Social work is a growing career field in the United States. As more people pursue social work for a living, they will face student loan debt related to earning their degrees. What’s the best way to tackle those student loans? Student loan refinancing for social workers is one option. There may be other ways to pay off your loan debt, though.
Social workers face their fair share of student loan debt, although not as much as many other professions. In 2017, the Council on Social Work Education collected data for a study on social work education in the United States. According to the council’s findings, here is the average student loan debt for social workers based on their education level:
Average Student Loan Debt
What is refinancing?
Refinancing is the process of replacing a current loan (or loans) with a new loan. When borrowers refinance student loans, they seek out refinancing through a private lender. If approved, their old loans are completely paid off by the private lender, and a new loan is created. This new loan will have new terms and a new interest rate. When federal student loans are refinanced, borrowers lose access to federal loan programs and protections, such as:
- Income-driven repayment (IDR) plans
- Federal loan forgiveness programs, like Public Service Loan Forgiveness
- Federal loan deferment options
- Federal loan forbearance options
It’s crucial to analyze your current and future financial situation before choosing to refinance your student loans. If there’s a chance you’ll need access to the federal programs mentioned above, you should hold off on refinancing.
Some social workers choose to refinance their student loans to take advantage of options available to social workers, like loan forgiveness and federal repayment plans. Sometimes, people just want to pay off their student loan debt quickly and move on with their life plans. Refinancing is an excellent option if your loan debt balance is lower.
The main draw of student loan refinancing for social workers is to secure a much lower interest rate than your current federal loans have. By getting a lower rate, there’s the potential to save thousands of dollars in interest charges over the life of your loan. A refinanced loan also comes with new terms, which may work out better for someone looking to pay off loans quicker.
To qualify for student loan refinancing and the lowest interest rate possible, borrowers need strong credit. For private loans and refinancing, a credit check is one of the main criteria for eligibility. This factor can be a challenge to social workers who haven’t established this level of credit yet.
However, some private lenders allow borrowers to enlist the help of a cosigner with strong credit. A cosigner is basically someone you know that will vouch for you and is financially responsible for your loans if you can’t pay them off. Often this can be a parent, grandparent, or family friend. Either way, having excellent credit is the way to get a low interest rate.
Refinancing doesn’t have to be a one-time thing either. You can always refinance your refinanced loan later on after establishing better credit. You could continue to lower your interest rate and save money along the way, but remember you’re creating a new loan with new terms each time.
When does refinancing make sense for social workers? It’s not a good option for those with large amounts of student loan debt, especially if your education continued past a master’s program. If you have a lower debt balance between $10,000 and $30,000, however, refinancing could be a solid choice. Any more debt than that, though, and student loan forgiveness for social workers makes more sense.
For social workers who took out federal PLUS loans with high interest rates, refinancing is a good solution for dealing with your debt. You should be able to get a better rate and pay off your debt quicker.
Student loan refinancing for social workers is a good option for those wanting to deal with their student loan debt head-on, especially if the student loan debt balance is lower. If that’s the case for you, we have partnered with several private lenders to offer cash bonuses when you refinance your student loans. This can be a great perk, especially for social workers with lower salaries.
Social workers have options when it comes to paying off student loans. For social workers with higher student loan debts, student loan forgiveness is the best repayment plan for social workers. PSLF is a federal loan forgiveness program that can wipe away the majority of your student loan debt tax-free.
How does PSLF work? Borrowers need to sign up to be on one of the four IDR plans, which include:
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
Borrowers need to make 120 qualifying, on-time monthly payments while working full-time for a qualified employer. Qualifying employers include government organizations and qualified nonprofits. If you’ve met all the requirements, after your 120 payments, any remaining loan balance is forgiven. There is no tax paid on forgiven loan balances with PLF.
Social workers who don’t work for a qualifying employer or want to pursue a career in the private sector have a loan forgiveness option too. Similar to PSLF, borrowers can get placed on an IDR plan. After paying roughly 10 percent of your income for 20 to 25 years, depending on the specific IDR plan, any remaining loan balance will be forgiven.
Unlike PSLF, there may be a huge tax bomb waiting for you after your balance is forgiven, however. The good news is you have a couple of decades to prepare for it. You can set aside money in a high-yield account or investment account, for example, specifically to deal with this issue later.
Social workers have options when it comes to repaying their student loans. If you need help devising a solid repayment game plan that makes sense, reach out to Student Loan Planner®. Our consultants can help find the solution for your student loan debt.