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Are Student Loans Worth It?

September 17, 2019 · 5 minute read

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Are Student Loans Worth It?

You’ve finally made it. After years of hard work and diligent studying, you’ve got high school under your belt and you’re ready to take the next steps to advance your education, pursue your passions, and earn that next diploma. But how will you pay for it?

Even for those who are offered scholarships and grants or have been saving up for college since they were little kids, student loans may be a necessary option to cover the full costs of tuition and fees—but is college debt worth it?

Will School Pay Off?

It’s no secret that the cost to attend college is on the rise, meaning more and more students are incurring debt as a means to afford a college education. Americans have accumulated over $1.56 trillion in student loan debt—this number exceeds the total U.S. credit card debt by about $521 billion.

For many people, a quality education can be an invaluable investment, regardless of the price tag. In many cases, having a good education may be able to afford college graduates unparallelled career opportunities that, in turn, can lead to greater financial achievements and security, allowing them to pay off their loans and get out of debt more quickly.

Payscale’s 2018 College ROI Report found that when comparing the cost of tuition to graduates’ salaries throughout their careers, top U.S. private and public colleges and universities largely have a positive ROI.

All things taken into consideration, there may certainly be situations where taking out student loans to pay for college may be a poor financial decision—particularly if you aren’t interested in what you’re studying.

But if you’re passionate about your major and you finish your degree, a strategically and thoughtfully chosen loan with a decent interest rate may very well be worthwhile.

Here’s What You Might Consider if You Choose to Take Out Student Loans

There are a number of factors to consider when deciding what loan will best suit your particular needs, so it’s important to do your research beforehand.

Things like whether the loan is federal or private, what the current interest rates are, and how long it will take to pay off the loan could all contribute to how much student loan debt you ultimately find yourself in and could be good determinants to think about before taking out a loan.

Federal Loans vs. Private Loans

There are two main types of student loans—federal loans and private loans . Federal loans are borrowed directly from the government, whereas private loans are borrowed from private lenders like banks, credit unions, and other financial institutions.

While the two loans can be similar in nature, there are some important distinctions to note. Because federal loans are made by the government directly, the terms and conditions are set by law and can have perks like fixed interest rates and income-driven repayment plans that may not always be offered with private loans.

Private loans are less standardized, since the terms and conditions are set by the lenders themselves and can change from lender to lender. For example, some may offer lower interest rates than federal loans or extra fees, so it’s important to understand specific terms and conditions set by a private lender.

If you’ve exhausted your federal loan options and are considering taking out private loans to help pay for your education, SoFi Private Student Loans may be a good option, as they have no fees, offer competitive rates and flexible repayment plans, and have a simple online application process that has been optimized for mobile.

Understanding Interest Rates

Sometimes people fail to consider the interest rate on the student loan and how it will affect the life of the loan and, ultimately, the amount of money they will end up owing. The Federal Student Aid Office of the Department of Education explains explains that interest is calculated as a percentage of the unpaid principal amount (total sum of money borrowed plus any interest that has been capitalized).

Capitalization is when the amount of your unpaid interest is added to the principal balance of a loan, and interest is calculated using this new amount, causing more and more interest to accrue and increasing the amount of money you owe on the loan.

You might have interest capitalization if, as one common example, you decide not to make interest payments on an unsubsidized federal loan , thus allowing all that interest to be added back onto the principal amount of your loan.

For all new federal loans, interest rates are set by the government and are fixed, but with private loans, it’s up to the lender to set the rate and terms and you to choose what might work for you from the rates you qualify for.

Without taking a loan’s interest rate into account, it can be easy to fall into the trap of accruing more debt than you’re able to comfortably pay off. A great way to avoid this is to learn about all of your student loan options and compare various interest rates that you may be subjected to paying in order to determine whether or not borrowing the money will be worth it.

How Long Will it Take to Repay Your Loan?

Student loan debt can be crippling and is likely not something you want hovering over your head for the rest of your life.

Paying more money sooner can drastically reduce the amount of time it takes you to pay off a loan, but that may not always be a feasible option, so it’s important to consider the implications of different kinds of repayment plans when you take out a loan.

While the standard term to repay a federal student loan will likely last 10 years, depending on your income, familial status, and other factors that may affect your finances, you may need more or less time to pay back the money.

There are a number of different options that may determine the amount of time you take to pay off your loan.

While some federal repayment plans are based on a general, anticipated salary trajectory, others can take your specific income into consideration to make payments affordable, regardless of your circumstances.

Many loans, federal and private, also offer grace periods or options to defer if you find yourself in a situation deeming you temporarily unable to make payments. As with everything, each plan has its own advantages and drawbacks, so it’s important to know what all of your options are to make sure that you’re getting the best bang for your buck.

Finding What’s Right for You

When you’re trying to figure out how to pay for school, it can be easy to feel overwhelmed and hastily make a decision to borrow money without knowing all of the terms.

This can sometimes put people in so much debt that taking out loans to pay for college may not even seem worth it, but if you educate yourself about all of your options and are certain that you understand what you’re getting yourself into by accepting a loan, repaying them doesn’t have to be an anxiety-inducing hassle.

SoFi’s Private Student Loans may help undergraduates, graduates, and parents pay for a college education on their own terms. SoFi recommends exhausting all federal loan options first, but if you think you may need to take out a private loan, SoFi offers competitive rates with no fees, flexible repayment options, and a mobile-first experience.

To Learn more about how SoFi can help you pay for school, check out our options for Private Student Loans.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Student Loan Refinance
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.


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