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Getting Financial Aid When Your Parents Make Too Much

Many college-bound students with high-earning parents may suspect that they don’t qualify for federal financial aid when they actually might.

Some may focus on need-based aid and not know that non-need-based aid exists.

And some students who face a crevasse between costs and means may not realize that options exist to bridge that gap.

It All Starts With the FAFSA®

The world of college financial aid needn’t be mysterious.

It’s widely recommended that anyone who wants a shot at help with college expenses fill out the Free Application for Federal Student Aid—commonly known as the FAFSA®—because it’s the gateway to not only federal student aid programs but state aid programs and, in many cases, college-based aid.

There’s no income cutoff for federal student aid. Eligibility is based on a number of factors.

Who Determines Aid Amount and Type?

The financial aid office at the college or career school will determine how much financial aid you, the student, are eligible to receive.

1.   The first factor considered is the cost of attendance (COA), or what it costs a typical student to attend a particular college or university for one academic year. Cost of attendance includes tuition and fees, sure, but also books, lodging, food, transportation, loan fees, personal expenses, and eligible study-abroad programs.

2.   Then the school considers your expected family contribution (EFC). The formula includes your family’s taxed and untaxed income, assets, and benefits such as Social Security; your family size; and the number of family members who will attend college during the year.

3.   To determine how much need-based aid you can get, the school will subtract your EFC from the COA. Need-based aid includes Pell Grants, Direct Subsidized Loans, and federal work-study.

4.   To determine how much non-need-based aid you qualify for, the school takes the COA and subtracts any financial aid you’ve already been awarded. Federal non-need-based aid consists of Direct Unsubsidized Loans, Direct PLUS Loans, and TEACH Grants.

One big difference between subsidized and unsubsidized loans is when interest accrual starts. Because subsidized loans are need-based, the government covers any interest that accrues until loan repayment starts. With unsubsidized loans, the interest starts to accrue from day one.

Want to estimate your eligibility for federal student aid? The FAFSA4caster does that.

Recommended: Subsidized vs. Unsubsidized Loans: What’s the Difference?

What Are Rules on Dependency, Divorce?

A student’s dependency status makes a big difference, clearly, on the EFC for FAFSA purposes.

Not living with parents or being claimed on their taxes does not an independent make. To be considered independent for federal financial aid, a student must be 24 or older, a veteran, an orphan, or married, or meet a handful of other criteria.

Currently, if a dependent student’s parents do not live together and are divorced or separated, or they never married, just one parent is responsible for completing the FAFSA. That will be the parent with whom the student lived for most of the 12 months before the FAFSA was filed.

But the rules for determining which parent is responsible for filing the FAFSA and the parent’s dependents will change starting with the 2023-2024 FAFSA .

Other Routes to Meeting All Needs

The government isn’t the only path to money for school. Here are several options.

Scholarships

The best thing about scholarships? You don’t need to pay them back. The second best thing is that they’re most often based on merit, not need.

So even if your parents make a “richest” list, you may still be eligible. While many are awarded solely on academics, others are given for athletic talent, specific interests, and lineage.

Patience, effort, and timing come into play to land merit aid for college. There’s a lot of scholarship money out there—billions each year.

Recommended: Find Scholarships and Grants in Your State”

An Appeal of Your EFC

If your financial aid offer is less than you can afford, you are within your rights to appeal to the school’s financial aid director.

You might want to be prepared to back up your request with detailed information such as your expected EFC, the amount you’ll need to successfully attend school, or circumstances that affect your family’s actual ability to pay, such as a parent’s job loss.

If you find a lower rate for student loan refinancing –
SoFi will match it AND give you $100.*


Parent Loans

A federal Direct PLUS Loan, commonly referred to as a parent PLUS Loan when made to a parent, is a fixed-rate loan offered by the federal government, but it’s based on parents’ creditworthiness rather than income. The rate until July 1, 2022, is 6.28% .

Some private lenders also offer parent loans for college expenses. SoFi Parent Student Loans come with no fees and may have a fixed or variable rate.

Both kinds of loans can be used to cover any gaps left over after scholarships, grants, and other financial aid have been applied, up to the full cost of attendance.

Private Student Loans

Private student loans are available for helping to cover the costs of higher education, and they could be a good Plan B in either of these scenarios:

•  Your parents make too much to qualify for federal need-based aid.

•  There’s a gap between aid received and the cost of attendance.

Private student loans don’t have federal benefits like income-driven repayment plans, grace periods, and interest rates set by law, but you can apply for them at any time of the year, unlike federal student loans.

Private student loans can have either a fixed or variable interest rate, and the process is based on creditworthiness rather than need.

Recommended: Choosing between Fixed and Variable Rate Student Loans

The Takeaway

What happens if your parents make too much money to qualify for financial aid? You may have to shift course a little bit, but there are other ways to get help paying for all of the expenses of college.

A SoFi Private Student Loan may be able to bridge any gaps in your higher-education path. SoFi charges no loan origination or late payment fees, and offers flexible repayment plans to fit your budget.

Check your rate, and apply with a cosigner in minutes.


*Guaranteed Rate Match Offer: Your pre-qualified rate, and the rate match program itself, are conditional upon our verification of your application information, including verification of sufficient income to support an ability to repay. Eligible documentation of a competitor’s rate offer, issued within 30 days of your SoFi pre-qualified rate, will be determined at SoFi’s sole discretion and must be for the same loan amount and term. SoFi will only match rate offers for private student loan refinance products. The match will be on the rate, exclusive of all discounts. The $100 Rate Match Bonus is not available to residents of Ohio. To receive the $100 Rate Match Bonus, you must: (1) register and/or apply for a student loan refinance (2) provide documentation of an eligible competitive rate offer; (3) call at (855) 456-SOFI (7634) or chat on SoFi.com and follow the instructions to send in your proof of lower rate; (4) have and provide a valid US bank account to receive bonus; (5) complete Form W-9; (6) and meet SoFi’s underwriting criteria and book a student loan refinance with SoFi. Once conditions are met and the loan has been disbursed, you will receive your Rate Match bonus via automated clearing house (ACH) into your checking account within 30 calendar days. Bonuses that are not redeemed within 180 calendar days of the date they were made available to the recipient may be subject to forfeit. Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received as required by applicable law. Recipient is responsible for any applicable federal, state or local taxes associated with receiving the bonus offer; consult your tax advisor to determine applicable tax consequences. Additional terms and conditions may apply. SoFi may discontinue this program at any time.
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 SoFi.com/eligibility 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.

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.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Important FAFSA Deadlines to Know

The Free Application for Federal Student Aid, or FAFSA®, is a form students can fill out each school year to apply for grants, work-study, or federal student loans from the government for higher education pursuits.

By not filling it out, or missing the FAFSA deadline, students may not receive financial aid that could help them pay for college. Many states and individual schools also use the FAFSA to help determine if a student qualifies for aid. Therefore, it’s helpful to fill out your FAFSA as early as possible and not miss the important application deadlines, as there is a limited amount of aid available.

What is the FAFSA?

The FAFSA is the application for federal student aid from the US government. The type of federal student aid awarded is determined based on income, usually the income of the student’s parents, if they are considered a dependent student. If a student is considered independent, then they are not required to submit their parent’s financial information. Federal financial aid includes student loans, grants, scholarships, and work-study jobs. It’s important when applying to schools to consider all of the costs involved.

Related: Independent vs Dependent Student: Which One Are You?

Students can estimate their financial aid online ahead of time, which can help inform decisions about where to attend school. If you are already in school, remember that the FAFSA must be filled out every year, since income and tax information might have changed.

In general, the eligibility requirements for federal aid state that for most programs, students:

•  Must demonstrate financial need (though there is some non-need based aid, such as unsubsidized student loans) and,

•  Must be a US citizen or an eligible noncitizen, and

•  Be enrolled in an qualifying degree or certificate program at your college or career school

For further detail, take a look at the basic eligibility requirements on the Student Aid website .

The FAFSA form will need information about the student, their family, and their financial situation. This includes things like Social Security numbers, driver’s license numbers, and federal tax information or tax returns for either the student or their parents (depending on whether or not they are a dependent student). Plus, this includes information on bank account balances such as savings, investments, and other financial information.

FAFSA Open Date and Deadline

School year FAFSA open date FAFSA Deadline
2021-22 Oct. 1, 2020 June 30, 2022

File Your FAFSA for Next Year Close to October 1

Generally, it makes sense to submit the FAFSA promptly after the October 1st application release. Some aid is awarded on a first-come, first-served basis, so submitting it early could potentially help students improve their chance of receiving some federal aid. In addition, since some schools determine funding on a first-come-first-serve basis, filling it out early will help ensure you get the funding you need.

It will also help you get what you need well in advance, so you’re not scrambling at the last minute.

File Your FAFSA for Last Year by June 30

Students must file the FAFSA no later than June 30th for the previous school year. So, for the academic year 2021-22, you must file by June 30th, 2022. While the federal deadline for submitting the FAFSA is after the end of the school year, it may be possible for some aid to be applied retroactively or be applied to summer courses. While this is the federal government’s deadline, it’s essential to submit the application well before then since students generally need funding to pay for the school year.

Again, individual states and institutions have different deadlines for awarding financial aid to students. Waiting too long may put you in a sticky financial situation if you don’t receive the funding you need to start school.

State and institutional FAFSA deadlines

So, when is FAFSA due? Below you will find the federal, state, and institutional FAFSA deadlines.

Institutional FAFSA Deadlines

Students typically have around 21 months to file the FAFSA, but individual schools may have their own earlier deadlines. So if you are applying to many different colleges, check each school’s FAFSA deadline and apply by the earliest one.

These priority deadlines mean you need to get your FAFSA application in by the school’s date to be considered for the possible aid. While filling out your FAFSA, you can include every school you consider, even if you haven’t been accepted to college yet.

State FAFSA Deadlines

Individual state deadlines can be found from the US Department of Education. Some states have strict cutoffs, while others are just best-practice suggestions—so check carefully.

States may have limited funds to offer as well.

Federal FAFSA Deadline

So, when is FAFSA due?

Again, the FAFSA becomes available almost a full year in advance of the year that aid is awarded. When is the deadline for FAFSA? While the final deadline for FAFSA submission is June 30, the FAFSA becomes available on October 1. That’s earlier than most individual college deadlines for application.

It’s generally recommended that students fill out the FAFSA as soon as possible after October 1 for next school year’s aid, to avoid missing out on available funds. For instance, for the 2021 to 2020 school year, the FAFSA became available October 1, 2019, though the final deadline to submit is June 30, 2021, at the end of the academic year it applies to.

But because some federal student aid programs have limited funds, the US Department of Education recommends applying as soon as you can. Plus, there are often earlier school and state deadlines to worry about first.

Taking The Next Steps After Submitting the FAFSA

So what happens after you hit “submit” on your FAFSA?

•  First, students receive a Student Aid Report (SAR) which summarizes the data and information submitted. This generally arrives anytime from three days to three weeks after the FAFSA is completed.

•  Check if the information is correct (and if not, make corrections online if needed). The SAR will not state how much financial aid students will receive, nor will it detail the income or tax information submitted. Instead, if a school was listed on the FAFSA form and the student has been accepted, or you are currently enrolled in school, the school will calculate your aid and send you an electronic or paper aid offer (sometimes called an award letter) telling you the amount of aid you’re eligible for at that school.

•  Wait for aid acceptance. Timing of the aid offer depends on the school and can be as soon as the winter before the next academic year, or as late as the summer before the fall semester starts. It all depends on when the application was submitted and how the school schedules it out.

Receiving financial aid can be a great relief when it comes to paying for higher education. But keep in mind that federal aid can come in the form of grants, work-study, and student loans. And Direct Loans are the most common federal student loans available for students looking for financial aid.

Students who don’t qualify for enough financial aid via FAFSA and are still looking for ways to finance their education could look into scholarships, grants, or even private student loans.

For example, SoFi makes the process simple—so paying for school is stress-free. Plus, SoFi has flexible repayment options to help you find the loan that fits your budget. Private student loans lack the same borrower protections as federal loans, so this method of financial aid should be considered as an option only after other sources of funding have been evaluated.

The Takeaway

Completing the FAFSA application is the first step in a student’s journey to apply for federal aid (including federal student loans, scholarships, grants, and work-study). The FAFSA form is generally released on October 1st of the year before the aid year and closes on July 30th of the school year. For the 2021-2022 school year, the FAFSA application opened on October 1, 2020 and will close on June 30, 2022.

If students need additional sources of financing for student aid, they may consider private student loans to fill in the gaps. SoFi offers competitive rates to qualifying borrowers and there are absolutely no fees.

Learn more about SoFi private student loans today.


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 SoFi.com/eligibility 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 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.com/legal.

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.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Pros & Cons of Car Refinancing

For many of us, buying a new or used car means getting an auto loan, which can have a major impact on the monthly budget. Refinancing that loan may make sense if you can get a better interest rate or preferable terms.

The typical auto loan term is 63 months, but loans of 72 and 84 months are becoming more common. The longer the term, the higher the interest rate, in general.

As you think about the cost of driving, chew on this: The average price of a new light vehicle has reached nearly $40,800, dwarfed by the average for a luxury full-size SUV, at $98,000, Kelley Blue Book says. And can you guess what the biggest annual cost of car ownership is, according to AAA? Depreciation.

What Is a Car Refinance?

Drivers who opt for refinancing a car loan use another loan to pay off the balance on an existing auto loan.

The goal is a lower interest rate and/or lower monthly payments. Some people, unable to lower their rate, may be able to extend their repayment term in order to secure lower monthly payments.

Refinancing a car doesn’t automatically mean a lower interest rate or lower monthly payments. The rate you’re offered depends on your current financial situation and the lender.

But if your credit score and debt-to-income ratio have improved since you took out your car loan, refinancing could potentially save you money.

Pros of Refinancing a Car Loan

Here are reasons why you might want to look into an auto refinance loan.

Your credit score has improved since you took out your current loan, making it possible to qualify for a lower interest rate on a new loan. Refinancing might not be for you if your financial history hasn’t improved since you first got your car loan, or if your credit score has decreased.

You’re looking to lower your monthly payments either with a rate reduction or a longer loan term.

You have a balance over $5,000. Many lenders won’t refinance a car loan that has less than $5,000 remaining.

Cons of Refinancing a Car Loan

Here are some reasons why you might not want to refinance your car loan.

A longer term may mean more interest paid. Extending the length of a car loan at the same rate will result in more interest paid over the life of the loan. For example, a $15,000 auto loan with an effective annual percentage rate of 7.5% and with five years remaining would cost $18,034 in total. Extending that loan to a seven-year period would cost $19,326—a difference of $1,292.

A lower rate isn’t guaranteed. Refinancing a car loan doesn’t always mean a lower interest rate. A credit score decrease since you took out the loan could mean you’re only eligible for a higher rate than your current car loan.

A balance under $5,000 often won’t qualify. Most lenders won’t refinance a car loan that has less than $5,000 remaining.

Options to Car Refinancing

Balance-Transfer Credit Card

Many balance transfer credit cards don’t require interest payments for several months, making them a potential alternative.

This move is probably only worthwhile, though, if the auto loan balance can be paid off during the interest-free time, which can range from six to 21 months.

Personal Loan

A personal loan can be used for everything from unexpected medical expenses to home repairs to auto loan payoff.

If your car loan balance is over $5,000 and you’re able to get a lower interest rate or change the term, a personal loan could be worthwhile.

Auto loans are secured: They require you to use the car you’re buying as collateral for the loan. The vehicle could be repossessed if you don’t repay the loan.

Personal loans are not secured by collateral.

The Takeaway

Although a car loan refinance isn’t for everyone, it may be a good choice for drivers looking to lower their interest rate or change the length of the loan.

If a personal loan of $5,000 to $100,000 sounds like it could be a good fit, check out SoFi fixed-rate personal loans. They come with no fees and with terms of up to seven years.

Check your rate within just a few minutes.


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.com/legal.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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Applying to Graduate School: Smart Tips and Strategies

Applying to Graduate School: Smart Tips and Strategies

Attending graduate school can help some students achieve their career goals, and may even be required in some fields. Applying to grad school does have some similarities to the undergrad application process, think of things like filling out relevant applications and writing personal statements.

For students embarking on their grad school journey, tips and strategies to help them navigate the application process include finding the right program, creating an application timeline, carefully crafting an effective statement of purpose and personal statement, and planning for how they’ll cover the upcoming expenses such as tuition and lab fees.

Four Tips and Strategies to Prepare for the Grad School Application Process

These tips and strategies may help students determine their goals and create a plan to help them achieve their graduate school goals.

Choosing the Right Graduate School

It’s important to make sure you’re applying to the schools that are most likely to suit your needs. Here are a few questions that could help students self-reflect to see if they’re on the right path:

•  Which degree path do you want to pursue?

•  Does your chosen career encourage a Ph.D. or a Master’s degree?

•  Do the schools you’re considering offer that program?

•  What is the cost of tuition?

•  Are scholarships available, either full-ride or partial?

•  Is the degree program accredited?

•  Does this school have excellent professors?

•  Will this degree facilitate your entry into the career of your choice?

Generally, students aim to apply to between five or six schools. Perhaps you’re still in the early stages of exploring schools and are mulling over which graduate program to pursue. Now’s the time to weigh your interests, skills, talents, and career goals to find a few options that may make sense to apply to.

Grad School Application Timeline

There’s plenty of prep work that must happen months before you start applying to graduate school. One way to alleviate some stress and make sure all of the necessary application requirements are met is to start early.
Additional timeline tips offered by Kaplan include the following highlights:

Two Years Before Applying: Research Schools and Programs

Narrow down the programs of interest and your career goals about two years before you plan to apply.

One Year Before Applying

•  Prepare for any standardized tests required for admission. Some programs may require students to submit GRE scores, while others may require the GMAT. Law students will generally need to take the LSAT and future med school attendees can anticipate taking the MCAT.

•  Start gathering application materials. This could include things like college transcripts, letters of recommendation(s), and prepping for any personal statements that may be required (more tips on that to follow).

Year of Grad School

Generally, graduate school applications open up about 9 months before a student would be expected to start classes. Some programs may accept applications on a rolling basis. It’s generally wise to apply as soon as all of your application materials are ready to go.

Refining Your Graduate School Statement of Purpose and Personal Statement

The statement of purpose for graduate school (sometimes called a letter of intent or a research statement) is where you detail your future plans and how the school you’re applying to can help you achieve those goals.

Students who are applying to multiple schools may need to tweak their statement of purpose slightly to meet different application requirements, but in general, there are a few common threads that are included in a statement of purpose. These include:

•  What do you want to study at graduate school?

•  Why do you want to study it?

•  What experience do you have in that field? How would you add value to the existing program?

•  What do you plan to do with your degree once you have it?

To craft a successful statement, create an outline and build a strategic statement that highlights details including your relevant experience and motivation for applying to this specific graduate school and program. You want your statement to stand out and target the school you are applying to; avoid writing the same statement of purpose for each school.

A personal statement, meanwhile, lets the admissions committees see applicants as a person, including their goals and passions and what students are hoping to get out of the program. Personal statements are generally more biographical in nature than a statement of purpose. It may highlight things like an individual’s passion for a particular field or help them demonstrate characteristics that will help them excel in grad school.

Options for Paying for Graduate School

There are a variety of ways to pay for graduate school.

Federal Aid

As a first step, fill out the Free Application for Federal Student Aid (FAFSA®) which is used to determine what federal financial assistance students may qualify for. Often, people applying for graduate school are considered independent students on the FAFSA. Independent students are not required to include their parents’ financial information on their FAFSA application.

Submitting the FAFSA allows students to apply for all federal aid, including:

•  Federal student loans

•  Grants

•  Scholarships

•  Work-study program

Scholarships and Grants from Your University

Take a look at the aid options available specific to the school you will be attending (or the schools you are applying to). It may be possible to apply for additional scholarships, grants, and fellowships depending on the program.

Universities sometimes use the FAFSA to make financial aid determinations, but some have their own application process. Again, check the graduate school website to find out relevant deadlines and procedures.

Possibilities Beyond Federal or University Aid

Other possibilities include employer tuition reimbursement plans, private scholarships and loans. Private student loans lack the borrower protections offered by federal student loans (things like deferment or forbearance, income-driven repayment plans, and Public Service Loan Forgiveness), so they are usually only borrowed after other sources of aid have been exhausted.

After graduating, some students may consider refinancing student loans. Qualifying borrowers can secure a competitive interest rate or preferable terms. Refinancing federal student loans will mean they no longer qualify for any federal borrower protections or programs, like deferment or Public Service Loan Forgiveness.

The Takeaway

Applying to graduate school doesn’t have to be overwhelming. Start by defining your career goals and determine which programs you want to apply to. From there, review the application requirements and set an application timeline. This should include things like prepping for any required standardized tests, getting letters of recommendation in order, and writing a statement of purpose. Also consider how to pay for the cost of graduate school―options include; federal student loans, scholarships, grants, or private student loans.

Prepared with this information, the grad school application process will hopefully feel much more manageable. Some students may consider refinancing their student loans after graduating. This could potentially result in a lower interest rate or preferable loan terms. Refinancing federal student loans will disqualify them from any federal or borrower protections.

Interested in refinancing student loans with SoFi? Applicants can find out if they qualify, and at what rates, in just a few minutes.


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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.com/legal.

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IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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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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 SoFi.com/eligibility 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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Examining How Student Loan Deferment Works

Examining How Student Loan Deferment Works

If you’re struggling under a mountain of student debt, you’re not alone. After all, the average debt load for a recent undergrad is around $30,000.

The worst thing to do when experiencing difficulty repaying student loans is to just stop making payments. If more than 270 days pass on a federal student loan payment, or three months pass on a private student loan payment, they could become one of the millions of student loans in default.

Consequences of Defaulting on Federal Student Loans

And unlike other debt, student loan balances are generally not eligible to be discharged in bankruptcy. Defaulting on your federal student loans can lead to:

•  Immediately owing the entire balance the loan

•  Losing eligibility for forbearance, deferment, or federal repayment plans

•  Losing eligibility for federal student aid

•  Damaging the borrower’s credit score, inhibiting the ability to qualify to purchase a car or a house or qualify for credit cards in the future

•  Withholding of federal benefits and tax refunds

•  Garnishing of wages

•  The loan holder taking the borrower to court

•  Inability to sell or purchase assets such as real estate

•  Withholding of the borrower’s academic transcript until loans are repaid

Consequences of Defaulting on Private Student Loans

The consequences for defaulting on private student loans may vary by lender but could include repercussions similar to federal student loans, and more, including:

•  Seeking repayment from the cosigners of the loan (if there are any cosigners)

•  Calls, letters, and notifications from debt collectors

•  Additional collection charges on the balance of the loan

•  Legal action from the lender, suing the borrower or their cosigner

To avoid these negative consequences, one option for borrowers struggling to pay federal student loans is deferment.

Student loan deferment allows eligible borrowers to temporarily reduce loan payments or pause them. It’s a popular choice: As of the second quarter of 2021, 3.3 million borrowers owing a combined $120 billion had their loans in deferment.

Borrowers who are struggling to afford their monthly student loan payments, may consider looking into student loan deferment. But while it could be a good option for temporary relief, other solutions for reducing payments in the long term may be required.

Who Is Eligible for Student Loan Deferment?

To be granted a deferment on federal loans, borrowers need to meet certain criteria.

You may be eligible if you’re:

•  Enrolled at least part-time in college, graduate school, or a professional school

•  Unable to find a full-time job or are experiencing economic hardship

•  On active military duty serving in relation to war, military operation, or response to a national emergency

•  In the 13-month period following active duty

•  Enrolled in the Peace Corps

•  Taking part in a graduate fellowship program

•  Experiencing a medical hardship

•  Enrolled in an approved rehabilitation program for the disabled

Borrowers who re-enroll in college or career school part-time may find that their federal student loans automatically go into in-school deferment with a notification from their student loan provider.

Loans may also keep accruing interest during deferment—depending on what kind of federal student loans the borrower holds. Borrowers are still responsible for paying interest if they have a:

•  Direct Unsubsidized (Stafford) Loan

•  Direct PLUS Loan

If you don’t pay the interest during the deferment period, the accrued amount is added to your loan principal, which increases what you owe in the end.

Related: Student Loan Deferment in Grad School

To request a deferment, borrowers will need to submit a form to their loan servicer. As a part of the process, it’s likely that they;ll be asked to provide documents to prove eligibility.

What If You Have Private Student Loans?

Private lenders aren’t required to offer deferment options, but some do. For example, some might allow you to temporarily stop making payments if you:

•  Lose your job

•  Experience financial hardship

•  Go back to school

•  Have been accepted into an internship, clerkship, fellowship, or residency program

•  Face high medical expenses

Typically, even while a private student loan is in deferment, the balance will still accrue interest, meaning in the long-term the borrower will pay a larger balancer overall, even after the respite of deferment.

In most cases, even with accrual of interest and limited options, deferment is preferable to defaulting. Borrowers with private loans could contact the lender to ask what options are available.

The Limits of Student Loan Deferment

Keep in mind that deferment is not a panacea. By definition, it’s temporary. Federal student loan borrowers will ultimately need to go back to making payments once they are no longer deferment-eligible. For example, a borrower’s deferral might end if they leave school, even if their ability to pay has not improved.

Federal loans can only be deferred due to unemployment or financial hardship for up to three years. With private loans, there may not be an option to defer at all, and if it is an option, the limit may be no more than a year.

Other Options for Reducing Federal Student Loan Payments

Besides student loan deferment, you have other choices if you can’t afford the total cost of your monthly payments. With federal loans, you can request a forbearance.

Requesting Forbearance for Federal Student Loans

There are two types of forbearance for federal student loan holders: general and mandatory.

General student loan forbearance is sometimes called discretionary forbearance. That means the servicer decides whether or not to grant your request. People can apply for general forbearance if they’re experiencing:

•  Financial problems

•  Medical expenses

•  Employment changes

General forbearance is only available for certain student loan programs, and is only granted for up to 12 months at a time. At that point, you are able to reapply for forbearance if you’re still experiencing difficulty. General forbearance is available for:

•  Direct Loans

•  Federal Family Education Loan (FFEL) Program loans

•  Perkins Loans

Mandatory forbearance means your servicer is required to grant it under certain circumstances. Reasons for mandatory forbearance include:

•  Serving in a medical residency or dental internship

•  The total you owe each month on your student loan is 20% or more of your gross income

•  You’re working in a position for AmeriCorps

•  You’re a teacher that qualifies for teacher student loan forgiveness

•  You’re a National Guard member but don’t qualify for deferment

Similar to general forbearance, mandatory forbearance is granted for up to 12 month periods, and you can reapply after that time. You still have to pay interest on all types of your federal loans while they’re in forbearance.

Income-Driven Repayment Plans

A longer-term solution could be signing up for an income-driven repayment plan.

Borrowers who qualify, may be able to reduce their monthly payment based on their income. Enrolling in an income-driven repayment plan won’t have a negative impact on your credit score or history. However, income-driven plans aren’t always the lowest monthly payment option, so you might want to look at all options before applying to one. On certain income-driven repayment plans, student loan balances can be forgiven after 20 or 25 years, depending on the payment plan that the borrower is eligible for.

Remember, with an income-driven repayment plan, monthly payment is based on the borrower’s total discretionary income. That means if someone changes jobs, or sees a significant increase in their paycheck, they’ll be expected to pay a higher monthly bill on the student loan payment.

Another Option to Consider: Refinancing

Another long-term solution, depending on personal financial circumstances, could be student loan refinancing. Some private lenders can consolidate a borrower’s loans, whether federal or private. Qualifying borrowers may be able to secure a lower interest rate or options to lengthen the term to reduce monthly payments. Note that lengthening the repayment period may lower monthly payments but will generally result in paying more interest over the life of the loan.

Refinancing could be a good option for borrowers with strong credit and a solid income, among other factors. Unlike an income-driven repayment plan, a borrower’s monthly payment wouldn’t change strictly based on their income.

Some may find that they are not able to qualify for student loan refinancing on their own. In that case, some lenders may offer the option to apply for refinancing with a cosigner. A very important note: Refinancing federal student loans eliminates them from any federal borrower protections or payment plans. So, borrowers who are taking advantage of things like income-driven payment plans or deferment generally won’t want to refinance. But for other borrowers, student loan refinancing might be a good long-term solution.

Refinancing your federal and private loans can roll many loans into one new loan with one new rate and new monthly payment. So in addition to potentially saving you money on interest, refinancing could also simplify your repayment process.

If you find a lower rate for student loan refinancing –
SoFi will match it AND give you $100.*


The Takeaway

Deferment allows borrowers with federal student loans to temporarily pause their monthly payments under certain circumstances, such as enrollment in a graduate program. Depending on the type of loan, borrowers may be able to qualify for forbearance, which is another option that allows borrowers to temporarily pause payments on federal student loans, to help those who may be experiencing temporary financial difficulty.

Income-driven repayment plans may be another option for federal student loan borrowers who are experiencing longer-term issues making monthly payments on their student loans. Borrowers who aren’t taking advantage of these federal student loan programs may consider refinancing with a private lender as an option to either potentially secure a lower interest rate or adjust the repayment terms on their loan.

Student loan debt getting you down? Learn more about refinancing student loans with SoFi.


*Guaranteed Rate Match Offer: Your pre-qualified rate, and the rate match program itself, are conditional upon our verification of your application information, including verification of sufficient income to support an ability to repay. Eligible documentation of a competitor’s rate offer, issued within 30 days of your SoFi pre-qualified rate, will be determined at SoFi’s sole discretion and must be for the same loan amount and term. SoFi will only match rate offers for private student loan refinance products. The match will be on the rate, exclusive of all discounts. The $100 Rate Match Bonus is not available to residents of Ohio. To receive the $100 Rate Match Bonus, you must: (1) register and/or apply for a student loan refinance (2) provide documentation of an eligible competitive rate offer; (3) call at (855) 456-SOFI (7634) or chat on SoFi.com and follow the instructions to send in your proof of lower rate; (4) have and provide a valid US bank account to receive bonus; (5) complete Form W-9; (6) and meet SoFi’s underwriting criteria and book a student loan refinance with SoFi. Once conditions are met and the loan has been disbursed, you will receive your Rate Match bonus via automated clearing house (ACH) into your checking account within 30 calendar days. Bonuses that are not redeemed within 180 calendar days of the date they were made available to the recipient may be subject to forfeit. Bonus amounts of $600 or greater in a single calendar year may be reported to the Internal Revenue Service (IRS) as miscellaneous income to the recipient on Form 1099-MISC in the year received as required by applicable law. Recipient is responsible for any applicable federal, state or local taxes associated with receiving the bonus offer; consult your tax advisor to determine applicable tax consequences. Additional terms and conditions may apply. SoFi may discontinue this program at any time.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
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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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.com/legal.

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