benefit from income-driven repayment options and public service forgiveness features that private loans typically don’t offer across the board. 

To maximize the funds you can qualify to borrow, it’s important to apply as soon as you can. File early for federal loans by completing and submitting your Free Application for Federal Student Aid (FAFSA) form as soon as possible. Check the deadlines for FAFSA submission and also verify with your chosen college what deadlines it has adopted for FAFSA, which can vary from the federal deadline. 

Shop Around for a Private Loan 

If federal loans aren’t going to get you to your financial aid goals, you may need to consider taking out a student loan from a private lender. Examine your potential lenders and their offers on the basis of these criteria:

• Interest rates: Private lenders can charge a wide range of rates, which can significantly alter your repayment obligations.
• Variable versus fixed-rate structure: Fixed-rate loans are more predictable. If interest rates increase, your variable-rate loan’s interest will also rise and you could wind up with a higher monthly repayment amount. 
• Repayment terms: How soon will you need to begin repaying your private loan? Some lenders require full payments or interest-only payments while the borrower is still enrolled in school, while others require minimum monthly payments and still others defer payments until after graduation. 
• Length of repayment: Also how long will you have to pay back your loans? For example, many lenders offer a choice of terms, from eight to fifteen years. Shorter terms mean your monthly payments will be higher but you’ll pay the loan off more quickly. 
• Customer service and reputation: You’ll be dealing with your lender and loan servicing company for a long time, so take the time to research their reputation for dealing with borrowers and complaints. You can search for independent reviews online and also check the database of complaints maintained by the Consumer Financial Protection Bureau (CFPB), a federal agency. 
• Cosigner requirements: Most lenders will require you to have a cosigner for your student loan application unless you already have a stable income and good credit. If you aren’t able to repay the loan as the terms require, your co-signer would then be legally obligated to make those payments. 

How important each of these factors is to you depends on your circumstances, of course. Don’t forget to also take into consideration your own needs and preferences.

Understand Your Repayment Obligations 

First, it’s important to clarify when your repayment obligation begins. Some private loans may require you to start paying your loan back even before you graduate, while federal loan repayment doesn’t typically kick in until you graduate with your degree or leave school for some other reason, or drop below half-time status at your institution. 

Next, estimate how much you’ll have to pay each month when repayment does kick in. Remember that you’ll end up owing substantially more than you borrow, thanks to accruing interest. 

Keep an eye on the funds you’re borrowing. Estimate interest rates for your loans given current rates. Then use online calculators to estimate your future repayment amount. 

Make sure the amount you’ll have to repay monthly is practical given your anticipated income after graduation. You can research average starting salaries in your chosen profession or field to get an idea now of what you might make in your first post-graduation job. 

Understand the Consequences of Failing to Pay

As we’ve all learned first-hand over the last few years, the unexpected can and does happen, often to a disruptive effect. What happens if you can’t graduate and have to drop out of school? Repayment on your loans will then kick in, and you’ll be obligated to make payments, just as if you’d graduated and found that better job you’re anticipating. 

You may also not be able to find a job with a salary as high as you’re anticipating. If that happens, you may likely struggle to meet the full loan repayment amount each month. 

You may have one or more options for relief available to you in either of these situations. 

• Income-based repayment ties the amount you have to pay each month to how much you’re earning. 
• Deferment is a program that relieves your repayment obligation for up to three years. 
• Forbearance postpones your payments for up to one year, after which you can ask for an extension of the forbearance period. 

These programs are typically associated with federal loans but private lenders may also have options available for borrowers struggling to pay. Find out in advance what policies your potential lenders offer. 

We asked an expert panel for financial tips for college students. Here’s what they said.

Consider Whether a Loan is Worth the Debt You’ll Carry

Finally, now that you know the true total cost of borrowing to finance your college education and have collected all the relevant data, consider whether taking out a student loan is worth it. 

Substantial student loan debt can be a heavy burden, even when everything’s going well. When you’re experiencing financial distress—unemployment or underemployment, for example, or unanticipated medical crises—student loan obligations can be downright catastrophic. 

You may be able to qualify for relief or assistance from your lender, especially with federal loans, but the psychological burden of heavy debt should also be weighed. That much debt—any kind of debt—can limit your choices and options. For example, you might feel forced to take a job you don’t want just to pay those obligations, or to give up living in your preferred city in order to reduce living costs. 

Taking out a student loan can help you reach your goals and make your dreams a reality, but it can also create a financial obstacle to those dreams and goals. Make sure you know what you’re getting into and that you’re getting the best deal you can before you agree to anything. 

The post What to Consider Before Taking Out a Student Loan appeared first on FinMasters.

Then reality hits. You’re out of school and working. The minimum payments you’re making seem to have little to no effect on the loan balance. You pay every month and the debt load barely seems to diminish. The payments become a constant mental load and a constant drag on your finances.

This scenario has become all too common. With over 42 million Americans now carrying federal student loan debt, averaging $37,584 per person^[1], student loan debt is an omnipresent reality. That doesn’t even include the more than $130 billion in outstanding private student loans. 

The CARES Act of 2020 provided some relief to borrowers of federal student loans. From March 2020 to January 2021, your federal student loan borrowers are granted a forbearance, where payments are temporarily halted. If you continue to make payments, the interest rate is 0%. But with the program expiring and its continuation in limbo, millions of Americans are now facing resumed payments.

Despite government legislation and an armload of statistics, student loan debt is personal. There are several ways to attack student loan debt, and any of them can have you free of student loan debt once and for all. You just have to choose a strategy that fits your individual needs.

Let’s review some steps that can help you find solutions that work for you.

1. Understand Your Student Loans

Before you develop a strategy for loan payoff, you have to understand what you’re working with. Take time to pull together the details of what you owe. You should know:

• What type of loans you have (federal, private, personal).
• The interest rate of each loan and whether it is fixed or variable.
• The balance remaining on each loan.
• The term length of each loan.
• The minimum monthly payment on each loan.
• The total amount of the loan to be paid, including interest.

Having this information at your fingertips will give you a sound basis for developing a debt payment strategy.

2. Payoff Strategies: Avalanche vs. Snowball

There are two main strategies for paying off student loans. One is called the snowball, the other is the avalanche. The goals of paying off debt are the same for both, but the approach is different.  

The Avalanche

The avalanche method requires you to pay off the loan with the highest interest rate first, preferably applying all available money in your budget towards it. While you’re doing this, you make only the minimum payment on all other student loans. Once you’ve paid off the first loan, you move on to the loan with the second-highest interest rate. Once the first loan is paid off you won’t have to make that payment anymore. Roll that money over into paying off the second-largest loan. 

This method knocks out high-interest loans first, which means you pay less in interest over the long run. This method also means you might not see real progress against your loans for a while. It’s easy to get discouraged when you feel like you’re not seeing results. 

Learn more about the debt avalanche method →

The Snowball 

With the snowball method, you pay off your loans from smallest to largest. Your first goal is to put all available money towards your smallest loan, while making only minimum payments on the other ones. 

The snowball method lets you see results quickly. Retiring those smaller loans will motivate you to keep paying and tackle the next one on your list. Your total interest cost may be larger than it would be with the avalanche method, but you might pay your debt off sooner since you’re more motivated to stick with the snowball strategy.

Learn more about the debt snowball method →

There’s no right or wrong answer to which one of these strategies to use. You have to decide which method will work best for your debts, income and personality. If you’re easily motivated by “instant” gratification, the snowball might be better. If the thought of paying a penny too much in interest gnaws at you, you might prefer the avalanche. 

It’s important to keep making progress no matter which method you choose. If one doesn’t work for your situation, reevaluate and make changes.

3. Refinancing and Debt Consolidation

Debt consolidation and refinancing are not payment strategies, but they can help you manage your student loans. You can use these methods in conjunction with the snowball or avalanche payoff strategy. 

Debt consolidation and refinancing are often lumped together, but these two terms have different meanings.

Student Loan Refinancing

Refinancing involves taking out a new loan at a lower interest rate and using it to pay one or more old loans. If you took out private student loans when you were young and your credit was poor, refinancing may be a viable option. Interest rates are at historic lows, and if your credit has improved you may be able to get a new loan at a substantially lower rate. 

If you’re thinking of refinancing you may want to check with several lenders to see what rate and loan costs they offer. Be sure to consider any fees in your cost assessment. Work through the numbers to see how much you’ll save.

Be sure to consider the term of your new loan. A longer term can lower your monthly payment, but it can also leave you paying more in total interest even with a lower rate. That may be an acceptable trade if your monthly payments are stressing your monthly budget, but always consider the total cost of the loan and the disadvantages of being in debt for a longer time.

Refinancing can be a viable move if you are paying private loans with relatively high interest rates. Before you make the move, think it through and be sure you’re saving enough to make it worth the effort.

Use our Student Loan Refinance Calculator to see how much you could save by refinancing your student loans.

Debt Consolidation

Debt consolidation is the process of combining several loans into one monthly payment. If you have multiple federal student loans you can consolidate them with a Direct Consolidation Loan. This is also a federal loan and you will retain all of the privileges that come with federal loans. You will not get a lower interest rate, but you will simplify your payment process, as you’ll only be making one payment a month.  

You can also consolidate private loans. If you consolidate private loans with another private loan, you are effectively refinancing several loans at the same time, and the considerations for refinancing should also be applied.

Use our Debt Consolidation Calculator to see how much you can save with a debt consolidation loan.

4. Use Automatic Payments

Many private lenders offer a slight deduction on your interest if you make your payments with an automatic deduction from your bank account. While it may not seem like much, the discount could add up to hundreds of dollars in savings over the life of your student loan.

If you choose to refinance your loans, search for a lender offering this option. In case that refinancing isn’t an option, contact your current lender and see if they offer a rate deduction for automatic payments.

If you have scheduled an automatic payment on your student loan, make sure you have enough in your account to cover it. Your bank may cover the shortfall but they’ll charge a hefty fee for it. That money is better off in your pocket.

Automatic payments can also help you protect your credit score. On-time payments have a significant impact on your credit score, and forgetting a payment can do real damage. Automatic payments can prevent that.

5. Make Bi-Weekly Payments

Another strategy for your student loans is to make payments every two weeks instead of paying monthly. If you make half of a monthly payment every two weeks you’ll make 26 half payments or 13 full payments every year instead of the 12 full payments you’ll make if you pay monthly. That extra payment will retire your loan faster, which will save you money on interest and get you out of debt faster.

This strategy works particularly well if you receive your salary on a bi-weekly basis. Even if you don’t, it’s worth considering.

You can see the difference this payment method makes by inputting your loan information into our Bi-weekly Loan Payment Calculator.

6. Apply Additional Payments Towards Principal, Not Interest

If you have extra money to put toward your loans, make sure you apply anything beyond the minimum to the principal of your loan and not the interest. If you have federal student loans you can generally indicate this preference on your loan servicer’s website. Contact the servicer and ask if this option is available if you don’t see it on their website.

Your interest payment goes straight to the lender. If you apply additional towards your principal, you’re reducing the balance and cutting the amount you’re getting charged interest on. This is particularly important if you’re using a strategy such as snowball or avalanche and are putting all available income towards your student loan(s). 

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7. Take On a Side Gig

Not all student loan payoff strategies involve looking for ways to reduce your payments. You can also try to bring in more income to put even more towards your loans.

Taking on a side gig has taken on a whole new meaning in the American economy. With over 45% of Americans claiming some sort of side hustle, it’s become the new norm^[2].

Taking on a side hustle in college and putting your earnings towards your student loans can get you out of debt earlier. You’ll also pay less in interest if you’re able to pay off your loans early.

The key to a successful side gig is to choose something you enjoy. If you dread doing the extra work, then you’re likely to find a reason to quit. A side gig can offer you a creative outlet or chance to interact with new people, in addition to bringing in extra income.

Side gigs take on many forms. For example you could:

• Drive for a rideshare service (Uber or Lyft)
• Sell items online
• Create an Etsy account and sell creative items
• Start a blog
• Teach an online course
• Become a virtual assistant
• Social media manager for a small business

This list of side hustles barely scratches the surface. You are only limited by your imagination. And while it may seem hard to balance your full-time job and a side gig, remember, this is only a temporary situation until you meet your debt payoff goals.

8. Use a Budget

A budget is one of the most important tools in your debt payment kit. If you know where your money is going and you have a plan for every dollar you earn it will be much easier to set aside the money you need to implement a debt payment strategy.

There are numerous budgeting methods. Choosing a budgeting strategy is a personal choice. Whatever method you use, the goal is the same: understand how much money you’re bringing in and control where it’s going.

When you use a budget, you’re creating a framework for your spending. Once you understand where your money is going, then you can see in black and white how much you can put towards your student loan payoff.

For instance, if you discover that you’re spending $200 per month on entertainment subscriptions between cable, Netflix, DisneyPlus and all the other apps, then you can make a decision about your future spending. You might decide to cut out your cable bill and add that money to your loan payment.

It’s your choice, but you won’t know how to make this decision without the help of a budget. 

See just how easy it is to start budgeting. Use our online Budget Calculator to quickly get an overview of your finances.

9. Don’t Obsess Over Student Loans

One of the key elements of budgeting is prioritizing your payments effectively. Some people get so focused on paying student loans that they put every available dollar toward that goal. That sounds like a great idea, but sometimes it isn’t. If you’re carrying a credit card balance at 22% annual interest and your student loans average 6%, there’s no logic in making the minimum payment on your credit card and putting extra money into your student loan payment. You’ll just end up paying money in interest on your credit card balance that could have gone to your student loan.

You need to place your student loans in your overall financial picture. If there are other goals that make financial sense – like paying off higher-interest loans or setting up an emergency fund – don’t hesitate to prioritize them.

10. Reward Yourself

Paying off student loans is hard work. It takes sacrifice. There are times you have to say “no” to friends , family, and even (or especially) yourself.

That doesn’t mean you shouldn’t reward your progress. Set up payoff goals along the way, such as paying off $5,000 or $7,500. When you hit this goal, give yourself a reward. Maybe it’s a dinner out at a restaurant you’ve been dreaming about or it’s a trip to a local winery. Whatever it is, make it something you enjoy and wouldn’t normally do for yourself.

Build this into your budget and you won’t have any excuses not to achieve your goals.

11. Some Months are Harder Than Others

No matter how much you plan and how much detail you put behind your strategies, there are some months it may be more difficult to stick to your student loan payoff goals. Unexpected expenses will arise, and there may be months when you fall short of the goals you set for yourself.

When this happens, accept it and move on to the next month. If it happens once in a while it’s not a big deal: life’s like that. If it’s happening on a regular basis you may need to review your budget and your payment strategy to see if you need to make changes. You’re in it for the long haul, and that means sticking to a plan. Refine your plan if you have to, but don’t give up!

12. An Emergency Fund Helps You Stay on Track

One strategy to help you stay on track with your monthly payments is to have an emergency fund in place as you begin to pay down your student loans. If you have an emergency fund your progress towards your student loans won’t be derailed when your car breaks down or your washing machine floods your apartment. Having savings on hand to cover these instances lessens the chance of you stop payments towards your loans.

It may seem counterintuitive to set aside $1,000 in savings instead of using it to pay your debts, but an emergency fund can help you avoid reaching for a credit card and going further into the hole. That helps your debt payment strategy in the long run.

13. Find the Strategy That Works for You

Anyone can say “my goal is to pay off my student loans”. Putting a plan behind that goal is what makes it achievable.

Paying off student loans early is absolutely possible. The key to success is to find a strategy that works for you. That means understanding your loans, your budget and your finances. You’ll need to use that information to develop a strategy and you’ll need to have the discipline to put that strategy into effect and stick to it. It won’t be easy, but if you’re willing to put in the effort you can be out of debt sooner than you ever thought possible.

The post 13 Tips for How to Pay Off Your Student Loan Debt appeared first on FinMasters.

Before we get into it, make sure that you understand what student loan refinancing is and how it works.

Should I Refinance My Federal Student Loans?

Federal student loans make up 92% of the total amount of student debt in America^[1]. But if you have federal loans, it’s not always a good idea to pursue refinancing. For one thing, you can only refinance through a private lender, which will sever your access to government programs and benefits.

Federal loans offer benefits such as:

• Forbearance in your loan payments (such as during the 2020 pandemic)
• Student loan forgiveness programs
• Income-based repayment plans
• Debt forgiveness

You won’t have access to these benefits if you refinance your federal loans.

When Should I Refinance My Federal Student Loan?

You should refinance federal loans only when you find a private lender offering a significantly lower interest rate. For instance, a difference of 3% to 4% could save you a considerable amount in the long term, though you’ll likely still see greater benefits by sticking with the government.

If you have a stable job and a substantial income and your credit is very good or excellent, refinancing government loans might be an option. You probably won’t be using most of those federal loan perks, and you could get a substantially lower interest rate.

Tip: Use our student loan refinance calculator to see how much you can save if you choose to refinance your student loans.

Alternatives to Refinancing Federal Student Loans

Another option you might consider is consolidating your federal student loans through a direct consolidation loan. Doing so won’t save you money or lower your interest rate, but it can make it easier to keep track of your payments. You might even avoid late payments that cause you to have to pay penalties.

Should I Refinance My Private Student Loans?

Although private student loans make up only 7.6% of total educational debt, this still adds up to $131 billion nationwide^[1].

Private lenders don’t generally offer the kinds of debt relief programs and income-based advantages that come with federal loans, so refinancing your private loans can be a great way to save money and reduce your monthly payments.

It’s possible to have a mixture of private and federal student loans. If so, you can always refinance your private loans and retain the advantages of your federal loans.

When Should I Refinance Private Student Loans?

If you decide to refinance your student loans, you’ll want to ensure you do so at the right time. Here are some tips to help you determine when to refinance your student loans.

• After You Graduate – Some lenders require that you complete your degree before refinancing your student loans. Yes, that means completing graduate school before refinancing your Bachelor’s degree. You generally won’t have to worry about student loans until after you graduate, so you can afford to wait.
• When You Have a Steady Job – Once you have a steady job — one that you intend to maintain for several years — you’ll be in a good financial position to repay your loan. Having a steady income may also help you meet eligibility requirements for favorable interest rates.
• When Your Credit Improves – Your credit score is one of the most important factors when it comes to your interest rates. Only consider refinancing once your credit score improves. According to CNBC, the baseline credit score for refinancing is 670, so this might be a goal to shoot for when you’re considering your options^[3].
• When You Have Many Private Loans – Refinancing can also help you consolidate multiple loans. The lender will repay your existing loans and replace them with a single payment, making it easier to manage your bills.
• When You Have a Variable Interest Rate – Some loan programs come with a variable interest rate. That’s good news in low-rate environments, but it isn’t the best idea long-term. Locking in a low, fixed interest rate can help you save money as well as provide reliable monthly payments.
• When Your Balance Is High – The sooner you refinance, the more you’ll benefit from a lower interest rate. But some lenders might have specific requirements about your minimum balance, sometimes specifying as much as $10,000 before refinancing is possible. You’ll have more options if you shop for lenders while your student loan balance is high.

When NOT to Refinance Your Student Loans

It’s better not to refinance your student loans when:

• You have federal student loans
• You don’t have a stable job
• You haven’t graduated yet
• Your credit score hasn’t improved
• Nationwide interest rates haven’t improved
• You’re behind in your payments

For example, if you’re late in your payments or default on your existing loan, you won’t be able to obtain a new loan. You’ll be better off simply working with your current lender to pay off your loan or waiting until your circumstances improve.

The post When Should I Refinance My Student Loan? appeared first on FinMasters.

Let’s take a closer look at refinancing and when it makes sense to refinance student loans. 

In this post:

• What is Refinancing?
  • How Refinancing Can Help
  • Refinancing vs Consolidation
• Refinancing Federal Student Loans
  • Types of Federal Student Loans
  • Benefits of Federal Student Loans
  • Consolidating Federal Student Loans
  • Should I Ever Refinance Federal Student Loans?
• Refinancing Private Student Loans
• When Should I Refinance My Student Loans?
• How Much Can I Save by Refinancing My Student Loans?
• What Are the Average Student Loan Refinance Rates?
• FAQs

What is Refinancing?

Refinancing is replacing a current loan with a new one. You take out a new loan and use it to pay off the old loan. You can get your new loan from your old lender or a new lender.

How Refinancing Can Help

Under the right circumstances, refinancing can deliver several benefits:

• A lower interest rate: if your credit score and financial status have improved since you got your old loan, you may be able to get a new loan at a significantly lower interest rate.
• Lower monthly payments: if your new loan has a longer term than your old one, your monthly payment could be lower. This can be an advantage if your payments are causing serious stress or you need to lower your debt-to-income ratio, but a longer term can also mean you pay more in interest over the life of the loan, even at a lower interest rate.
• Shorten your loan term: if you can afford larger monthly payments, a shorter loan term can help you retire your debt faster and cut your total interest cost.
• Remove a co-signer: If you have a co-signer on your old loan, getting a new one can free your cosigner from their obligation.
• New lender, which means new relationship: if you have a difficult relationship with your lender or you don’t like their customer service, refinancing can move your loan to a lender you like better. 

Before you choose to refinance you should understand exactly what benefits you intend to gain. Don’t sign for a new loan until you’re sure that it will deliver the advantages you’re looking for.

Refinancing vs Consolidation

You often hear consolidation and refinancing discussed in the same conversation. It’s important to understand the similarities and differences. 

Debt consolidation is a type of refinancing. If you use your refinancing loan to pay off more than one existing loan, you are consolidating your loans. Consolidation can help you simplify your financial life by replacing several payments with one. If you’re having trouble keeping track of your payments, that can be a big plus.

Consolidation can also bring all of the advantages of refinancing, but only if your new loan has better terms than the loans you’re paying off. That won’t always happen with student loans, as we’ll see later!

Use our debt consolidation calculator to see how much you can save with a debt consolidation loan.

Refinancing Federal Student Loans

Loans from the federal government account for 92% of all US student debt^[1]. The federal government does not refinance loans at a lower interest rate. If you want to refinance federal student loans at a lower interest rate you’ll have to do it with a private loan, and that will mean losing many of the advantages that federal loans offer.

Types of Federal Student Loans

There are two basic types of federal loans. Before you consider refinancing, you should know what type of loans you have.

Subsidized Loans

Direct Subsidized Loans are federal loans available to undergraduate students who demonstrate financial need.

Interest does not accrue while you are in school, deferment, forbearance, and any other grace period. The U.S. Department of Education pays the interest during these periods.

If you have subsidized federal loans, refinancing is generally not a worthwhile option. It’s almost impossible to get a new loan with better terms than you’d get from a subsidized federal loan.

Unsubsidized Loans

Unsubsidized loans are available to both undergraduate and graduate students and there is no requirement to demonstrate financial need.

Interest accrues on these loans while you are in school, deferment, forbearance, and any other grace period. If you have an unsubsidized loan, you’re responsible for paying the interest at all times during your repayment period.

There may be some circumstances where it would be advantageous to refinance an unsubsidized federal loan, but you should think very carefully before making that decision. The decision to refinance is permanent and irreversible, and you will lose the benefits offered by federal loans.

Benefits of Federal Student Loans

These are some of the benefits you will lose if you refinance a federal student loan with a private loan.

• Student loan forgiveness with the Public Service Loan Forgiveness (PSLF) program is for federal loans only. After 10 years or 120 loan payments, you may qualify to have the remaining balance of your federal loans forgiven if you work for a qualifying employer, including government organizations and non-profits.
• Income-based repayment plans, such as PAYE and REPAYE. These programs set your payments as a percentage of your income, which means your payment is lower during your “lean” years. As you earn more, your payment increases. 
• Fixed interest rates. Interest rates on all federal student loans are fixed. Many private loans have variable rates.  
• Forbearance and deferment options. If you hit hard times and can’t make your payments, federal student loans offer relatively liberal forbearance and deferment options. 
• Repayment grace period. A six-month grace period after finishing school is available to students with federal student loans.
• Longer default period: Default on a federal student loan occurs after 90 days of missed payments. Private lenders are generally much quicker to declare you in default.
• Loans can be discharged. If a borrower passes away or is permanently disabled, the government will discharge the loans.
• Poor credit is allowed for consolidation. Unlike consolidation with a private lender, no credit check is required for consolidation. 
• Future benefits. There is currently an active debate in Washington DC over forgiving some federal student loans. There’s no assurance that actual forgiveness will happen, but it will probably only apply to federal student loans if it does.

These advantages are significant, and it’s critical to weigh the benefits carefully before choosing to refinance with a private loan.

Consolidating Federal Student Loans

The federal government does allow the consolidation of federal loans with another federal loan through the Direct Consolidation Loan program. Direct Consolidation Loans come with all the benefits associated with federal loans, such as eligibility for deferment and forbearance and multiple flexible repayment programs. There are no credit checks, and you won’t need a cosigner. If your parents took out federal loans to fund your education, you can include those loans in your Direct Consolidation Loan.

You will have to consolidate your federal student loans in order to qualify for government loan forgiveness programs, such as Public Loan Service Forgiveness (PSLF), or to pursue an income-based repayment plan such as PAYE or REPAYE. 

Consolidating federal loans will not change your interest rate. The rate of your new loan will be based on the rates of your old loans. If the consolidation loan has a longer term than your old loans your total interest payment may increase.

Be sure to study the advantages and disadvantages of Direct Consolidation Loans before deciding to use the program. There are many types of federal loans and you could lose some benefits associated with specific loan types.

Should I Ever Refinance Federal Student Loans?

Most borrowers will not want to refinance federal student loans. Since federal student loans are a large majority of the total outstanding student loans, that means most student loan borrowers will probably not want to refinance.

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Most of the benefits that go with federal student loans are designed to help people who are having trouble paying their student loans. If you are not having any problems paying and don’t expect any change in your circumstances, those benefits may not be important to you. There are a few circumstances in which you might want to consider refinancing unsubsidized federal student loans.

If you have a large, secure income, a low debt-to-income ratio, and very good to excellent credit, it may make sense to refinance all or some of your unsubsidized federal loans. You might be able to get a significantly lower rate and you might be able to get terms that help you to get out of debt faster and with less cost.

You don’t have to refinance all of your federal loans. For example, if you used federal PLUS loans to finance graduate school, you are probably paying a higher rate on those loans than you are paying for your undergraduate loans. You might consider refinancing only the more expensive PLUS loans.

If you are considering refinancing federal student loans you should consider your options very carefully and be absolutely sure that the advantages you gain are worth more to you than the benefits you will lose.

Refinancing Private Student Loans

Private student loans are made by banks, credit unions, and online lenders. Unlike the federal government, these lenders are out to make a profit. They base your interest rate on your credit score, income, debt-to-income ratio, and other financial indicators. Most students don’t have great credit, so they will have to pay high rates or get a cosigner to get a private student loan.

These features make private loans good candidates for refinancing. If your credit has improved since you got your loan, you may be able to get a significantly lower rate on a new loan. There are many competing lenders, and if you shop carefully you may be able to get a new loan with terms that suit your needs better.

There are three key steps to making refinancing work for you.

• Know what you want to accomplish. You can’t get what you want if you don’t know what you want. Before you begin looking at lenders you should have a very clear idea of what you hope to achieve by refinancing.
• Shop around. This is true of all loans, but that doesn’t make it any less important. There are lots of lenders out there and the terms they offer may vary considerably.
• Compare your offers to your existing loans. If your best offer is not substantially better than your existing terms, or if it would not achieve the goals you’ve set, student loan refinancing may not be worth the effort.

Refinancing student loans is not much different than refinancing a mortgage or a car loan. In each case you’re looking to achieve specific goals related to your loan. If you’re offered a loan that achieves those goals, refinancing is probably a good move.

Use the student loan refinancing calculator below to see how much you can save if you choose to refinance your student loans:

Go to the full page to view and use the calculator.

When Should I Refinance My Student Loans?

There is no defined time for you to refinance student loans, but there are times when it makes more sense to consider it.

• You have graduated from school.
• Your credit score has improved since you got your old loan.
• You are confident that your finances and employment are secure.
• You have a full-time job.
• Your debt-to-income ratio is low.

It’s important to remember that considering student loan refinancing doesn’t commit you to anything. If you think you might benefit, it’s worth looking into the possibility and getting the information you need to make a fully informed decision.

Just be sure that if you apply to multiple lenders to compare rates, you keep your applications within a 15-day period. The credit reporting bureaus will recognize that you are loan shopping and they will only record one hard inquiry on your credit report.

If it doesn’t look like refinancing student loans will help you, there are other things you can do. Check out these tips for paying off student loan debt.

How Much Can I Save by Refinancing My Student Loans?

Your mileage may vary, but lowering your interest rate by even a single percentage point can save you thousands of dollars. And that’s to say nothing of the increased spending (and saving!) power gained by lowering your monthly payments.

Admittedly, the difference isn’t terribly dramatic. But for some borrowers, any possible advantage can help tremendously. And if you can improve your credit score, you might be able to secure an even greater drop in your interest rates.

What Are the Average Student Loan Refinance Rates?

There are numerous lenders competing for your business. That competition is good for you, and so is the relatively low interest rate environment that prevails at this time (February 2021).

Student loan refinancing rates range from 1.12% up to 8.49% or higher, with variable or fixed rate options available^[2]. The rates you are offered will depend on a number of factors, including your income and your credit score.

Remember that there are ways to earn discounts on your interest rate. Many lenders offer incentives if you select automatic payments each month. They may also give discounts if you have multiple accounts, such as an auto loan or checking account, with the same institution.

FAQs

Refinancing student loans is a major decision and it shouldn’t be taken lightly. If you have private loans – or in some circumstances unsubsidized federal loans – it may be worth considering. If you have a clear understanding of what you hope to gain, you have shopped for the best deal, and it’s clear that you’re being offered a better deal than you have now, it can be a very useful option.

The post What Is Student Loan Refinancing and How Does It Work appeared first on FinMasters.

Why Have Student Loan Forgiveness Scams Increased Lately?

Student loan forgiveness scams are on the rise in recent years, according to the Consumer Finance Protection Bureau. One major reason for this is that borrowers and scammers alike are in financial distress. 

For one thing, the pandemic has increased financial pressures on people everywhere. Additionally, rising inflation is depressing spending power and increasing the costs of basic living expenses. This naturally leaves less for student loans and consumer debt payments. The additional funds in COVID relief that many taxpayers received have been spent and probably wouldn’t have made a significant dent in student loan balances anyway. 

Bankruptcy laws allow for the discharge of federal student loans in limited circumstances. These discharges are sometimes hard to obtain. You’ll need to prove that repayment would cause undue hardship for you. Additionally, you’ll have to go through what’s called an “adversary proceeding,” which is something like an ancillary lawsuit that’s pursued within your bankruptcy case. 

The increased financial pressure means that a potential market has opened, consisting of individuals who are highly invested in finding relief from oppressive debt, including student loan payments. Where there’s a market, scammers and others who aren’t as strongly guided by ethical strictures will happily meet the market’s perceived needs, or at least promise to do that.

How to Spot a Student Loan Forgiveness Scam

It’s easier than you might think to get taken in by a clever student loan forgiveness scam.

Some of the more common potential scams people run across include:

• An organization claiming you need to apply for student loan forgiveness right away or very soon, before the offer is rescinded or stopped.
• A scam asking you to call a number right away in order to verify that you are qualified for a student loan forgiveness plan.
• An offer indicating that you may have a chance for full student loan forgiveness, but that the offer only can work on a first-come, first-served basis.

To avoid becoming a victim of a student loan forgiveness scam, keep a sharp eye out for the following hallmarks of fraud.

1. Upfront Fees 

Whether you’re being asked to pay a one-time fee or a recurring monthly amount, avoid any purported programs that ask for more of your money. Keep in mind that legitimate federal programs for forgiveness, deferment, and consolidation programs don’t charge for applying to or participating in those programs. 

If you’re being asked to pay, something’s wrong.

2. High-Pressure Sales Tactics

Are you being subjected to a sales pitch with traditional high-pressure sales techniques, such as a sense of urgency or scarcity? (i.e., “only a few borrowers will be allowed to apply, so it’s important that you sign up with me today”) Legitimate federal relief programs will never try to pressure you into making a fast decision like this. 

3. Encouraging You to Stop Communicating With Your Servicer

For obvious reasons, it’s in a scammer’s best interest to isolate you from your servicer. After all, if you’re in contact with your servicer, you’ll find out about actual avenues for relief that aren’t scams. It’s important to keep in touch with your loan servicer and meet your monthly payment obligations. If that’s proving difficult or impossible, ask the servicer about possible avenues of relief. 

4. Identifying Themselves as an Affiliate Of Your Servicer

Always ask for their full identification and employer name. Then call the servicer yourself using the information on your billing statement. Alternatively, log on to the servicer’s website and ask a service representative if the person contacting you is legit.

5. Requesting Your Personal Identifying Information

If the person on the phone is asking for information like your Social Security number, bank account information, or your Federal Student Aid (FSA) ID and password, be wary. Better yet, hang up!

These data points will enable the scammer to access your account with your servicer, terminate contact between you, and even access funds from your checking account. A legitimate contact will never ask for this information over the phone.

6. Claiming They Can Help Before They Know the Details Of Your Situation

Quick or easy loan forgiveness is pretty much always a pipe dream. Legitimate programs require paperwork and processing, which take time. In most cases, there’s nothing anyone can offer to do for you (usually for a fee) that you can’t do for yourself for free. 

Anyone offering a magic trick to make student loans go away is almost certainly a scammer.

How to Avoid Student Loan Forgiveness Scams

The best way to avoid falling prey to a scammer who promises student loan forgiveness is to contact your loan servicer as soon as you experience difficulty meeting your monthly payment obligation. This will help you avoid a situation where your financial stress adds to the pressure to make quick decisions without analyzing the facts. 

Never disclose personal data over the telephone to anyone contacting you about your student loans. Providing a scammer with your Social Security number, FSA ID, bank or other relevant site login information can give them all the ammunition they need to access your money and cancel your access to your servicer, so you won’t immediately know that you’ve been scammed. 

Remember that anyone can spoof a telephone number, making it seem like a scammer’s phone call is really coming from the Department of Education or your loan servicer. Verify their identity by calling them back at a confirmed official number. If they’re legitimately who they claim to be, they’ll understand and respect your caution. 

Finally, resolve to never agree to pay any kind of upfront fees in exchange for assistance. The Department of Education prohibits this kind of arrangement and won’t ever charge you to get access to assistance. 

What to Do If You Think You’ve Been Scammed

If you suspect you’ve become the victim of a student loan forgiveness scam, it’s crucial that you gather your documentation and take action quickly. 

1. Contact your bank and stop payment on any pending payments. Protecting your funds should be your primary focus right off the bat. 
2. Talk to your bank’s fraud department about your concerns. There may be additional steps they can take to help protect you, your money, and your identity. 
3. You’ll also need to contact your student loan servicer as soon as possible and let them know you’ve been targeted by a suspected scam. 
4. Change your login credentials and protect your personal information. If you gave the scammer any other personal ID information, such as your FSA ID or password, change your password immediately. 
5. Next, contact the major credit reporting agencies: Equifax, Experian, and TransUnion. Let them know you may have been the victim of fraud, and arrange to put a freeze on your credit to prevent potential future identity theft attempts. 
6. Write a short narrative beginning with your first contact with the scammer and describe each communication (phone call, letter, or email). Note where you have any contemporaneous notes from these discussions or other documentation. 
7. Use this narrative to help you file written complaints with the federal agencies tasked with investigating claims of fraud, starting with the Consumer Financial Protection Bureau. You should also file a complaint with the Federal Trade Commission. You may also want to file a complaint with your state Attorney General’s office. In some cases, the AG’s office may be able to exercise a more assertive approach in investigating and pursuing charges against fraudsters and scammers. 

The best response to a scam is to spot it before any damage is done. However with the increasing sophistication of scams these days, even borrowers who know what to look for can fall for fraudulent scams. It’s important to act quickly to protect yourself and put a stop to future damage to your identity, credit, and account status. 

Legitimate Student Loan Forgiveness Programs

As of now, there are no universally applicable forgiveness programs for federal or private student loans. However, you may qualify for specific types of student loan forgiveness. 

For example, if you’ve entered a career that would qualify as public service for a government employer, you might be eligible to seek relief under the Public Service Loan Forgiveness program (PSLF). Borrowers must make timely payments for ten years to become eligible for this and meet other criteria to qualify. 

Teachers may qualify for the Teacher Loan Forgiveness Program. Eligible borrowers must teach in a low-income school for five consecutive years. Thereafter, they can apply for forgiveness of up to $17,500 of direct subsidized and unsubsidized federal loans. 

Members of the U.S. armed forces and AmeriCorps may also qualify for assistance. While not technically forgiveness programs, they can be used to reduce your federal student loan obligations. 

In addition, certain borrowers may qualify for other types of relief and assistance. Income-based repayment plans can reorganize your payment schedule and amount by tying them to your monthly income, making them more affordable. You may also be eligible for discharge in certain limited circumstances, such as: 

• A closed school
• Total and permanent disability
• Certain conditions involving Perkins loans

Finally, you can inquire about refinancing your loans. In many cases, borrowers can qualify for a lower interest rate which would reduce the monthly amount, as well as the total amount owed. However, be aware that refinancing your federal loans with a private lender will render your stude

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