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Though college students are unlikely to have amassed much wealth, federal and private student loan interest rates tend to be a bit higher than for other kinds of “good” debt, such as mortgages or car loans.

Current rates for federal student loans disbursed after July 1, 2021 are 3.73% for Direct Subsidized and Unsubsidized loans for undergraduates,5.28% for Direct Unsubsidized loans for graduate or professional students, and 6.28% for Direct PLUS loans for graduate or professional students or parents of undergraduate students.

As of June 2021, current interest rates for private student loans can range to 14.49% (and possibly higher) for fixed rate loans and to 12.23% (and possibly higher) for variable rate loans.

When compared to other types of loans, these rates might feel high. For example, on June 10, 2021, the interest rate for a 30-year fixed mortgage averaged 2.96%, according to Federal Reserve Economic Data . In general, why do student loan interest rates tend to be somewhat higher than some other common loans? This (mainly) comes down to the differences between secured versus unsecured loans.

Unsecured loans, like student loans, are not tied to an asset that can serve as collateral. Secured loans, in comparison, are backed by something of value. If you don’t pay your mortgage or auto loan, the lender can seize your house or car.

But a lender can’t seize a college degree! In other words, student loan interest rates are typically higher than secured loans’ rates because the lender’s risk is higher.

How Have Federal Student Loan Interest Rates Changed?

Though interest rates on federal student loans have fluctuated over the last few decades, they’ve been fairly steady in recent years. From the 1960s to 1992, Congress set fixed interest rates for student loans that ranged from 6% to 10%.

Over the past couple of decades, federal interest rates varied depending on whether borrowers were in school, in the six-month grace period after leaving school, or in repayment.

Until 2006, rates for federal student loans were a bit all over the spectrum. After 2006, rates became fixed again, but differed based on the type of loan (for example, Direct Subsidized vs. Direct Unsubsidized).

These rates hovered around 6% or 7% until the 2009 recession, then fell to 3% or 4% for undergraduate loans and closer to 5% for graduate ones. In the 2020-2021 school year, amidst the pandemic, rates sunk to lows that hadn’t been seen in many years. But compared to that year, federal student loan interest rates for the 2021-2022 academic year rose nearly 1% across the board.

How Do Private Student Loan Interest Rates Differ From Federal Loan Rates?

Federal student loans have their interest rate set by Congress annually, based on the 10-year Treasury note auction in May. The interest rate is fixed over the life of the entire loan; meaning, if you get a federal student loan for, say, your freshman year,the rate it was issued with won’t change despite Congress setting a new rate every year. But, if you need to take out an additional federal student loan, say, for your sophomore year, you will get the new rate for it, not the previous rate.

With private student loans, lenders can determine their own rates based on the borrower’s creditworthiness and market conditions. Unlike federal student loans, private student loan interest rates can be either fixed or variable:

•  Fixed, meaning the rate might be a bit higher than a variable rate, but it won’t change over the life of the loan.

•  Variable, meaning they typically start out lower but can change over time depending on the market.

As with any choice, there are upsides and downsides to picking a fixed versus variable interest rate loan. Depending on your financial picture and the offered interest rate on the loan, the choice will likely vary.

Since so much depends on the applicant, the rates vary widely among private lenders. Private student loan rates will fluctuate with market trends, but they’re also dictated by additional factors. When applying for a private student loan, unlike with a federal student loan, private lenders will look at factors including (but not limited to):

•  Credit History – When entering college, most students have little to no credit history. That means the lender could be unsure of their ability to pay the loan back since students don’t typically have a history of paying any loans. This can lead to a higher interest rate.

•  The School You Are Attending – Most four-year schools are eligible for private loans, but some two-year colleges aren’t. Additionally, applicants typically have to be enrolled at least half-time to qualify for private student loans.

•  The Finances of Your Cosigner – Since many private student loan applicants are relatively new to debt and have no credit history, they might be required to provide a cosigner. A cosigner shares the burden of debt with you, meaning they’re also on the hook to pay it back if you can’t. A cosigner with a strong credit history sometimes means a lower interest rate on private student loans.

In addition to the above factors, students can shop around for interest rates with private student loan providers, unlike the single rate set annually for federal student loans. Rates will likely vary at each lender based on their underwriting criteria and your financial profile.

While federal student loan rates are annually set, private student loans will vary across a variety of factors from lender to lender.

Managing High Interest Rate Student Loans

Student loan rates can be higher than that of other loans, and if you’re struggling to make your monthly student loan payments because of high interest, it might be time to consider an alternative.

Federal Repayment Plans

If you took out federal student loans, you qualify for various federal repayment plans. Borrowers are automatically placed on the Standard Repayment Plan, unless they select another option. The standard repayment plan spreads repayment over 10 years.

Other options extend the repayment term, which can make payments more manageable in the present, but also means that you may pay more in interest over the life of the loan.

Those struggling to make payments on the Standard Repayment Plan might consider one of the other repayment plans available to federal borrowers. These include the Graduated and Extended repayment plans and other income-driven repayment options.

There are five income-based repayment plans to choose from; here is some basic information about each of these federal plans:

•  Revised Pay as You Earn Plan (REPAYE) — In this plan, payments will be 10% of discretionary income each month. The payment amount will be recalculated each year based on income and family size.

•  Pay as You Earn Plan (PAYE) — Similar to REPAYE, your payments will be 10% of monthly discretionary income, but they will never be more than what would be paid on the 10-year Standard Repayment Plan.

•  Income-Based Repayment Plan (IBR) — To qualify for this plan, borrowers must have high debt relative to income. Monthly payments will be 10% to 15% of discretionary income and will be reevaluated annually.

•  Income-Contingent Repayment Plan (ICR) — For ICR, repayment is either 20% of discretionary income, or “the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income.”

•  Income-Sensitive Repayment Plan — Loan payments will be based on the borrower’s annual income. Under this plan, a borrower’s loan will be repaid in 15 years.

Additional detail can be found on the Federal Student Aid website , which is operated by the Department of Education. To qualify for income-driven repayment, applicants must meet specific requirements. Private student loans aren’t eligible for the repayment plans described above.

Federal Student Loan Forgiveness

In some instances, you may qualify for forgiveness on some or all of your federal student loans. Loan forgiveness is possible under a few specific circumstances, including:

Public Service Loan Forgiveness — If you work for the government or a qualifying nonprofit, you may be eligible to receive some form of loan forgiveness.

You have to make 120 qualifying on-time payments on the loan and generally work full time for the organization. Unfortunately, many applicants find the process of applying for public service loan forgiveness challenging, and not all non-profits or government work qualify.

Teacher Loan Forgiveness —, Teachers who work full-time for five years in a qualifying low-income school are eligible for forgiveness on their federal loans. If you qualify for forgiveness, you may be eligible for up to $17,500 on your Direct Subsidized and Unsubsidized Loans.

These student loan forgiveness plans are only for federal student loans, not private student loans.

The Public Service Loan Forgiveness program has a strict application process that requires a lengthy commitment from applicants. November 2020 – April 2021 data shows that nearly 98% of forms did not meet requirements. Pursuing federal loan forgiveness might require considerable attention to detail as there are many program requirements that must be met in order to get approved for loan forgiveness.

Refinancing Student Loans

If you’re saddled with high-interest student loan debt, and don’t qualify for one of the federal programs mentioned above, it might be time to consider your options around refinancing. Refinancing your student loans is one way to potentially lower your interest rate or your monthly payments.

Among many other factors that vary by lender, you could be a strong candidate for student loan refinancing if:

You’ve improved your credit score since you first took out your loans. Unlike when you were first headed to college, you may now have a credit history for lenders to take into account. If you’ve never missed a payment and continually grown your credit score, you might qualify for a lower interest rate.

You have a stable income. Being able to show consistent income to a private lender may help make you a less risky investment, which in turn could also help you secure a more competitive interest rate.

The Takeaway

As mentioned above, federal student loans generally have lower interest rates than private student loans. And since2006, federal student loans are offered at fixed interest rates, whereas private refinancing can be offered at either a fixed or variable interest rate.

Please note that if you are refinancing federal loans with a private lender, you’ll give up all federal student loan protections such as forbearance, or benefits like income-driven repayment programs. Refinancing won’t be the right fit for everyone, but for qualified borrowers it could help them secure a more competitive interest rate.

SoFi is a leader in the student loan space, offering both private student loans to help pay your way through school, or refinancing options to help you save on the loans you already have. Check out your interest rate in just a few minutes—with no strings attached.

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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 SEPTEMBER 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.
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.
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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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For most students, affording college would be impossible without borrowing money. As of the fall of 2020, there were nearly 20 million students enrolled in colleges and universities. And as of fall 2019 approximately 65% of college graduates borrowed student loans. And the majority of debt will come from the US Government in the form of federal student loans, the single-largest source of student loans.

Not all loans come from the government, though. There are also private student loans, which are offered by banks, credit unions, and online lenders. It is recommended that a student exhaust all federal student loan options before moving to private loans, and this is because of the favorable terms and borrower protections offered by federal loans.

Federal loans offer a variety of flexible payment plans, the option to earn student loan forgiveness, and the option for deferment or forbearance.

Also, interest rates on federal loans are locked in at a fixed rate, which is set annually by Congress, which means that the borrower won’t get bamboozled by a potential increase in the interest costs of the loan.

Below, we’ll explain the different types of federal loans, including who qualifies, maximum loan amounts available, and what your options are in the event your federal loans don’t cover the cost of your education.

What Types of Federal Student Loans Are Available?

There’s a lot of terminology being thrown around out there regarding student loans, and it can get confusing. Stafford and Perkins may sound like the names of Ivy League frat bros, but they’re actually federal student loan types.

To clear up any confusion around federal student loan types, it is helpful to first split federal loans into two overarching categories: subsidized and unsubsidized.

Subsidized Federal Student Loans

Subsidized loans are awarded on the basis of financial need. They are called “subsidized” because the government subsidizes—absorbs the cost of—some interest payments on the loan.

For example, interest on subsidized loans is paid by the government while the student is enrolled (at least half-time), during the six-month “grace period” after graduation, and during periods of deferment.

Unsubsidized Federal Student Loans

Unsubsidized loans are not doled out based on need, and borrowers are responsible for the interest at all times. If a borrower chooses not to make interest payments, the interest that accrues is generally capitalized in certain instances, like after a period of deferment or forbearance, or following the six-month grace period after graduation.

When unpaid interest is capitalized, that means it is added to the balance of the loan. Then, borrowers are charged interest on top of that interest—another name for capitalized interest is compound interest.

Currently, there is only one type of subsidized federal loan offered, and several types of unsubsidized loans. Next, we will discuss the different types of federal loans and who typically qualifies for each type.

The Direct Loan Program

The US Department of Education’s federal student loan program is called the William D. Ford Direct Loan Program. Under the Direct Loan Program, the US Department of Education is the lender, but they work with a few different loan servicers , who manage the loan.

Direct Subsidized Loan (also known as a Stafford Loan)

Direct Subsidized Loans are for undergraduate students who have financial need. The maximum amount offered is between $3,500 and $5,500 depending on the academic year; students who need substantial assistance might not be able to cover their entire tuition with Direct Subsidized Loans. There is a loan fee for all Direct Subsidized Loans that is proportionally deducted from each loan disbursement.

Direct Unsubsidized Loan (also known as a Stafford Loan)

Direct Unsubsidized Loans are offered to undergraduate, graduate, and professional degree students, and financial need is not required. These are the most common types of federal student loans.

Undergraduate students can take out between $5,500 and $7,500 in unsubsidized loans each academic year (although any offer of subsidized loans would be subtracted from this amount).

The interest rate for Direct Subsidized and Unsubsidized Loans for the 2021-2022 school year is 3.73%, up from 2.75% for the 2020-2021 school year.

The interest rate is higher for loans made to graduates and professional degree students and the maximum amount offered is higher, too. Grad students can take up to $20,500 in unsubsidized federal student loans each school year.

The interest rates for the 2021-2022 school year for unsubsidized loans offered to graduate or professional students is 5.28%, up from 4.30% during the 2020-2021 school year.

Direct PLUS Loan

Direct PLUS Loans are offered to parents paying for their dependent child’s undergraduate education and to graduate or professional degree-seeking students. Financial need is not a requirement to acquire a Direct PLUS Loan .

Unlike with Direct Subsidized and Unsubsidized Loans, however, the borrower’s credit will be taken into consideration; a borrower may not have “adverse” credit history. Here’s what that means:

The maximum amount that the government awards in each school year is the total cost of attendance (which is determined by the school) minus all other financial aid that the student receives. There is a loan fee for all Direct PLUS loans that is proportionally deducted from each disbursement that the borrower receives.

Yep, the federal loans that a parent can take out on behalf of a student have worse terms than a loan made directly to the student through the Direct Subsidized or Direct Unsubsidized loan programs.

Depending on your family’s financial situation, you’ll likely want to take this into consideration when choosing loans. The interest rates on PLUS Loans offered to parents and graduate/professional students is 6.28% for the 2021-2022 school year, up from 5.30% for the 2020-2021.

Direct Consolidation Loan

Somewhat different from the previously mentioned loans, a Direct Consolidation Loan allows the borrower to combine multiple federal loans into one loan. This allows the borrower to merge multiple student loans into one, enabling them to make one payment towards one loan for easier management.

With a Direct Consolidation Loan, the weighted average of each individual loan is calculated to determine the new interest rate, rounded up to the nearest eighth of a percent.

There is never any cost to apply for a Direct Consolidation Loan; if you are contacted by a company offering to help you consolidate for a fee, be leery—this is a free service offered by the Department of Education.

A Direct Consolidation Loan can only be used to consolidate federal student loans. Borrowers aren’t able to consolidate private loans, which aren’t issued via the government. (Refinancing is a different process that is able to consolidate both federal and private loans.)

Perkins Loans

Loans made through the Federal Perkins Loan program were low-interest loans for undergraduate and graduate students exhibiting exceptional financial need.

The Perkins loan program ended on September 30, 2017, with disbursements for Perkins loans ending on June 30, 2018.

What Federal Loans May I Qualify For?

Not all students may qualify for all types of federal loans. First, it is helpful to understand that loans are considered either need-based or non-need-based. Here’s how these calculations are made:

Need-Based Loans

Direct Subsidized Loans are need-based federal student loans. To determine who qualifies, the Department of Education first determines a family’s Expected Family Contribution (EFC) .

The EFC takes into consideration a family’s assets, income, and the size of the family, and spits out a number called the EFC. The EFC can be confusing because it’s not actually how much a family is expected to contribute to a child’s education but is really just a number that is used to determine need-based aid.

To calculate financial need , a college will subtract the EFC from the Cost of Attendance, which the school determines. COA – EFC = A student’s “financial need.”

For example, if the COA is $30,000 and the EFC is $25,000, then the student is eligible for no more than $5,000 in need-based aid, including Direct Subsidized Loans. (Need-based aid may also include federal grants and work-study programs, which is money that does not need to be repaid.)

If you do not qualify for need-based loans or if need-based loans will not cover the full cost of attending college, you can access the next “tier” of student loan borrowing non-need-based loans:

Non-Need-Based Loans

Direct Unsubsidized Loans and Federal PLUS Loans are non-need-based loans. To determine how much non-need-based loans a student qualifies for, a school will do the following calculation:

Non-needs-based loans are calculated by taking the Cost of Attendance (COA) and subtracting the sum of all financial aid awarded to the student so far, including scholarships or grants from the state or school.

For example, if COA is $30,000 and a student has $20,000 in financial aid from other sources, then they are eligible for $10,000 in non-need-based financial aid, including Direct Unsubsidized and PLUS Loans.

Because there are annual limits to the amount of need-based and non-need based federal loans for which a student qualifies, some students may not be able to cover the cost of their education via federal loans alone. What are students who find themselves without enough federal aid supposed to do?

Other Funding Options

The first option you might want to consider is sources of “free” money, such as scholarships, work-study, and grants. Just because you’re enrolled in school doesn’t necessarily mean you need to stop applying for scholarships.

Next, students could consider private student loans, which are loans offered through banks, credit unions, or online lenders.

Generally, private student loans offer less flexible repayment terms and higher rates. (For example, they don’t necessarily offer things like income-driven repayment plans.)

The interest rates on private loans are generally tied to the borrower’s credit score and income, whether the borrower is the student, parent, or another family member.

If you think you may need to use private loans, don’t be discouraged and instead, be informed about your options.
First, make sure to shop around for private loans. Lenders’ terms may vary widely, get multiple quotes and ask about the interest rate (and whether it’s fixed or variable), the loan’s repayment terms, and what happens in the event you cannot make a payment.

Also, keep in mind that you may be eligible to refinance student loans—both federal and private—once you’ve graduated and have an established income and improved credit score.

Refinancing is the process of paying off one loan with another loan with new terms and a new—and hopefully lower—interest rate.

Refinancing might not be the right option for those planning on using their federal loans’ unique benefits, such as forgiveness for work in certain professions or an income-driven repayment plan, as access to federal benefits is forfeited when federal loans are refinanced.

The Takeaway

Federal loans can be either subsidized or unsubsidized. Subsidized student loans are offered based on financial need and do not accrue interest while the borrower is enrolled in school (at least half time).

Unsubsidized loans do accrue interest while student borrowers are enrolled in school. Only undergraduate students are eligible for subsidized student loans.

There are unsubsidized options available to undergraduate, graduate or professional students, and parents.

Interested in refinancing your student loans? Learn more about what SoFi offers.

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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.
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 SEPTEMBER 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.
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 .
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.
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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As of May 2021, the total amount of student loan debt was approximately $1.7 trillion and there are over 45 million borrowers in the country.

That means there are a lot of us trying to understand and navigate the student loan landscape. How much are we borrowing? And what can we do to decrease the amount we owe?

The College Board found that cumulative debt levels upon graduation—meaning the debt students had accumulated over the four years of undergrad—had risen to $28,800 per borrower for those graduating in 2019 (the latest stats available). And nearly 56% of all graduates carried student loan debt.

How Average Student Loan Debt Has Changed in the Last 10+ Years

It’s no secret that college is expensive and has only gotten more expensive in the last 10 years. According to data compiled by US News, the cost of attending college with in-state tuition at public National Universities increased by 72% from 2008 to 2021.

Over roughly that same period of time (from 2010 to 2020), total outstanding student loan debt grew from $845 billion to $1.7 trillion in order to cover those costs. This student loan debt crisis is taking a financial toll on graduating students, potentially affecting their credit and home-buying prospects.

There is good news, though: the growth of student loan debt is slowing. While the average student loan debt continues to grow slightly, it’s leveled off in recent years. The average cumulative student debt was $23,765 for 2009 graduates. The class of 2018 had a cumulative average of $29,843, which increased slightly less than 1% to $30,062 for the class of 2019, according to US News .

However, Parent PLUS loan debt is on the rise. According to the New York Times , in 2013, Parent PLUS loans accounted for 14% of undergraduate student loan debt to nearly 25% in 2019.

Public vs Private Four-Year Schools Student Loan Debt

The College Board’s annual survey of trends in student aid 2020 found that graduates of public four-year institutions had an average college debt of $27,000, compared to private school borrowers, who graduated with an average debt of $33,700.

It should be noted that numbers for for-profit schools are harder to come by, but what is true across analyses is that students at for-profit schools take out more in student loans and default at higher rates.

Of students at for-profit colleges, 71% borrow federal student loans. Borrowers from for-profit colleges account for about half of all student loan default, despite making up only about 10% of students.

Undergraduate vs Graduate Student Debt

Let’s look at this from a different angle. How does undergrad debt compare to grad school debt? The College Board’s annual survey of student aid trends found that on average, undergraduates took out $6,400 in either subsidized or unsubsidized federal loans in the 2019-2020 school year. That same year, graduate students took out $18,510 in subsidized or unsubsidized federal loans.

Nearly 62% of students borrowed student loans in the class of 2019. Of those, the average student debt for a bachelor’s degree was $28,950, according to The Institute for College Access and Success. But if you are planning to get an advanced degree, prepare for a potential mortgage-sized debt load.

Related: Will There Ever Be a Student Loan Bailout?

As an example, 75% of people with law degrees have at least $100,000 in student loan debt according to the American Bar Association’s 2020 Law School Student Loan Debt survey. Looking to fix teeth for a living? Dentists graduate school with an average of $292,169 in debt.

The Average Student Loan Debt for Borrowers Under 25

There are about 7.8 million people under the age of 24 with student loan debt. As a group, they owe just over $115 billion, according to the US Department of Education’s Q4 2020 report . The average amount owed per individual is $14,807.69.

The average amount owed per person when you consider borrowers of all ages is $39,351.

Average College Debt by State

When we look at the average student loan debt broken down by school and region, it also becomes clear there is a range of highs and lows across the country.

The Institute for College Access and Success (TICAS) puts together a comprehensive report on national student debt, using numbers self-reported to college guide publisher Peterson’s from thousands of colleges and universities.

The numbers reported by schools vary—with average debt among graduating students ranging from $17,935 to $39,410—but it does allow for a geographic look at the average student loan debt by state.

The highest debt states in 2019, the last year for reported numbers, were New Hampshire ($39,410), Pennsylvania ($39,027), and Connecticut ($38,546). The states where college graduates had the lowest average debt were Utah ($17,935), New Mexico ($20,991 ), and Nevada ($21,254).

How Long It Takes to Pay Off Student Loans

But even as the growth of new student loan debt is slowing, there continue to be outstanding student loan amounts that haven’t yet been paid off—which helps to explain why the total loan balances are hitting record highs.

If you have a federal loan when you graduate, you select your student loan repayment plan. The default option is the Standard Repayment plan , which is 10 years of fixed monthly payments.

There are a few other options that extend the repayment term or allow you to repay on an income-driven plan. Many graduates take longer than 10 years to pay back their loans, and around 20% of students default on their loans.

There isn’t a lot of data on exactly how long it takes students to pay off their student loans, partially because it varies based on how big your loan amount is and partially because some numbers count consolidation as loan repayment—when in reality you’ve taken out a new loan with different terms.

The US Department of Education lists the maximum repayment timelines for Direct Consolidation loans, which for borrowers holding between $20,000 and $40,000 in student loan debt is 20 years. Direct Consolidation loans allow borrowers to consolidate their federal loans into a single loan.

Related: Student Loan Options: What is Refinancing vs. Consolidation?

But it is worth noting: the sooner you pay off your loan, the more you save in the long run because you aren’t accruing interest for as long. Part of the reason so many students struggle to make payments is that their student loan payments are large in comparison to their incomes.

The interest rate can be a big factor in that. While interest rates on federal student loans are fixed and set annually by the government, interest rates on private students can range from 3% to 13%. Use our student loan calculator to figure out how your monthly payments could change at different interest rates.

Refinancing Student Loans With SoFi

Those looking for options to manage student loan payments might consider student loan refinancing. This process involves borrowing a new loan with a private lender. Lenders review applicant credit history and earning potential (among other financial factors) to determine the new loan terms, with a new, hopefully lower, interest rate.

Borrowers who refinance student loans with a private lender, may also be able to adjust their repayment term. Extending the term could lower monthly payments but may end up making the loan more expensive over the life of the loan.

Those who want to continue to take advantage of federal loan benefits like income-based repayment may not want to refinance with a private lender, because all federal student loan benefits are lost when a federal student loan is refinanced.

The Takeaway

The average student loan debt has increased over the past few years. For the 2018-2019 school year, the average student loan debt for those graduating with their undergraduate degree was $28,800, according to the College Board. There’s no shortage of student loan statistics—there are averages by state, by age group, and by degree type.

Regardless of how much you owe in student loan debt, creating a repayment plan is critical. Qualifying borrowers may consider refinancing to a lower interest rate, which could help them spend less in interest over the life of the loan. Refinancing federal student loans eliminates them from federal borrower protections (like income-driven repayment plans) and may not be the right choice for all borrowers.

Learn more about refinancing your student loans with SoFi.

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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.
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 SEPTEMBER 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.
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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College is expensive. Now that we’ve gotten that out of the way, let’s roll up our sleeves and get to work so that we can make college happen for our kids.

We are going to tackle this by taking a high-level look at breaking down the cost of college and then covering net price versus sticker price. We’ll discuss many of the options you may have when it comes to saving for your child’s college years.

Before we jump in, though, we want to point out that everyone’s life and financial situations are unique. That means that while some of these tips might apply, some may not.

We always suggest you speak with a qualified financial advisor before making any major decisions related to your finances. Only you (and they) will know what’s going to be the best plan for you.

Let’s get started!

Determining the Cost of College for Your Children

Keep in mind that there is no one solution to saving for your kid’s college. Tuition costs tend to fluctuate based on the type of school your child wants to attend, the type of degree they’ll earn (bachelor’s or associate), and even geographic location.

According to the College Board, the average annual tuition costs for the 2020-21 school year were:

•   $10,560: public four-year in-state institutions (a 1.1% increase from 2019-20)
•   $27,050: public four-year out-of-state institutions (a 0.9% increase from 2019-20
•   $37,650: private nonprofit four-year institutions (a 2.1% increase from 2019-20)
•   $3,770: public two-year in-district (a 1.9% increase from 2019-20)

The College Board also studied the annual rate of increase for the average cost of college over the last decade:

•   2.2%: four-year public universities
•   2.0%: two-year public universities
•   1.9%: four-year private (nonprofit) universities

Despite the average tuition costs, don’t assume that a public school will always be a better deal than a private school. “A student can sometimes get a better financial deal to attend a private school than if they were to attend a public school,” Andy Stiles, director of admissions at Ottawa University, a private liberal arts college in Kansas, told US News & World Report .

“A big factor in this is the institutional scholarship. The scholarship at a private school may be larger than a public school to make their overall cost, out of pocket, more competitive to a public school.”

Net Price vs. Sticker Price

The net price of college tuition is typically lower than the “published,” or “sticker” price. The net price is what a student would actually pay, after factoring in financial aid and any tax credits.

Consider this: Take the average published tuition price for a private institution—$37,650 per year. However, in actuality, the average family in this hypothetical might pay only half that. How do you get this net price? By subtracting need-based aid, merit-based aid, work-study funds, etc.

Private nonprofit institutions may offer some combination of grants, scholarships, and fellowships to offset the sticker price.

This practice is known as “tuition discounting.” According to the National Association of College and University Business Officers , private nonprofit institutions discounted their first-year tuition at a record high during the 2020-21 school year (the most recent stats available). The final tally was an average discount of nearly 54%.

Using a Net Price Calculator

You don’t have to be a math whiz or a professional economist to figure out how much you’re going to need to stash away for your child’s higher education. The Department of Education offers a net price calculator right on their website.

This tool may help students and their get a better idea of the cost of college, after subtracting scholarships, grants, and other financial aid.

Keep in mind, though, that a net price calculator is going to require specific details about your income and assets, so the more transparent you are regarding your personal finances, the more precise your calculation is likely to be.

When is a Good Time to Start Saving for Your Child’s Education?

It may seem obvious, but let’s make it official: now. It’s never too early to start an education fund for your child. It’s all about giving yourself and your child a head start.

Starting earlier also means you’ll likely have more time to change savings direction along the way, if need be. Later on, if your child develops an aptitude for sports, art, theater, or writing, or any other specific field, it’s possible to look into financial aid and scholarships that may support that talent.

That said, meeting other financial goals is also important. Some may focus on paying off credit card balances and other high-interest debt, and working toward making their own student loans a faint memory of the distant past.

In addition, creating an emergency fund that covers three to six months of living expenses can provide a financial buffer in the event of unexpected expenses. Another focus, staying on track for retirement.

It is absolutely critical that parents have their own financial plan in solid shape before saving or paying for a child’s education. At the end of the day, students are able to borrow student loans for an education but it’s not possible to take out loans to fund retirement.

Some Options for Saving

529 Plan

A 529 plan allows you to save for future education costs while you benefit from certain tax breaks. Why the odd name? The plan is made legal by Section 529 of the Internal Revenue Code.

Prepaid tuition plans – This is a type of 529 plan that allows account holders to purchase “units” (credits) at participating colleges and universities.

Education savings plans – These 529 plans let account holders open an account to help save for qualified educational expenses, which is broader than simply tuition and fees.

In a nutshell, a 529 savings plan allows account holders to invest after-tax money based on their comfort with risk and options available in the plan they selected. Withdrawals made for qualified expenses can be made tax-free.

Additionally, residents in some states may receive a state income tax deduction or credit for contributing to a 529 savings plan. This varies state-by-state, so it is important to understand the rules that apply to your unique situation.

Additionally, 529 savings plans may offer an age-based investment option to automatically adjust the risk of the investment strategy as the beneficiary gets older. This type of investment approach might be similar to how a target date fund works in your retirement plan.

Regular Savings Accounts

For these accounts it’s a good idea to compare and contrast interest rates. For the most part, current bank rates on regular savings accounts are relatively low.

It may be difficult to reach education financing goals through a traditional savings account alone since the interest rate might not keep pace with the inflation of college expenses.

Roth IRAs

These are individual retirement accounts that let you save and invest after-tax money. Currently, you can request a distribution after age 59 ½ without penalty or taxes.

It is possible to make a withdrawal from a Roth IRA before turning 59 ½ to pay for college expenses for your children. Withdrawing contributions (not any earned interest) does not generally incur taxes or penalties.

Those withdrawing any earnings may be able to avoid penalties if the distribution is used for qualified education expenses. Additionally, it might also be possible to avoid taxes on earnings if the Roth IRA has been open for more than five years.

It is important to keep in mind that a Roth IRA is designed for retirement savings and it could be worth consulting a tax professional before making any decisions about withdrawing from retirement funds.

Other Options to Pay for College

Sometimes saving alone isn’t enough to cover the cost of college. In that case, there are other types of aid available that could help students and their families pay for college.

Private Scholarships

Usually, private scholarships are offered by associations, unions, religious organizations, nonprofits, and other types of groups. And… (drumroll, please) you generally don’t have to pay them back. They sometimes cover all four years of education.

Often scholarships are offered on merit and ability alone (for example, sports, music, or science scholarships); however, some are awarded on the basis of nationality, ethnicity, or economic need. A couple of places to look for scholarships are scholarships.com and College Board .

Federal Financial Aid

Annually, students can fill out the Free Application for Federal Student Aid (FAFSA®) to apply for Federal financial aid. This includes things like federal student loans, work-study, and grants and scholarships.

Related: SoFi’s FAFSA Guide

Private Student Loans

For families that still need help funding a child’s education after exhausting their federal aid options, private student loans might be worth considering. SoFi, for example, offers private student loans and parent student loans to help pay for school.

SoFi’s private student loans are no fee and low-rate, plus there are flexible repayment options.

The Takeaway

College tuition can be a daunting expense. Setting up a dedicated account to save for college tuition can help streamline the process. There are accounts, like 529 plans, that are designed specifically to pay for educational expenses.

In addition to savings, students and their families may rely on scholarships, grants, federal student loans, or even private student loans to pay for tuition and other educational expenses.

Learn more about private student loans with SoFi today.

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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.
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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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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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Congratulations! After years of rigorous studying, training, and overall hard work, you’ve graduated from medical school. At this point, you’ve likely made it through Match Day and are ready to start a residency, even closer to becoming a fully fledged doctor.

Though the relief of graduation is certainly well deserved, medical school isn’t going to disappear from your rearview mirror soon. If you’re like most medical students, you likely finished school with a considerable amount of debt.

According to the Association of American Medical Colleges , 84% of medical students in the graduating class of 2020 had education debt (premedical and medical) of $100,000 or more, with 54% of graduates owing $200,000 or more and 20% owing $300,000 or more.

And while doctors can potentially make quite a bit of money—pediatricians earn an average of $232,000 and orthopedic specialists make $511,000, according to Medscape’s 2020 annual compensation report , for example—the average resident does not.

So, what’s a resident to do? Unfortunately, for some, finances may continue to be a challenge in the years immediately after graduating from medical school, so it could be helpful to take steps to lessen the financial anxiety that can accompany such a significant debt load.

The good news is most physicians could be on track to pay off their debt quicker than those in other fields with lower earning potential. But, even once you make the big bucks as a doctor and negotiate a sizable physician signing bonus, you’ll likely look to maintain your financial well-being.

Here, we take a look at some steps that may help you to get the most out of your money post-med school-and manage your student loans.

Making a Post-Med School Budget and Sticking to It

Residency can feel like a time when you’re struggling to make ends meet while working 12-hour shifts on your way to becoming a doctor. Being placed in a city with a high cost of living only increases the challenge.

The average resident salary in 2020 was $63,400, according to Medscape’s 2020 annual report . This may not go as far as it would seem to someone who has been in school earning no money.

Creating a budget that makes sense for your current circumstances and sticking to it will help. This might not include a fancy car (yet), and unless you’ve already signed a medical contract to stay in the same city after your residency, then it may not include buying a house either—even if you might be tempted by a mortgage loan.

Budgeting doesn’t end once you’re done with residency, either. If you can stick to your resident budget for an extra year or two, you may be able to save up money to pay down more on your student loans and start your medical career with some cash.

After all, the rate at which you are able to become debt-free may largely depend on your budget and lifestyle, not just your income.

Having an Emergency Fund and a Retirement Account

Typically, a good financial wellness rule of thumb is to aim to have a few months’ worth of your income saved up for an emergency fund. And yes, this is even applicable for doctors, who, like everyone else, could have something happen that ends up being a huge expense.

Given this, one good idea may be to start stashing away money whenever you can, and putting this emergency money into a separate account from your regular checking account. This way, you can know that it’s there but not be tempted to use it.

Though retirement may seem like a lifetime away—especially after recently finishing up school—saving for retirement as soon as is practical is a common financial goal. It’s also helpful to get into the habit of putting away something regularly. With a solid budget in place, you may be less likely to have to pick between paying down student loans and setting aside for retirement: it’s possible to do both.

Depending on your situation and goals, you may want to invest your money in a 401(k), 403(b), or a traditional or Roth IRA. It may be helpful to keep in mind that one easy way to up your retirement savings is by contributing enough to your employer-sponsored plan to max out on any company match. If your work doesn’t offer a retirement savings plan, consider opening an IRA with SoFi and get access to a broad range of investment options, member services, and a robust suite of planning and investment tools.

Considering an Income-Driven Loan Repayment Plan

You might find yourself feeling tempted to put your medical school student loans (if they’re federal student loans) on hold or into forbearance while you finish residency, but that move could still rack up interest and leave you further in debt.

Instead, you might consider an income-driven repayment plan that establishes monthly payments based on your income and family size.

It may not be as fast as sticking with traditional repayment plans, but if it’s necessary, this method could potentially help you avoid ballooning interest payments while you’re in residency, and typically lowers your monthly payments by lengthening your loan term. (Repayer beware: longer loan terms mean more interest payments, so it’s likely you’ll pay more for your loans overall.)

For med school graduates, there are a few federal income-driven repayment plans you may want to consider: income-based repayment (IBR), income-contingent repayment (ICR), and Pay As You Earn (PAYE).

The eligibility requirements will vary for each type of plan, and you may have to pay more once you sign a medical contract or earn more as a doctor, as income for plans such as PAYE is reviewed on an annual basis. Still, it’s helpful to consider the different options out there and choose what works best for you. And if you choose to practice medicine in underserved communities—as we’ll explain in more detail below—an income-driven repayment plan may be part of that picture.

Checking out Student Loan Forgiveness Programs

Another potential option you may want to look into is going into a public service program. This option allows for a particularly attractive perk for doctors: student loan debt forgiveness.

Public Service Loan Forgiveness (PSLF) is one such program run by the U.S. Department of Education that forgives the remainder of federal loans after participants have met certain eligibility requirements, such as ten years’ worth of on-time, eligible monthly payments and working for a qualifying employer, which typically includes government or certain nonprofit organizations.

The good news is that these programs may tie in nicely with the work you already want to do as a doctor. If you’ve always wanted to go into public service and also find yourself feeling overwhelmed by the prospect of paying off all of your debts, then this may be a great option.

Even if you’re not entirely sure, it may be a good idea to get started with the process now because you will need to ensure your repayment plan is on track in order to qualify later—and that may require one of the income-driven plans mentioned above.

To set yourself up financially for this situation, first you may need to consolidate your federal loans into a Direct Consolidation Loan, but it’s wise to carefully review the PSLF program requirements first.

Additionally, the National Institutes of Health (NIH) and the National Health Service Corps (NHSC) also have med school loan repayment programs for doctors who are interested in doing medical research for a nonprofit organization (through NIH programs) or health care work in a high-need area (via the NHSC program).

Many states also run their own loan forgiveness and repayment programs for doctors, which are worth looking into if you’re interested in this route. Keep in mind, there may be several different options that can help you get your loans forgiven.

Looking into Refinancing Your Student Loans

Dealing with student debt can be one of the most stressful things people experience in their lifetime. After years of hard work, graduating into a world of six-figure debt can sometimes feel anti-climatic, but rest assured that there are options.

Even if the above strategies aren’t a fit for you, there are other ways to move forward. Depending on your exact situation and needs, you may be a good candidate for student loan refinancing, which allows you to consolidate outstanding loans and may reduce your interest rates, as well as your stress levels.

(Keep in mind that refinancing your student loans with a private lender will mean that federal loan benefits, such as PSLF and income-driven repayment, will no longer be available to you.)

Refinancing your loans at a lower interest rate can be a fairly simple way to save money on the lifetime cost of your loan. SoFi has a number of student loan refinance options for medical school graduates, with variable or fixed interest rates and no application fees.

Don’t let your loans keep you from financial wellness. Consider refinancing your medical school student loans with SoFi, and see if you can save yourself money in the long run.

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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.com/legal.
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 SEPTEMBER 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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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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