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President Joe Biden has announced up to $10,000 in student loan debt will be forgiven for all borrowers earning under $125,000.
Why it matters
Student loan debt has become a major economic issue, with 45 million Americans carrying more than $1.7 trillion in federal student loans.
What's next
Biden also extended the current moratorium on student loan payments through the end of the year.
President Joe Biden has extended the current pause on student loan payments, which was set to expire on Aug. 31. In a tweet on Wednesday, Biden announced the moratorium would be extended "one final time" through Dec. 31, 2022.
As expected, the White House also announced a long-awaited executive action erasing up to $10,000 in federal student debt for borrowers making less than $125,000 a year -- or $250,000 for married couples.
The president, who said he would go into more detail in a press conference Wednesday afternoon, also announced that Pell grant recipients will have $20,000 of their student debt erased. Borrowers with undergraduate loans will be able to cap repayment at 5% of their monthly income.
The forgiveness plan could wipe clear the balances of 15 million borrowers, The Wall Street Journal reported, a third of the 45 million Americans who are currently carrying about $1.7 trillion in federal student loans.
"In keeping with my campaign promise, my Administration is announcing a plan to give working- and middle-class families breathing room as they prepare to resume federal student loan payments in January 2023," Biden said.
Americans are divided on student loan forgiveness: 59% are concerned it will make inflation worse, according to a CNBC/Momentive poll last week, which also said 30% of adults opposed any kind of student loan forgiveness.
Democrats in Congress had pressed for more debt forgiveness -- at least $50,000 -- while Republicans said the president lacked the authority to cancel billions in student debt. Republican Sen. Mitt Romney introduced legislation to block Biden from forgiving debt but the bill never advanced in the Democrat-controlled Senate.
"Canceling student loan debt is yet another giveaway to the wealthy by Washington Democrats," Missouri Rep. Jason Smith, a Republican who serves on the House Budget Committee, tweeted Wednesday morning before the announcement. "And 87% of Americans who don't have student debt will be forced to pay for the 13% who chose to take on student loans," Smith added.
According to a Wharton School of Business research model, the one-time debt forgiveness of $10,000 per borrower will cost taxpayers around $300 billion over the next 10 years.
Read more: Student Loans Have Been Paused Again but You Should Probably Keep Making Payments Anyway
Student loan company Navient agrees to $1.86B settlement
Student loan company Navient agrees to $1.86B settlement
Navient, one of the largest student loan servicing companies in the US until 2021, reached a $1.86 billion settlement deal on Thursday with a coalition of 39 state attorneys general. In addition to canceling $1.7 billion in private student loans for almost 66,000 borrowers, Navient agreed to pay $95 million to borrowers who were unduly placed in certain types of long-term forbearances.
Though Navient isn't a lender itself, it managed the student loan repayment process on behalf of the US government. However, Navient chose to end its participation in federal student loan servicing at the end of 2021. Navient was accused of engaging in abusive and deceptive practices during that tenure, including targeting students the company allegedly knew would struggle to pay back loans.
This settlement comes as federal student loan repayments continue to be paused due to the pandemic -- omicron's surge prompted another moratorium extension last month. Federal student loans are on pause until May 1. Moreover, the US Department of Education recently pushed to expand its Public Service Loan Forgiveness Program, which will bring expanded relief to more than 500,000 student borrowers.
"Navient repeatedly and deliberately put profits ahead of its borrowers -- it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back and placed an unfair burden on people trying to improve their lives through education," Josh Shapiro, attorney general of Pennsylvania, said in a release.
Shapiro added that the settlement corrects corrects Navient's past behavior and puts in place "safeguards to ensure this company never preys on student loan borrowers again."
Navient didn't admit any fault in the settlement and "denies violating any law, including consumer-protection laws, or causing borrower harm," the company said in a statement. The student loan servicer said it's resolving the claims to save on legal costs.
As part of the settlement, Navient agreed to "maintain servicing practices that support borrower success."
$10,000 or $50,000 student loan forgiveness: Could Biden eliminate debt through executive order?
$10,000 or $50,000 student loan forgiveness: Could Biden eliminate debt through executive order?
Since taking office, President Joe Biden has expressed support for canceling up to $10,000 per student in loan debt. Some Democratic leaders are looking to go higher, to $50,000. And a new Change.org petition is calling for Biden to go even further and cancel all federal student debt in 2021 through an executive order. The survey has more than 1 million signatures.
In March, Biden did forgive $1 billion in loans for students defrauded by for-profit institutions, but he has yet to present a plan for reducing the roughly $1.7 trillion in student debt across the board. Biden in April asked Education Secretary Miguel Cardona if he has the legal authority to cancel student debt. Under the American Rescue Plan Act, eligible Americans received a third stimulus check and "plus-up payments" where applicable, more money for unemployed individuals, thousands more dollars for families with the new child tax credit and changes to health care savings. But students who are in debt weren't addressed in the bill.
Here's where the situation stands now when it comes to student loan forgiveness; we'll continue to update this story as it develops. Also, you could get up to $50,000 back with one-time COVID credits. For more on the new child tax credit, check here to see who is eligible and how to calculate your total.
Where does Biden stand on forgiving student loan debt right now?
During his presidential campaign, Biden called for forgiving $10,000 of federal student loan debt per person. He also laid out additional plans for college students in the Biden Plan for Education Beyond High School, such as free tuition and more money for federal grants.
Shortly after taking office, Biden signed an executive order to extend the pause on student loan payments and interest till the end of September. Former President Donald Trump initially suspended payments at the start of the pandemic, and the loan suspension was extended twice more.
In Biden's American Rescue Plan, a provision removed any tax penalty if student loans are forgiven. The IRS treats debt discharged for less than what's owed as taxable income. This would apply to both government and private loans. The forgiveness provision lasts until Dec. 25, 2025. However, as president, Biden has yet to formally forgive additional student loan debt.
It's important to keep in mind that there has been no movement on loan debt cancellation yet, but there is a growing number of scammers claiming they can help you with student loan forgiveness.
Does the president have the authority to forgive $10,000 or $50,000 across the board in student debt?
During a CNN town hall in February, an audience member asked if Biden would cancel $50,000 of student loan debt.
"I'm prepared to write off a $10,000 debt, but not 50" [thousand], Biden said. "Because I don't think I have the authority to do it by signing [with] the pen."
It appears the president may have changed his mind. On April 1, he asked Education Secretary Miguel Cardona if it's within the president's power to cancel $50,000 in student loan debt. The department has yet to announce its findings.
Will anything happen this year?
Depending on the response from the secretary of education's office, a few things could take place. Biden may be able to sign an executive order that cancels some debt per student. Or it may be that Congress would have to pass a bill if sweeping cancellations are outside Biden's power. In either case, the final amount canceled, and any rules and exceptions involving public and private debt, would be contentious areas of negotiation.
Whatever the outcome, it's unlikely to occur imminently, though it's a topic we're keeping a close eye on.
Read also:All the extra stimulus check money parents and the elderly could get in their third payment
Money tied up in student loans? There are a few things you can do now.
Sarah Tew/CNET
3 student loan forgiveness options you might be able to get
However, they're not so widely available -- or quick to receive.
Public Service Loan Forgiveness is a government program intended to forgive federal direct student loans if the borrower has a job with the government or a nonprofit organization, after 120 qualifying on-time payments in an income-driven repayment plan. This means after 10 years of making payments, the government is supposed to forgive the balance. However, many borrowers who believe they're qualified for forgiveness are having trouble getting approved.
In 2019, there were more than 41,000 PSLF applications -- and 206 were approved by the Department of Education. Many were denied due to errors, but a 2020 report from the nonprofit Student Borrower Protection Center found the department's Office of Federal Student Aid had mischaracterized employers, causing applicants to be ineligible. Since the PSLF began in 2007, 98.8% of applications have not been approved, according to the center.
Borrowers who took out loans to become teachers can get their Perkins, Stafford or Direct loans partially forgiven. The amount varies depending on what subjects they teach, what schools they teach at and how long they've been teaching.
And lastly, borrowers who are on an income-driven repayment plan -- in which the monthly payments are no more than 10% of a person's discretionary income -- can have their remaining loan balance forgiven after 20 years for undergraduates, or 25 years for graduate students.
For more information, visit CNET's resource guide for all things loans.
Who Is My Student Loan Servicer? Here's How to Find Out
Who Is My Student Loan Servicer? Here's How to Find Out
On Wednesday, President Joe Biden announced his long-awaited student loan forgiveness plan. Borrowers who make less than $125,000 are eligible for cancellation of $10,000 of their federal direct loans, or $20,000 if they are federal Pell Grant recipients.
More than 45 million Americans carry some amount of student loan debt. Close to 8 million borrowers (less than 20%) may be eligible to have their debts wiped automatically, according to the Department of Education.
If you want more details on your specific loan, however, you'll want to contact your loan servicer -- the third-party company contracted by the Department of Education to handle billing and other services.
You may want to reach out, for example, if you made payments during the loan forbearance period and want to request a refund to maximize your debt forgiveness.
Here's how to find out who your loan servicer is, how to contact them and what you should have handy when you reach out.
For more on student debt forgiveness, find out if you're eligible, learn how to sign up and know how to avoid student loan payment scams.
Who is my student loan servicer?
If you don't know who your servicer is, you can sign into your Federal Student Aid account with your FSA ID. Once you get to the dashboard, you'll see your service provider and other loan details.
You can also call the Federal Student Aid Information Center (FSAIC) at 800-433-3243 or consult the Department of Education's "Who is my loan servicer?" site for more information.
How do I contact my student loan servicer?
There are nine companies that manage most federal student loans. The largest is Nelnet, which acquired Great Lakes Education Loan Services in 2018 and is now responsible for overseeing more than 40% of all student loans.
If you know your provider, we've included links and telephone numbers, below, for the companies that service federal student loans.
Student Loan Servicers
Servicer
Website
Phone Number
Aidvantage
https://aidvantage.com/
800-722-1300
EdFinancial Services (HESC)
https://edfinancial.com/home
855-337-6884
Educational Computer Systems Incorporated (ECSI)
https://efpls.ed.gov/
866-313-3797
FedLoan Servicing (PHEAA)
https://myfedloan.org/
800-699-2908
Great Lakes Educational Loan Services
https://mygreatlakes.org/
800-236-4300
Maximus
https://maximus.com/fsa
800-621-3115
Missouri Higher Education Loan Authority (MOHELA)
https://www.mohela.com/
888-866-4352
Nelnet
https://www.nelnet.com/welcome
888-486-4722
Oklahoma Student Loan Authority (OSLA)
https://public.osla.org/
866-264-9762
Be patient. It might take some time
Biden's announcement has unsurprisingly sparked a massive number of inquiries -- servicer sites are experiencing delays, and providers are also reporting unusually high call volumes.
Redditors on the Student Loans subreddit on Wednesday reported they were on the phone for several hours.
On Thursday morning, Nelnet asked borrowers to "hold off on calling us as we continue to experience heavy phone volume."
Come prepared
When you do reach out, have handy any information you know about your loan before contacting your loan provider, including account numbers and balances. This is especially important if you are going to ask for a refund.
They might not have the answers you need
"We do not have any more details on who is eligible for loan cancellation than what was announced by President Biden," Nelnet tweeted on Thursday.
On Friday, EdFinancial indicated the most up-to-date info was on the Education Department site, tweeting "We have no updates. Loan eligibility has not been shared with servicers."
Aidvantage also recommends consulting the FSA website.
Get ready for major changes to who services federal student loans
In 2020, US Secretary of Education Betsy DeVos announced a shakeup to the companies contracted to manage student loan payments.
Alex Wong/Getty Images
In June 2020, then-Education Secretary Betsy DeVos announced sweeping changes to the companies that would be managing active and defaulted student loans for the federal government to streamline the process and improve a system that "can lead to customer confusion and inconsistent operations."
The number of third-party contractors with contracts from the Department of Education was trimmed from nine to five: EdFinancial Services, F.H. Cann & Associates, Maximus (which runs Aidvantage), MOHELA and Trellis Company.
Aidvantage recently began taking over the 6 million borrower accounts previously overseen by Navient, which announced it was getting out of the federal student loan business last September.
After December 2022, FedLoan Servicing will no longer continue its contract with the government, and accounts are already moving to MOHELA. Some non-Public Service Loan Forgiveness (PSLF) accounts have been moved from FedLoan to Nelnet.
But DeVos also announced that Nelnet and its subsidiary, Great Lakes, would no longer manage student loans for the federal government. The company's contract was initially set to expire in December 2022, but the Department of Education under Biden extended it through Dec. 14, 2023, the Lincoln Journal-Star reported.
Borrowers should receive a letter or email if their assigned servicer has been changed. Your account information should transfer automatically, with no change to the terms of your loan.
If you are told of a change, however, it might be worth checking in with your new provider.
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8 Ways to Protect Your Money During a Recession
8 Ways to Protect Your Money During a Recession
This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.
What's happening
With the latest GDP report showing another consecutive quarterly decline in economic activity, the country is likely in a technical recession.
Why it matters
Previous recessions have all seen pervasive layoffs, higher costs of borrowing and a tumultuous stock market.
What it means for you
Worry less about the macroeconomic news of the day and focus on what you can control. Take inventory of your financial life, gather facts and make moves to protect your savings.
While many economists still refuse to use the R-word, the warning signs indicate the US economy is now likely in a technical recession. In addition to another quarterly drop in GDP, or gross domestic product, consumer confidence has gone down, the stock market is in bear territory and inflation is still soaring, despite four interest rates hikes from the Federal Reserve.
An increase in layoffs -- another key indicator of a recession -- is also being felt across the country as many companies, particularly in the tech sector, have announced layoffs in recent months. And if you ask most people, they'll say it's become undoubtedly harder to make ends meet. At least one poll conducted in June finds a majority of Americans, or 58%, believe we are in a recession.
But then others point to some key factors that point in the opposite direction -- for example, low unemployment levels, rising spending and a healthy banking sector.
While the National Bureau of Economic Research makes the official call on a recession -- and so far it's remained tight-lipped -- whether we call this challenging financial period a recession or not seems like a pretty subjective matter of interpretation.
At CNET Money, we're dedicated to supporting your financial health with accurate, timely and honest advice that takes into consideration the pressing financial questions of our time. That's why we're launching the Recession Help Desk, a destination where you will get the latest, best advice and action steps for navigating this uncertain period.
First, a quick look back at the US economy
Since the Great Depression, the US has had about a dozen economic setback periods lasting anywhere from a few months to over a year. In some ways, there's always a recession on the horizon: Economies are cyclical, with upswings and downturns. We can't predict what will happen in advance, and sometimes we can't even tell what's happening while we're in the middle of it. Morgan Housel, author of The Psychology of Money, may have said it best when he tweeted back in April: "We're definitely heading toward a recession. The only thing that's uncertain is the timing, location, duration, magnitude and policy response."
Attempting to figure out recession specifics is a guessing game. Anyone who tells you different is likely trying to sell you something. The best we can do right now is draw on history to build context, get more proactive about the money moves we can control and resist the urge to panic. This includes reviewing what happened in previous recessions and taking a closer look at our financial goals to see what levers to pull to stay on track.
Here are eight specific steps you can take to create more financial stability and resilience in a turbulent economy.
Read more: Bear Markets: Expert Stock Market Advice for Investors
1. Plan more, panic less
The silver lining to current recession predictions is that they're still only forecasts. There is time to assemble a plan without the real pressures and challenges that come with being in the thick of an economic slowdown. Over the next couple of months, review your financial plan and map out some worst-case scenarios when your adrenaline isn't running high.
Some questions to consider: If you did lose your job later this year or in early 2023, what would be your plan? How can you fortify your finances now to weather a layoff? (Keep reading for related advice.)
2. Bulk up your cash reserves
A key to navigating a recession relatively unscathed is having cash in the bank. The steep 10% unemployment rate during the Great Recession in 2009 taught us this. On average, it took eight to nine months for those affected to land on their feet. Those fortunate to have robust emergency accounts were able to continue paying their housing costs and buy time to figure out next steps with less stress.
Consider retooling your budget to allocate more into savings now to hit closer to the recommended six- to nine-month rainy day reserve. It may make sense to unplug from recurring subscriptions, but a better strategy that won't feel as depriving may be to call billers (from utility companies to cable to car insurance) and ask for discounts and promotions. Speak specifically with customer retention departments to see what offers they can extend to keep you from canceling your plans.
3. Seek a second income stream
Web searches for "side hustles" are always popular, but especially now, as many look to diversify income streams in the run up to a potential recession. Just like it helps to diversify investments, diversifying income streams can reduce the income volatility that arrives with job loss. For inspiration on easy, low-lift side hustles that you might be able to do from home, check out my story.
4. Resist impulsive investing moves
It's hard not to be worried about your portfolio after all the red arrows in the stock market this year. If you have more than 10 or 15 years until retirement, history proves it's better to stick with the market ups and downs. According to Fidelity, those who stayed invested in target-date funds, which include mutual funds and ETFs commonly tied to a retirement date, during the 2008 to 2009 financial crisis had higher account balances by 2011 than those who reduced or halted their contributions. "Those who panic and sell 'at the bottom' often regret it because trying to time the market can result in losses that are very difficult to regain because stock prices can change quickly," said Linda Davis Taylor, seasoned investment professional and author of The Business of Family.
If you have yet to sign up for automatic rebalancing, definitely look into this with your portfolio manager or online broker. This feature can ensure that your instruments remain properly weighted and aligned with your risk tolerance and investment goals, even as the market swings.
5. Lock interest rates now
As the policy makers raise interest rates to bring down inflation levels, interest rates will increase. This potentially spells bad news for anyone with an adjustable-rate loan. It's also a challenge for those carrying a balance on a credit card.
While federal student loan borrowers don't have to worry about their rates going up, those with private variable rate loans may want to look into consolidating or refinancing options through an existing lender or other banks, such as SoFi, that could consolidate the debt into one fixed-rate loan. This will prevent your monthly payments from increasing unpredictably when the Federal Reserve raises interest rates again this year, as expected.
6. Protect your credit score
Borrowers may have a tougher time accessing credit in recessions, as interest rates jump and banks enforce stricter lending rules. To qualify for the best loan terms and rates, aim for a strong credit score in the 700s or higher. You can typically check your credit score for free through your existing bank or lender, and you can also receive free weekly credit reports from each of the three main credit bureaus through the end of the year from AnnualCreditReport.com.
To improve your credit score, work towards paying down high balances, review and dispute any errors that may be on your credit report or consider consolidating high-interest credit card debt into a lower interest debt consolidation loan or 0% introductory APR balance transfer card.
7. Rethink buying a home
While home prices have cooled in some areas, it remains a competitive housing market with few homes to go around. If rising mortgage rates are adding more pressure to your ability to buy a home within budget, consider renting for a little longer. If you're also worried about your job security in a potential recession, then that's even more reason to take pause. Leasing isn't cheap at the moment, but it can afford you more flexibility and mobility. Without the need to park cash for a down payment and closing costs, renting can also keep you more liquid during a potentially challenging economy.
8. Take care of your valuables
The advice that was born out of the sky-high inflation period in the late 1970s still applies now: "If it ain't broke, don't fix it."
With ongoing supply chain issues, many of us face high prices and delays in acquiring new cars, tech products, furniture, home materials and even contact lenses. This includes replacement parts, too. If a product comes with a free warranty, be sure to sign up. And if it's a nominal fee to extend the insurance, it may be worth it during a time when prices are on the rise.
For example, my car has been in the repair shop for over three months, waiting for parts to arrive from overseas. So, in addition to paying my monthly car payment, I have a rental car fee that's adding up. If nothing else, I'll be heading into a possible recession a more cautious driver.
Read more: Smaller Packages, Same Prices: Shrinkflation Is Sneaky
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Does High Inflation Impact Your Student Loans? For Most Borrowers, Yes
Does High Inflation Impact Your Student Loans? For Most Borrowers, Yes
This story is part of Recession Help Desk, CNET's coverage of how to make smart money moves in an uncertain economy.
Despite a slight slowdown in July, inflation remains sky high as prices continue climbing, making everything from the groceries you buy to the rent you pay each month more expensive. But how does inflation impact student loan borrowers?
The answer will vary depending on what type of loans you hold -- federal or private -- and whether or not you're eligible for loan forgiveness. In a general sense, however, inflation will make it harder for borrowers to repay existing debt and will continue to drive up rates on private student loans.
The current pause on federal student loan repayments expires at the end of August. The moratorium was extended six times since the start of the pandemic and has offered borrowers temporary relief. Yet when repayments begin, high prices can make it more difficult for borrowers to restart monthly student loan payments.
How exactly does inflation impact the student loan debt you hold? We sat down with student loans expert Mark Kantrowitz, author of How to Appeal for More College Financial Aid, to discuss the specifics of what inflation means for student loan holders.
The role inflation plays in student loans
The Federal Reserve has raised the federal funds rate four times in an effort to slow rampant inflation. But while prices haven't dropped from record-high levels, these hikes in the federal funds rate have indirectly led to more burdensome interest rates on consumer products, such as credit cards, mortgages and loans.
The Fed's rate increases won't impact any fixed-rate student loans you currently hold, for example, federal loans. But private loans with adjustable-rates (interest rates that can rise and fall along with the economy) may see their rates increase, making them more expensive for borrowers to repay.
If your wages were to rise alongside inflation at the same rate or higher, it could make paying back your debt a little bit easier and counter higher interest rates. "Inflation dictates that a dollar ten years ago is worth more than a dollar today. So, as long as your wages are rising along with inflation, the debt for a loan borrowed in the past will hold less value today," said Kantrowitz.
However, average wage increases are not keeping up with inflation. As of June, wages have only increased 5.1% over the past 12 months, making it more difficult for borrowers to chip away at their debt on top of covering daily expenses.
Here's a breakdown on how inflation might impact you depending on your loan type and whether or not you're still in school:
If you hold federal student loans:
Federal student loans are always fixed-rate loans, so the interest rate will stay the same over its lifetime.
If you hold a federal student loan, inflation could work in your favor because it effectively devalues your debt, but that only helps if your wages kept up or surpassed the inflation rate.
If, like for most Americans, your wages haven't increased substantially and your budget is stretched even thinner than before, this devalued debt won't help you -- and you might even find it more difficult to repay your loans when the federal loan repayment freeze ends.
If you hold private student loans:
Private student loans can be either variable or fixed rate, and payments for either type of private loan have not been on hold during the pandemic.
For those with fixed-rate private loans, the interest rate of your existing student debt won't go up. However, since inflation is making everyday purchases pricier, you might find yourself with less cash overall to set aside for paying off debt.
If you have adjustable-rate loans, your interest rates could definitely rise -- and may have already. As inflation rates go up, interest rates usually follow. Variable-rate private loans holders could see even higher interest rates in the future.
If you're a new borrower in 2022:
Both federal and private student loan interest rates will be higher for the 2022-23 academic year, Kantrowitz said. The new federal student loan interest rates for the 2022-23 school year are as follows:
Undergraduate loans: 4.99%
Graduate Direct Unsubsidized loans: 6.54%
PLUS loans: 7.54%
This is a big jump up for students. For reference, last year an undergraduate federal student loan had an interest rate of 3.73% -- around 1.25% lower than the rate for the coming academic year.
Private student loan rates have also increased. Fixed-rate private student loans range from 3.22% to 13.95%, and variable-rate private student loans range from 1.29% to 12.99%, according to Bankrate, which is owned by the same parent company as CNET.
Will inflation make loan repayment more difficult after the federal payment pause ends?
Kantrowitz said he predicts that the student loan repayment pause will be extended again, with renewed payments beginning after the 2022 midterms. Whether or not the student loan freeze is prolonged could hinge on the White House's decision on widespread federal student loan forgiveness. In any case, since the federal payment pause is set to expire in a couple weeks and no official announcements have been made, it's best to prepare for repayment now.
For many, repaying student loan debt in a time of high inflation is a real concern. According to the Student Debt Crisis Center, out of 23,532 borrowers, 92% of those who were fully employed are concerned about affording payments in the face of skyrocketing inflation.
"I personally have not been able to save for student loan repayment, and I don't think I could have given the growing disparity between wages and the national cost of living," said Jonathan Casson, a recent graduate of Cornell University.
If you're worried about repaying your student debt, here are some tips to plan ahead:
How can you prepare to repay federal loans?
1. Look into income-driven repayment plans
The government offers four income-driven repayment plans that can help make monthly payments more affordable for borrowers who need to keep payment sizes small. Each IDR plan caps payments at between 10% to 20% of your discretionary income (income after taxes and necessities are paid), and forgives your loan balance after 20 or 25 years of payment. Eligibility for these plans is dependent upon family size and discretionary income.
2. Check if you're eligible for loan forgiveness
If you're a teacher, first responder, public servant or government worker, you may be eligible for federal student loan forgiveness under the Public Service Loan Forgiveness program. You must be in a qualifying position, hold eligible federal student loans and have made 120 qualifying payments to receive forgiveness (each paused month during the federal payment freeze counts as one qualifying payment).
The PSLF has temporarily expanded its benefits to include forgiveness for more federal loan types and IDR plans, and could make some applicants now eligible who had been denied loan cancellation in the past. The expanded forgiveness waiver application is due by Oct. 31, so it's important to find out if you're eligible now. In some cases, you may need to consolidate your loans into federal Direct Loans, a process that can take 45 days.
While your monthly payment may not change if you haven't reached the 120 payment goal yet, you'll at least be a step closer toward student loan forgiveness.
3. Refinance private loans
With many interest rate hikes expected this year, refinancing your private adjustable-rate student loans into fixed-rate student loans could help you save hundreds to thousands in interest -- and may even reduce your monthly payment. You should only refinance if you receive better payment terms or a lower rate. Otherwise it generally won't be worth the hassle and could cost you more in interest.
4. Review your budget
If a student loan payment is not feasible with your current budget, see if there are any ways to cut expenses or pay down high-interest debt now to free up funds. While adjusting your budget may seem daunting, there are multiple resources and apps to help you calculate and identify expenses you can reduce or eliminate.
5. Consider a side hustle
A part-time gig outside of your primary job may help supplement your income as inflation skyrockets. Currently, 31% of American adults have a side hustle, according to a 2022 Bankrate survey. Having an additional source of money can help bridge a gap in your budget and offer you a bit of breathing room.
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Best Debt Consolidation Loans for August 2022
Best Debt Consolidation Loans for August 2022
If you have existing credit card, medical or other personal debt, keeping track of payments and getting hit with high-interest charges can be overwhelming. Debt consolidation allows you to combine your debt into a new, lower-interest loan. With the Federal Reserve expected to raise interest rates even higher this year, if you're considering a debt consolidation loan, now is the best time to lock in a low rate.
A debt consolidation loan combines all your high-interest debt into one personal loan, giving you a lump sum you can use to pay off credit cards, medical bills and other debt. By consolidating multiple payments into one fixed monthly payment, a consolidation loan means your debts will be easier to manage and you can simplify your repayment plan.
We've evaluated major debt consolidation loan providers and highlighted the best options below. We'll update this list regularly as terms change and new loan products are released. Note that all of the starting annual percentage rates, or APRs, that are listed are based on a high credit score of 800 or above.
Rates as of Aug. 3, 2022.
LightStream
APR: 5.73% (with AutoPay) to 19.99% (with AutoPay)
Loan amount: $5,000 to $100,000
Loan terms:24 to 84 months*
Time to receive funds:As early as same day (conditions apply)
Prequalification: No
Origination fee: No
Co-signer option: No, only joint applicants
Debt consolidation for student loans: No
LightStream is an online lender under Truist that offers some of the lowest rates for debt consolidation loans. Its low rates, high loan limits and long loan terms make it a great option for borrowers with excellent credit. Lightstream also eliminates fee pitfalls by not charging origination or prepayment fees -- but to lock in its lowest rates, you'll want to enroll in AutoPay, which will earn you a 0.5% discount.
A caveat is that LightStream doesn't offer prequalification, which often lets you view possible loan rates before the lender runs a hard credit check. To find out what rate you qualify for with LightStream, the lender will conduct a hard pull on your credit, which could cause a temporary dip in your credit score.
Rocket Loans
APR:7.727% to 29.99%
Loan amount: $2,000 to $45,000
Loan terms: 36- and 60-month terms
Time to receive funds:As early as same day
Prequalification:Yes
Origination fee: 1% to 6%
Co-signer option:No
Debt consolidation for student loans: No
Rocket Loans is a great option for those seeking same-day funding. It offers prequalification and flexible loan amounts and terms, and boasts zero prepayment penalties. However, it does charge an origination fee of 1% to 6% for each loan. Furthermore, in order to access the best rates, you'll need to sign up for AutoPay.
SoFi
APR: 6.99% to 22.23%
Loan amount: $5,000 to $100,000
Loan terms: 36 to 84 months
Time to receive funds: 1 business day after accepting loan
Prequalification: Yes
Origination fee: No
Co-signer option: Yes
Debt consolidation for student loans: Yes
Social Financing, or SoFi, offers debt consolidation at a low rate without origination, late or prepayment fees. It also offers a 0.25% autopay discount. It's notable for its special benefits, such as unemployment protection and free financial advising.
SoFi also offers great rates on private student loan debt consolidation (private student loan refinancing), at 3.49% for fixed-rate refinancing and 1.74% for variable-rate refinancing. It holds several promotions and guaranteed rate matches on student loan refinancing, including a $20 promotion on checking your rate on a SoFi student or personal loan refinance.
Happy Money
APR: 5.99% and 24.99%
Loan amount:$5,000 to $40,000
Loan terms:24 to 60 months
Time to receive funds: 2 to 5 business days
Prequalification:Yes
Origination fee: 0% to 5%
Co-signer option: No
Debt consolidation for student loans: No
The Payoff Loan by Happy Money is designed specifically for borrowers looking to pay off credit card debt. It focuses heavily on financial wellness, offering you access to tools to help track your credit score and build or rebuild your credit. Those with lower credit scores may also qualify, since Happy Money only requires a minimum credit score of 550 to take out a loan. On the downside, Happy Money does change an origination fee between 0% to 5% and its loans aren't offered in Massachusetts or Nevada.
Upstart
APR: 5.40% to 35.99%
Loan amount: $1,000 to $50,000
Loan terms: 36- and 60-month terms
Time to receive funds:1 business day after accepting loan
Prequalification: Yes
Origination fee: 0% to 8%
Co-signer option:No
Debt consolidation for student loans:No
Upstart describes itself as an artificial intelligence lending platform designed to offer higher approval rates and improve consumers' access to credit. While it does use your credit score to gauge eligibility, it also considers alternative factors, such as job history, to determine if you qualify. While you may be accepted even if you have insufficient credit history or no credit score, proof of a regular source of income is a requirement. It does not charge prepayment penalties.
However, Upstart does charge relatively high origination fees, as well as late payment fees and $10 for every requested paper copy of your loan agreement. West Virginia or Iowa residents are also not eligible for Upstart loans.
Best debt consolidation lenders, compared
LightStream
Rocket Loans
SoFi
Happy Money
Upstart
Best for
Excellent credit
Fast funding
No fees
Consolidating credit card debt
Limited credit
APR
5.73% to 19.99% (with Autopay)
7.727% to 29.99%
6.99% to 22.23%
5.99% to 24.99%
5.40% to 35.99%
Loan amount
$5,000 to $100,000
$2,000 to $45,000
$5,000 to $100,000
$5,000 to $40,000
$1,000 to $50,000
Term lengths
24 to 84 months*
36- and 60-month term
36 to 84 months
24 to 60 months
36- and 60-month terms
Time to receive funds
As early as same day (conditions apply)
As early as same day
1 business day after accepting loan
2 to 5 business days
1 business day after accepting loan
Prequalification
No
Yes
Yes
Yes
Yes
Origination fee
No
1% to 6%
No
0% to 5%
0% to 8%
Co-signer option
No, only joint applicants
No
Yes
No
No
Debt consolidation for student loans
No
No
Yes
No
No
FAQs
Will a debt consolidation loan save me money?
A debt consolidation loan may save you money. You may pay less interest if you're approved for a lower rate than your existing debt. For example, if you have $2,500 in total debt with a combined APR of 20% and a combined monthly payment of $125, you'll pay $566 in interest over about two years. But if you were to take out a debt consolidation loan with an 11% APR and a two-year repayment term, the new monthly payment would be $116.50, and you would save $329 in interest.
Keep in mind that access to lower rates is heavily dependent upon a high credit score.
How does student loan debt consolidation work?
Student loan debt consolidation is similar to other types of debt consolidation -- borrowers can combine multiple student loans into one for new terms and a potentially lower interest rate.
However, student loan debt consolidation differs depending on whether you have federal loans or private loans. If you have federal loans, consolidation can only occur through the Direct Loan program, for a new rate of the weighted average of all your loans, rounded to the nearest eighth.
You cannot consolidate private student loans. However, you can refinance your loans (both private and federal) into one brand-new loan. Keep in mind that debt consolidation is a loan combination, while refinancing is simply changing the terms on a debt obligation.
What is prequalification?
Many lenders offer the option to prequalify, which allows you to view your payment plan and see what your potential interest rates and monthly payments would look like. Prequalification requires a soft credit pull, allowing lenders to view a limited portion of your credit history. A soft credit pull will not impact your credit score.
What's an origination fee?
An origination fee is an upfront, one-time fee for processing your loan. It may also be called the administrative or processing fee.
What is a co-signer, and how does it differ from a joint applicant?
If you don't have a longstanding credit history, you may need someone with good or excellent credit to co-sign your loan. A co-signer takes on loan responsibility, serving as a guarantor, and is required to make loan payments if you're unable to. Keep in mind that your loan repayment history will affect your co-signer's credit score. With a joint-applicant loan, both applicants are held equally responsible for paying the loan back. A co-applicant has more rights and responsibilities than a co-signer.
Lenders reviewed:
Avant
BestEgg
Discover
Freedom Plus
LightStream
Marcus by Goldman Sachs
Payoff
PenFed
Peerform
Prosper
One Main Financial
Rocket Loans
SoFi
Upstart
More loan advice:
*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment example: Monthly payments for a $10,000 loan at 5.73% APR with a term of 3 years would result in 36 monthly payments of $303.00.
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
