After you’ve put in hours filling out college applications and writing personal essays, you’ve finally been accepted and narrowed down your choices for college. Congrats! Next on the list of to-dos: paying for college.
Student loans provide many college students the opportunity to finance their education. Being well-informed on the nuts and bolts of student loans may make it even easier to fund your education, while still keeping your eye on long-term goals like starting a career and saving for the future.
If you’re left with student loan questions, you’re not alone. In this post, we’re sharing 10 of the most common student loan questions, along with some practical tips. These FAQs range from the process of getting enough funding, choosing between federal and private loan options, calculating the costs and benefits of attending college, and learning what is a grace period for student loans.
1. How Can I Get Enough Student Loans?
An important first step is to accurately fill out your Free Application for Federal Student Aid (FAFSA®) form. You’ll need to fill out a FAFSA form every year you’re in college to be eligible for federal student aid, including grants, student loans, and work-study programs. After your FAFSA is reviewed, you’ll receive a letter describing the options available to you, such as which federal loans or grants you’re eligible to receive. (Be sure to check the deadlines for the different federal aid programs—they can and do differ.)
In some cases, depending upon your financial situation (and, usually, your parents’ financial situations), you may find all the help you need from FAFSA sources. Other times, this is just one step of your search. Types of loans you’ll automatically be considered for through your FAFSA application include Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS Loans.
2. How Do I Fill Out a FAFSA® Form?
You can fill out a FAFSA form online (or you can print one out and mail it in). If you’re going the online route, you’ll need to create a username and password—and, in many circumstances, your parents will need to as well. It’s in your best interest to start the FASFA as early as possible because states and schools can run out of money to award.
After you have filled out the FASFA once, you can select the Renewal FAFSA option in years following, which allows a significant amount of information you’ve already submitted, including student demographic info, to be auto-filled from previous applications.
You’ll also need to list which schools should receive your FAFSA information, including those you’re considering but haven’t applied to yet. You’ll also need to include both your and your parents’ financial information, which can be streamlined if you use the IRS Data Retrieval Tool (DRT) .
3. What is the Difference Between Private Student Loans and Federal Ones?
Federal loans are funded through the government and are strictly regulated. To qualify for them, you must fill out the FAFSA®. Private loans, on the other hand, are not subsidized by the government.
If you choose to move forward with a private student loan, you’ll probably want to check with the school you’ll be attending to see which lenders they work with. Then you can apply directly through the those lenders. If your school doesn’t have that information handy, you can always check with the lender you’re considering to see if they work with your school.
Your credit history (and your parents’ credit history) is not considered for most federal student loan options (federal PLUS loans are a notable exception), although it often is considered as part of the application for a private student loan. And while financial need is a factor for federal loans, it isn’t for private ones.
It’s important to investigate all options, speak to a qualified financial advisor, and make the best possible choices for your situation (which may ultimately involve a mixture of the both federal and private student loans), as taking out a private student loan can result in a loss of federal benefits, like income-based repayment options or loan forgiveness.
4. How Much Does College Cost?
The average cost of college varies widely depending up the type of college you plan to attend—from around $11,970 a year for a public, two-year college to $46,950 a year for a private, four-year college.
Most important to you, of course, will be the cost of the college you choose to attend. Once you’ve chosen a school, you can calculate tuition costs and subtract scholarships, grants, and money you’re able to pay up front.
It’s also smart to set up a budget for your college years. Things to consider include costs like college textbooks and other supplies, lab fees, testing fees, parking fees if you plan to have a car at school, food beyond what’s covered by the meal plan, and everyday living expenses.
5. Is College Worth the Cost? What Are the Benefits?
College represents an investment in yourself and your future, and only you can decide how much that’s worth. So, we’ll focus instead on the potential benefits of going to college. The most obvious benefit is that, if you want to pursue certain careers, you’ll likely need the appropriate college education and training.
studies show that college graduates earn significantly more money, accumulated over a lifetime, than those who did not attend. And by 2020, 65% of all jobs will require college degrees or some sort of post-high school education; on top of that, recent trends indicate that 91% of new jobs created today are filled by people with at least a bachelor’s degree.
Earning your degree of choice requires a solid plan and commitment, and these are excellent strategies and skills to develop before you enter the working world. Plus, people often make lifelong friendships at college, and many universities have a strong alumni network, which can be helpful on many levels as you begin your career.
6. What Can Student Loans Be Used For?
According to the Office of Federal Student Aid , funds must be used for education-related expenses. These include college tuition and fees, room and board, textbooks and other school supplies, and transportation to and from school.
You’ll most likely find yourself with additional expenses while you’re at college, such as travel expenses outside of transportation to and from school, and meals outside of the school’s meal plan; these are not generally eligible expenses for student loan funds, so creating a budget (see #4) before you apply for student loans may be a good idea.
7. What is a Grace Period for Student Loans?
Although not all student loan payment plans are alike, most come with a six-month grace period, which means you’ll typically need to start paying back your loans six months after you graduate, drop below half-time enrollment, or drop out of college altogether.
The student loan grace period is designed to give students a chance to find employment before their monthly loan payments kick in. Check with your loan holder to see what the grace period on your loans are. Armed with that information, you can better consider how those grace periods (or lack thereof) might impact your future plans.
8. Can I Repay Student Loans Early?
The short answer is yes, you can repay your student loans early. There is no loan prepayment penalty for paying more or for paying off the balance in full before the due date. (You may want to reach out to your lender first to fully understand how they intend to apply your additional payments.)
Depending upon the repayment plan and type of loan you choose, you typically have 10 to 25 years to pay back your loans, with a minimum payment calculated based upon how much you owe and the length of the loan. You should have the option to select from different repayment plans, such as an income-based repayment plan. If you don’t choose a repayment plan, you will be automatically enrolled in the Standard Repayment Plan, which is a 10-year repayment plan. (You can also change your repayment plan at any time.)
If you need help figuring out your monthly payment, you can use a tool like SoFi’s student loan calculator. This can help you decide if you want to stick with your current repayment plan, or switch to a different one.
9. Can Student Loans be Refinanced?
When the time comes, you can refinance your student loans and may be able to secure a lower interest rate or lower monthly payments, which may be especially helpful if you’re right out of college and your budget is tight.
You can also refinance for a shorter term, which could allow you to pay off student loans more quickly. When deciding which option is right for you, it’s important to be clear about why you’re refinancing, and what monthly payments you can afford, so you can choose a refinancing program that can facilitate those goals.
10. How Can I Refinance My Loans at SoFi?
If you decide to refinance your student loans after you graduate, that means you’ll be taking out a new loan that comes with a new interest rate, new monthly payments, and a new loan term. If you are handling a variety of student loan payments from different lenders, refinancing may help you manage those payments by reducing the number of monthly payments you need to keep track of. At SoFi, we work hard to make student loan refinancing easier. In fact, you can get pre-qualified in just two minutes.
If you currently have federal student loans, it is important to know that if you refinance with a private lender like SoFi you will lose some of the federal benefits that come with them—like deferment, forbearance, or income-based repayment plans.
But depending on your financial profile and earning potential (among other factors), refinancing could be a good option to help reduce the amount of money you pay in interest over the life of the loan. You can always use our student loan refinancing calculator to see how refinancing could impact your student loan repayment plan as your academic career progresses.
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Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit .
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.