SoFi

With the cost of higher education at an all-time high, many students need financial assistance to pay for tuition, room and board, books, and more. In fact, in the U.S. alone, 43 million borrowers are carrying over $1.7 trillion in student loan debt.

Taking out student loans may be the first major financial commitment you make. And it’s a decision that has the potential to affect your financial situation for years to come. So it’s crucial to understand the terms you’re signing up for, and all the options available.

To help you get started, here’s a quick guide to student loans. We’ll break down the basics of how loans work, how to apply for both federal and private student loans, and what to expect after you graduate.

What Is a Student Loan?

Student loans let young people borrow the money they need to pay for their education. Like other types of loans, this money must be repaid in the future, with interest.

Student loans can be borrowed by the student or, in some cases, by their parents. When a student loan is borrowed by a parent to pay for their child’s education, it may be called a parent loan.

The way student loans work is similar to other loans, but the application process is different, especially when it comes to federal student loans (more on that below). Federal student loans are funded by the federal government.

With private student loans, the application process is similar to other types of loans. Potential borrowers will file an application directly with the bank of their choice.

What Can Student Loans Be Used For?

Student loans can be used to pay for a student’s qualified educational expenses. These include things like tuition, books and supplies for classes, and fees charged by the school.

They can also be used to pay for room and board, living expenses, commuting to school, and a laptop or computer used for school.

Private student loans can even be used to pay off an outstanding tuition balance. Each lender determines how far in the past a loan can be used to pay an overdue balance, but many will allow loans to cover past-due balances that are 6-12 months outstanding. Also, keep in mind that you can apply for a private student loan at any time, and paying before the bill is due is preferable so you don’t have any interruptions in enrollment or class scheduling.

Graduate students are also eligible for federal aid and are encouraged to complete a grad school FAFSA.

Recommended: What Can You Use Student Loans For?

The Two Main Student Loan Categories

Student loans fall into two main categories, federal and private. Federal loans, which are funded by the federal government, offer some advantages and protections for borrowers. These special features, which are not common with regular loans, include:

•   Lower, fixed interest rates (what you pay the lender for loaning you the money) that offer a better deal than private student loans.

•   Income-driven repayment plans, which base your monthly payment after graduation on your salary.

•   Temporary relief programs for graduates who are facing unemployment or other hardship.

Federal Student Loans

Federal student loans are provided by the government. However, your payments and loan management are usually handled through an independent company called a student loan servicer.

To see if you qualify for a federal loan and other federal student aid, you need to fill out the Free Application for Federal Student Aid, commonly referred to as FAFSA®. The application must be filled out every year you want to apply for federal student aid.

There are a few different types of federal student loans. The main federal student loans are:

•   Direct Subsidized Loans, available to eligible undergraduates with financial need. The interest that accrues while students are enrolled in school and during the grace period is covered by the U.S. Department of Education.

•   Direct Unsubsidized Loans, available to eligible undergraduates and graduate students regardless of financial need.

•   Direct PLUS Loans, available to parents of undergraduate students and to graduate or professional students for expenses not covered by financial aid.

Check out our breakdown of the different types of federal student loans for details on how these loans work and the distinctions between them.

Private Student Loans

Private student loans are issued by non-government lenders, such as banks, credit unions, or other financial service companies. A potential borrower’s eligibility and terms will depend on their credit history (their financial track record) and other factors.

Parents or even family friends can cosign with a student who may not be able to qualify for a private student loan on their own. Unlike federal loans, repayment on private student loans may start while the borrower is still enrolled in school.

Unlike their federal counterpart, private student loan lenders may not offer the same safety-net protections in cases of financial hardship or unemployment. So be sure to understand the terms before taking a private student loan. Private loans tend to be the last option for paying for college after all other methods of financial aid have been exhausted.

Recommended: Guide to Private Student Loans

Understanding How Student Loans Work

Understanding the difference between federal and private student loans is the first step in navigating how college loans work. Here is other essential information:

Student Loan Application Process

Applying for federal student loans requires students to complete the FAFSA every year they attend college. Some people assume they won’t meet the requirements for FAFSA federal aid because of their parents’ income or a low GPA, but that’s usually not the case.

Everyone who might need help paying for college should fill out the FAFSA. Aside from federal student loans, there are state and school-based scholarships, grants, and work-study programs that you may qualify for. The FAFSA form is generally available on October 1 for the following school year and can be completed online.

If you’re opting for private student loans, find a reputable lender and make sure your school and program are eligible for their offerings. The application process may or may not have a fee, depending on the lender.

Private lenders typically want applicants to provide basic personal and financial details, and may also consider credit history.

As mentioned above, lenders may allow potential borrowers to apply for a private student loan with a cosigner, such as a parent. Because college students tend not to have much of a credit history yet, adding a cosigner can potentially improve an applicant’s chance of getting approved with a competitive interest rate.

Recommended: High-Income Financial Aid

Student Loan Interest Rates and Fees

Interest is a percentage of the unpaid principal loan amount that is paid to the lender in exchange for borrowing money. Federal student loans have fixed interest rates, and interest is accrued on a daily basis.

The interest rate on federal direct subsidized and unsubsidized loans for undergraduates for the 2022-2023 school year is 4.99%. Interest rates on federal student loans are set annually by Congress.

Fixed-rate student loans have an interest rate that stays the same over the life of the loan. Although the rate might start off higher than on variable-rate loans, it won’t change as general interest rates fluctuate.

The way interest on private student loans works is different. Private student loans may have either fixed or variable interest rates. Variable-rate loans, also called floating-rate loans, have an interest rate that can vary every month, quarter, or year. Rates usually start off lower than a fixed-rate loan, but can fluctuate dramatically over the life of the loan.

If you expect to pay off your student loans quickly, you may consider a variable-rate loan. But if you’re not sure how much you’ll be making after you graduate, or you don’t think you’ll be able to pay your student loans off fast, or you’re just not a risk taker, a fixed-rate loan might be a better choice.

Private student loans will have different interest rates depending on the lender and the borrower’s credit history.

Repaying Your Loan

As long as you’re still in school at least part-time, students aren’t required to make payments on federal loans. The exception for federal student loans is PLUS Loans, which require borrowers to start making payments as soon as they receive the entire loan amount. By the way, if you have an unsubsidized loan, interest starts accruing while you’re enrolled in school.

Your federal loan servicer should give you a student loan repayment schedule that tells you when your first payment is due and how much you owe. There are a few different repayment plans available for federal student loans. Borrowers can change their repayment plan at any time without incurring fees.

Most federal student loans have a six-month grace period, which gives you a break after you leave school before you have to start paying your loans back. Some private lenders also offer grace periods, but it’s not a guarantee. Unless the loan is a federal unsubsidized loan, it will likely accrue interest during the grace period.

PLUS Loans work a little differently. While PLUS Loans for undergraduate studies do not have a grace period, graduate and professional students who receive PLUS Loans receive an automatic six-month deferment that is activated when the student graduates, leaves school, or their enrollment drops below half-time. Also, parent borrowers who’ve received PLUS Loans can request a six-month deferment after their child graduates, leaves school, or enrolls less than half-time.

Private lenders determine when repayment begins on a private student loan, so review your student loan agreement closely before signing.

Many lenders offer interest rate reductions if you have your student loan payments automatically deducted from your checking account.

The Takeaway

Student loans can make it possible for young people to attend college, but just like other types of loans, student-borrowers are charged interest. Federal loans have fixed interest rates and generally have a six-month grace period following a student’s departure from school. They also come with borrower protections and benefits like income-driven repayment plans. Private student loans can be helpful if a student did not receive enough federal aid in the form of federal student loans, scholarships, grants, and work-study, to pay for college. Lenders determine the interest rate and terms partly based on the borrower’s credit history. Interest rates may be either fixed or variable. Private student loans do not carry the same federal borrower benefits.

Students interested in borrowing private student loans should shop around to find the best interest rate and terms they qualify for. SoFi’s private student loans have absolutely no fees, and the application process is entirely online.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

How are student loans paid out?

According to the Federal Student Aid website (StudentAid.gov), your school will give out your loan and grant money in at least two payments, called disbursements. Usually, you’ll receive a payment once per term (semester, quarter, etc.). If you accept a work-study job, you’ll be paid at least once a month.

How much money do student loans give you?

Undergraduates may receive between $5,500 and $12,500 per academic year in direct subsidized and unsubsidized student loans. The amount is determined by your year in school and your dependency status. Your total financial aid is calculated as the difference between the cost of attendance for your school and your family’s expected contribution.

How much is a student loan monthly?

The average monthly student loan payment is $461. Your monthly payment will depend on how much you borrow, your interest rate, and the length of your repayment term.

Can you use a student loan to pay a tuition bill that is past due?

Yes, you can use a private student loan to pay off an outstanding tuition balance. Each lender determines how far in the past a loan can be used to pay an overdue balance, but many will allow loans to cover past-due balances that are 6-12 months outstanding.

Can a SoFi Private Student Loan be used for past-due balances? How long?

Yes. As long as the student is enrolled the next semester or has recently graduated, the student may apply a SoFi Private Student Loan to a past-due balance up to 6 months after term. The school must certify the loan and the dates the funds cover.

---

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 Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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.
SOIS1122005

Read more

In dental school you’re taught the skills you need to become a successful dentist. What they don’t tell you is how to effectively handle your dental school debt. A typical dental school graduate enters the profession with a student loan burden topping $293,900, according to the Education Data Initiative.

That’s $90,000 more than the average medical school debt. Right when dentists are ready to hit the accelerator on their careers, the reality of repayment presents a sizable speed bump.

The good news is, you’ve picked the right profession when it comes to ROEd, or the “return on education” you should reap down the road. The average base salary for general dentists is $217,620, and more than $355,570 for specialists who provide implant services, per a 2021 survey by DentalPost and Endeavor Media.

Ways to Pay Off Dental School

At this stage of the game, it’s important to have a plan for paying down your debt as efficiently as possible. Getting your finances in order early is especially critical if you anticipate borrowing more money down the road to open your own practice or buy a home.

Below, we explain the various student loan payment options available and how to know which one makes the most sense for you.

Choose a Repayment Plan

Federal student loan borrowers have four repayment plans to consider. They all set your monthly loan payment at an amount deemed affordable based on your income and family size. You can change your plan anytime without incurring fees.

•   Standard Repayment Plan. Spreads payments evenly over 10 years. Under this plan, if you have a loan balance of $250,000 at 7.54%, your monthly payment will be about $2,900. This is the default plan if no other plan is chosen.

•   Graduated Repayment Plan. With this plan, payments start lower and then gradually increase over time, usually every two years. Repayment takes place over 10 years.

•   Extended Repayment Plan. Choose either fixed or graduated payments. Repayment takes place over 25 years.

•   Income-Driven Repayment Plans. There are four types of income-driven repayment plans that tie a borrower’s income to their loan payments. Repayment takes place over 20 or 25 years. At the end of the repayment period, the remaining balance is forgiven (though this amount may be taxable).

Thanks to their higher income, dental professionals often pay off their loans before the end of the repayment period, making the forgiveness benefit irrelevant. Also, you may not be eligible for forgiveness programs if your income is over a certain threshold. (Still, we’ll get into forgiveness programs a bit more in the next section.)

Keep in mind that the longer your repayment term, the more interest you pay over the life of that loan. The shorter your term, the less you’ll pay in interest, but the higher your monthly payment will be.

A student loan payoff calculator will give you an idea of your monthly payment for different repayment terms.

Recommended: How To Get Out of Student Loan Debt

Loan Forgiveness

The Public Service Loan Forgiveness (PSLF) program is an option if you start your career at an eligible nonprofit or public service agency. Work for a local, state, tribal, or federal government organization or for a nonprofit organization, and you may be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan. Serving as a full-time AmeriCorps or Peace Corps volunteer also counts.

Examples of qualifying government employers are the U.S. military, public colleges, and public child and family service agencies, but not government contractors.

There are also a number of federal and state loan-repayment assistance programs that reward dentists for providing service to certain segments of the population. The Indian Health Service Loan Repayment Program, for example, offers dentists who serve American Indian communities up to $20,000 per year toward the repayment of school loans.

Student loans from private lenders do not qualify for PSLF.

Student Loan Consolidation

Federal student loan consolidation lets you combine multiple federal student loans into a single new loan with a fixed rate. Your new rate is the weighted average of the old student loans’ interest rates rounded up to the nearest eighth of a percentage point. That means the rate might actually be slightly higher than the prior rate on some of the loans.

If your monthly payment decreases, it’s likely the result of lengthening the term (up to 30 years), which can mean paying more interest over time.

By the way, you can’t include private student loans in this type of a consolidation loan.

Student Loan Refinancing

For many dental school grads, consolidating multiple student loans into a single loan with a private lender, and then refinancing the balance at a lower interest rate, makes sense. Student loan refinancing makes it easier to manage your finances: You’ll get one bill each month from a single lender, instead of several bills for varying amounts that are based on different rates.

Depending on how you structure your loan, a lower interest rate might allow you to pay back your debt faster. That can save you a substantial amount of money over the life of the loan.

You can also choose a term that lowers your monthly payments, leaving more money in your pocket to be used for other things: building an emergency fund, starting a family, and investing for retirement.

Tips for Thriving as a New Dentist

Here are some ways you can set yourself up for success from the very start of your career.

•   Create a budget you can stick to. Leave room for annual and quarterly expenses as well as incidentals.

•   Start a savings plan. The sooner you start saving and investing, the sooner you can enjoy compound growth, which is when your money grows faster over time.

•   Set up automatic payments for student loans. This helps you make payments on time, plus many loan service providers offer a discount if you arrange to autopay.

•   Look into different ways to invest. In addition to maxing out your 401(k) or 403(b), you may also want to consider vehicles such as a health savings account or individual retirement account.

•   Get familiar with your employee benefits package. Find out what perks your employer offers, such as help with student loan repayment.

Recommended: Budgeting as a New Dentist

The Takeaway

Though a typical dental school student owes nearly $294,000 by the time they graduate, there are several student loan payment options that can help borrowers pay down debt more efficiently. All four federal student repayment options, for example, set your monthly payments based on your income and family size. And depending on your employer, you may also qualify for a forgiveness program.

Have multiple loans? Federal student loan consolidation lets you combine them into one new loan with new terms and a new interest rate. Student loan refinancing, which lets you consolidate multiple student loans into a single loan with a private lender, is another option to consider.

It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for example, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more—at no extra cost.

Refi with SoFi today to get flexible terms and a competitive low rate before interest rates rise even higher!

---

^†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. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE THAT THE WHITE HOUSE HAS ANNOUNCED UP TO $20,000 OF STUDENT LOAN FORGIVENESS FOR PELL GRANT RECIPIENTS AND $10,000 FOR QUALIFYING BORROWERS WHOSE STUDENT LOANS ARE FEDERALLY HELD. ADDITIONALLY, THE FEDERAL STUDENT LOAN PAYMENT PAUSE AND INTEREST HOLIDAY HAS BEEN EXTENDED TO DEC. 31, 2022. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE THE AMOUNT OR PORTION OF YOUR FEDERAL STUDENT DEBT THAT YOU REFINANCE 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.
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.
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, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SLR17159

Read more

If you’re a doctor or studying to be one, chances are you have student loans. A typical medical school graduate has an average student loan debt of $202,450, according to the Education Data Initiative. That’s seven times as much as the average college student owes.

Paying back the loans can be a challenge for doctors during residency and the early part of their career. But the good news is, the profession tends to pay well. In 2023, a typical entry-level doctor earned around $210,000 per year.

Ways to Pay Off Medical School

No matter how much you owe, it’s smart to have the right repayment strategy in place. This can help ensure your monthly loan payments are manageable and your financial health is protected.

Let’s take a closer look at various student loan payment options available.

Choose a Repayment Plan

When it comes to federal student loans, borrowers have four different repayment options. No matter which plan you choose, your monthly loan payment will be based on your income and family size. If you need to change your plan at any time, you can do so without incurring fees.

•   Standard Repayment Plan. This plan spreads out payments evenly over 10 years. For example, if you have a loan balance of $200,000 at 6.54%, your monthly payment will be about $2,275.

•   Graduated Repayment Plan. With a graduated plan, your payments start out lower and then gradually increase over time, typically very two years. Repayment takes place over 10 years.

•   Extended Repayment Plan. You can choose either fixed or graduated payments, and repayment takes place over 25 years.

•   Income-Driven Repayment Plans. There are four types of income-driven repayment plans: Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (RPAYE). Repayment takes place over 20 or 25 years, depending on your income and the plan you choose. At the end of the repayment period, the remaining balance is forgiven, though this amount may be taxable.

As you weigh your options, think about the length of the repayment term and the monthly payment amount. With a longer repayment term, your monthly bill is lower but the amount of interest you pay over the life of the loan is higher. With a shorter term, you pay less in interest over the life of the loan but your monthly payment is higher. A student loan payoff calculator will give you an idea of your monthly payment for different repayment terms.

Recommended: 4 Student Loan Repayment Options — and How to Choose the Right One for You

Loan Forgiveness Programs

Loan forgiveness programs can wipe out some or all of your medical student loan debt, provided you meet certain criteria. If you work for an eligible nonprofit or public service agency, for example, you may qualify for the Public Service Loan Forgiveness (PSLF) program. Considering a job with a local, state, tribal, or federal government organization or with a nonprofit organization? You could be eligible for federal Direct Loan forgiveness after 10 years in an income-based plan.

You may also qualify for a federal or state loan-repayment assistance program if you provide service to certain areas or segments of the population. For instance, the National Health Service Corps Loan Repayment program will erase as much as $50,000 of eligible student debt, tax-free, if you work for at least two years in an approved medical facility.

Student loans from private lenders do not qualify for PSLF.

Student Loan Consolidation

If you’re paying off more than one federal loan, federal student loan consolidation may be an option worth exploring. Consolidation lets you combine different federal student loans into a single new loan with a fixed rate. The new rate is a weighted average of all your federal loan rates, rounded up to the nearest eighth of a percent. This may result in a slightly higher rate than you were paying before on some loans.

When you consolidate, you have the option to choose a new repayment plan that extends the life of the new loan up to 30 years. Keep in mind that you can’t include any private student loans in this type of consolidation loan.

Student Loan Refinancing

With student loan refinancing, you combine private and federal student loans into one new loan with a private lender, and then refinance the balance at a potentially lower interest rate. This in turn can lower how much you pay in interest over the life of your loan. Refinancing can also make it easier to manage student loan payments. Instead of bills from different lenders, you get one bill each month from one lender.

You can choose a new length for your loan, which lets you adjust your monthly payments. This may be especially helpful if you choose to refinance during your residency.

Recommended: A Guide to Private Student Loans

The Takeaway

Attending medical school isn’t cheap, and it’s common to graduate with significant student loan debt. The good news is, there are several repayment options that can help you tackle your debt more efficiently and protect your financial health. For example, if you have federal student loans, your monthly payments are based on your income and family size. You may qualify for a forgiveness program, which could erase part or all of your balance.

Have more than one loan? Consolidation lets you combine multiple federal loans into a single loan with new terms and a new fixed rate. With student loan refinancing, you combine private and federal student loans into a single loan with a private lender, and then refinance it at a potentially lower interest rate.

Refinancing can be a great choice for working medical school graduates who have higher-interest PLUS loans, Direct Unsubsidized Loans, and/or private loans.

Refi with SoFi today to get flexible terms and a competitive low rate before interest rates rise even higher!

---

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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.
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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
SOSL0223007

Read more

Student loans can be used to cover more than tuition and fees. They can pay for lodging, food, commuting, a computer, and study abroad (but not spring break!).

Most qualified education loans can be used to cover the entire cost of attendance — an estimate of total costs for an academic year at a college, as determined by each campus financial aid office — minus any aid you receive.

Let’s take a closer look at what student loans can cover, what they should not, and alternative ways to pay for living expenses.

Books, Yes. New Car, No.

As long as a student is enrolled at least half-time, student loans can cover a range of expenses at a qualified institution of higher education or at a hospital or health care facility that provides postgraduate internship and residency training programs.

What Student Loans Can Cover

•   Tuition and mandatory fees. You can even use private student loans to pay off past-due tuition balances.

•   Room and board. Whether it’s a dorm or an apartment off-campus, the expense can be covered. Board means a campus meal plan or groceries.

•   Transportation. Loan money can pay for maintaining, insuring, and fueling your car or for public transportation fares.

•   Personal expenses. These include cell phone bills, laundry costs, bed linens, towels, a microwave oven, and anything else you normally spend money on.

•   Books and supplies. New, used, or rented textbooks are covered, as are supplies ranging from software to notebooks.

•   A personal computer. You can buy or rent a computer with student loan money.

•   Dependent care. Child care expenses are covered.

•   Loan fees. This includes any origination fee.

•   Study-abroad costs. The Federal Student Aid office lists international schools that participate in the federal student loan program and describes the process.

Other qualified expenses may include utilities and furnishings.

What Student Loans Should Not Cover

•   Travel or vacations

•   Purchase of a car

•   Down payment on a house

•   Entertainment

•   Frequent dining out or expensive meals

•   New wardrobe

•   Small-business expenses

•   Other debt

•   Someone else’s tuition

What If I Use Student Loan Money for Nonessentials?

The use of student loans for nonqualified expenses could be reported to the Office of Inspector General as fraud, or a lender could call the loan balance due immediately. But in general, no one is tracking how you spend loan money.

Both federal and private student loans are disbursed to your school, which takes out tuition and fees, and if you live on campus, room and board. Any remaining money goes to you, so it would be hard for lenders to tell if you’re using the remainder as intended.

It can be tempting to go on a spending spree with your student loan refund, but remember that you will pay, or are paying, interest on that borrowed money.

Federal student loans have annual and aggregate limits that may seem generous, especially for graduate and professional students.

Private student loans can help fill gaps in need. These loans are not backed by the federal government and therefore not subject to its qualification rules. They may also lack the borrower protections available to federal loans, such as deferment. It’s a good idea to obtain a private student loan only after maxing out federal student aid. A cosigner can often help a student qualify.

Recommended: A Guide to Private Student Loans

Other Ways to Cover Living Expenses

Aside from using student loans, there are several ways to pay for living expenses while in school. Here are some ideas.

Part-Time Job

Getting a part-time job can help students make extra money to cover costs. Generally, these side hustles offer flexible hours so students can more easily juggle work and class. Some students may also be able to find a job that’s related to their major or career of choice.

Recommended: Jobs That Pay for Your College Degree

Work-Study

Federal work-study may be offered as part of a student’s federal aid package and is based on financial need. Work-study programs are available to undergraduate, graduate, and professional students, regardless of whether you are a full-time or part-time student.

Becoming a Resident Assistant

A resident assistant (RA) is usually assigned to a particular floor or wing of a dormitory to oversee dorm residents. RAs might lead mandatory floor meetings, organize monthly social gatherings, and referee the occasional roommate disagreement. Not only do you typically get a better room than others on your dorm floor, you also get free housing.

Scholarships

Merit scholarships are often awarded to a student based on their skill or ability for a certain speciality. They’re offered through private companies, nonprofit organizations, colleges and universities, and professional and social organizations. As you’re researching scholarships that you might be eligible for, pay attention to any requirements. Some awards have certain conditions, such as requiring that the money be used only for tuition, while others allow you to use the funds for whatever you want.

Recommended: Grants for College — Find Free Money for Students

Summer Job

As an alternative to (or addition to) a part-time job, you might want to consider a summer job or paid internship. During the summer, students may have more free time to work more hours and rack up cash to help cover their housing and living expenses for the following year.

Selling Unwanted Items

Cleaning out your closet? Selling castoffs on buy-and-sell apps and websites can be a quick way to earn money.

The Takeaway

Student loans can be used to cover housing, food, transportation, supplies, and other college essentials. Funds shouldn’t be used for “nonessential” expenses, like vacations, new clothes, pricey meals, or other debt. In general, no one tracks how you spend loan money. But remember, this is borrowed money that will have to be repaid, with interest. A part-time job, work-study program, and scholarships are different ways to earn extra money for expenses.

To help fill any gaps, there are private student loans, like those from SoFi. The application process can be completed easily online, and you can see rates and terms in just a few minutes. Repayment plans are flexible, helping students find an option that works for their budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Can you use student loan money on monthly car payments?

No. However, you can use loan money to maintain, insure, or fuel your car, or for public transportation fares.

Can you use student loans to pay for a gym membership?

Student loans shouldn’t be used to cover membership to a gym. Many schools have a gym or fitness center on campus that’s available to students and included in the cost of tuition.

What should you do with leftover student loan money?

It’s a good idea to return the excess money to the lender — it lowers the total cost of the loan. You could also use the funds to pay for qualified educational expenses, like tuition, housing, child care, or transportation.

Can you use a student loan to pay a tuition bill that is past due?

Yes, you can use a private student loan to pay off an outstanding tuition balance. Each lender determines how far in the past a loan can be used to pay an overdue balance, but many will allow loans to cover past-due balances that are 6-12 months outstanding.

---

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 Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
SOIS0123003

Read more

College is expensive. That means that even if you saved up your pennies since you were five, are currently working two part-time jobs, with a clutch of scholarships in tow, you might still need a little extra student loan cash to help you pay for your degree.

There are a number of ways to finance your college education, but the two most common options are federal and private student loans. Federal student loans are fairly straightforward, but private loans can get a bit murky.

After all, there are a lot of options when it comes to things like private student loan interest rates, term lengths, and approval criteria. It can be hard to understand what makes one lender or type of private student loan better than another.

That’s why it’s important to learn as much as you can about private student loans so that you’re better able to decide if they’re right for you, and find the private student loans that work best for your situation.

Recommended: Types of Federal Student Loans

What are Private Student Loans?

Often when people talk about student loans, they’re referring to federal student loans which are given out by the government and have a common set of criteria around things like interest rates, repayment plans, and forgiveness programs.

When it comes to federal student loans, you apply for them by filling out the FAFSA® (Free Application for Federal Student Aid) form which allows the government to determine your financial need in relation to your family’s income and the school you’ll be attending.

In contrast, private student loans are student loans that are offered by banks or private lenders to help people pay for school. To apply for them, you have to fill out a loan application as you would for any other loan, like a mortgage or an auto loan.

How much you can borrow won’t just depend on the costs of your degree, but typically depends primarily on personal financial factors like your credit score and income and the credit score and income of your cosigner (should you need or opt to have one).

How Do Private Student Loans Work

Private student lenders set their own terms in regard to term lengths, private student loan interest rates, repayment plans, and underwriting criteria. For that reason, one private student loan lender can offer options that are very different from another private student loan lender. That’s why it’s so important to seek out private student loans that are right for you — there can be a huge difference between one lender and another.

To apply for a private student loan, potential borrowers will file an application directly with their lender of choice. Based on the information submitted, the lender will determine whether or not the applicant is approved for the loan, and the rates and terms for which the applicant qualifies.

Recommended: How Do Student Loans Work? Guide to Student Loans

The Benefits of Private Student Loans

There are a lot of benefits when it comes to private student loans. For many students, they can mean the difference between paying tuition and fees in full or not being able to. One key benefit of private student loans is that you can apply for them at any time of the year — unlike federal student loans.

For that reason, they can potentially help you with those end-of-term funding shortfalls. Just be sure to plan ahead since it may take a while for the private loans to clear your account depending on the lender.

Private student loans are often used to make up the difference between what a student is able to borrow in federal student loans and their remaining need after things like scholarships, federal or state grants, work-study, or part-time jobs are factored in.

The maximum amount that you can borrow through federal government student loan programs depends on things such as whether you’re an undergraduate or a graduate or professional student and whether you’re a dependent or an independent student.

With federal student loans, the maximum amount first-year dependent undergraduates can borrow in subsidized and unsubsidized student loans is $5,500 for the year. Graduate or professional students can borrow up to $20,500 per year.

The lifetime maximum for a dependent undergrad is $31,000, and the lifetime cap for graduate students is $138,500 in federal student loans, including undergraduate study. When students need more than these caps, they often turn to private loans.

Another benefit of private student loans is that you have more control over things like private student loan interest rates. There are private student loans that offer you the option of either fixed or variable interest rates.

Private student loans may also have more choices in regard to loan terms. Many allow you to choose between 5-, 10-, and 20-year term lengths on your loans.

Some private student loans do not charge origination fees, though you should check the fine print on your award to make sure.

Private student loans can even be used to pay off an outstanding tuition balance. Each lender determines how far in the past a loan can be used to pay an overdue balance, but many will allow loans to cover past-due balances that are 6-12 months outstanding. Also, keep in mind that you can apply for a private student loan at any time, and paying before the bill is due is preferable so you don’t have any interruptions in enrollment or class scheduling.

The Downsides of Private Student Loans

Despite the fact that private student loans could be the difference between going to your first-choice school and having to settle for your safety school, there are some downsides.

One big downside is that they often require a cosigner. After all, most high school and college students don’t make enough income or have a strong credit history (among other personal financial factors that can take years to build) to qualify for private student loans on their own.

According to the MeasureOne Private Student Loan Report, 90.78% of undergraduate private student loans given out for the academic year of 2022-2023 have a cosigner. Plus, 65.88% of graduate private student loans are cosigned.

The good news is that some private student loans allow for something called “cosigner release.” That means that after you make a certain number of on-time payments, you can apply to have the cosigner removed from the loan.

Another change in the industry is that more lenders are shifting their lending criteria away from simply looking at things like student’s income and credit score to also looking at things like your grades and income potential. That means that hopefully more students may be able to qualify for private student loans without having to get a cosigner.

(Although, we should note here that federal student loans for undergraduates don’t require cosigners at all, and don’t take a student’s income or credit history into account.)

Since private student loan interest rates are set based in part on how big of a credit risk applicants represent, you might also find yourself paying more than you would for federal student loans.

Federal student loans offer different types of income-driven repayment programs and things like loan forgiveness for public service employment and deferment protections that aren’t available with private student loans.

For example, you could apply for an income-driven repayment plan with federal student loans that, if you qualified, would allow you to pay just 10% to 20% of your income toward your student loans and then could forgive those loans after 20 to 25 years. In contrast, when you lock in your term length on your private loans, you can’t typically change your repayment term unless you refinance your student loans.

Other people express concern that private student loans lead students to borrow more than they will be able to afford to repay or to borrow amounts that will make repayment much more difficult. Responsible borrowing is critically important, especially when it comes to student loan debt, and only you and your family will know what’s right for you.

Another downside of private student loans is that they are generally not dischargeable in bankruptcy unless the borrower files an adversary complaint and meets an undue hardship test. This is unlike other types of unsecured consumer loans, like lines of credit or credit cards.

Recommended: Can You Get A Student Loan With No Credit History?

Should You Consider Private Student Loans?

When it comes to whether or not to take out private student loans, what matters is what’s right for you. Maybe you weren’t able to qualify for enough funding in the form of federal student aid and need a little bit in private student loans to top you off. Or maybe you experience an emergency midway through the term and need more money than you expected.

Whatever the reason, it’s important that you look into your options to find a private student loan that works for you. There are a number of different kinds of companies that offer competitive interest rates and flexible term lengths to choose from. You could also look for loans that don’t have origination fees and offer extra services like cosigner release and deferment.

Federal vs Private Student Loans

There are a few major distinctions when comparing federal vs. private student loans. Importantly, federal student loans are made by the government and are subject to a specified set of rules and regulations. Private lenders are not subject to the same requirements. Here’s an overview of the important differences between federal and private student loans.

The Application Process

Federal student loans are awarded as a part of a student’s financial aid package. In order to apply for federal student loans, students must fill out the FAFSA® each year.

To apply for private student loans, students will need to fill out an application directly with their preferred lender. The application requirements may vary depending on the lender.

Interest Rates

For the 2022-2023 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 4.99%, the rate on Direct Unsubsidized loans for graduate and professional students is 6.54%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 7.54%. The interest rates on federal student loans are fixed and are set annually by Congress.

The interest rates on private student loans may be fixed or variable and are determined by the lender based on factors included in the application, such as the borrower’s credit history.

Recommended: A Guide to Student Loan Interest Rates for the 2022 School Year

Repayment Plans

Borrowers with federal student loans can select from the federal repayment plans , including income-driven repayment plans.

Repayment plans are set by the individual lender. Review the terms and conditions directly with the lender.

Grace Period

Most federal student loans have a six-month grace period after a student graduates or drops below part-time enrollment. During this time, borrowers are not required to make payments on their loan, but depending on the type of loan they have, the loan may accrue interest during the grace period.

Private lenders may offer a grace period, while others may require payments as soon as the loan is paid out (or disbursed). Again, review the loan’s terms and conditions closely before borrowing.

Options for Deferment or Forbearance

Federal student loan borrowers can apply for deferment or forbearance if they encounter financial difficulties while they are repaying their loans. These options allow borrowers to pause their loan payments. Note that interest may continue to accrue during periods of deferment or forbearance, depending on the type of federal loan the borrower holds.

Some private lenders may offer options for borrowers who are facing financial difficulties, however, this will vary by lender. For example, SoFi has unemployment protection, which allows qualifying borrowers who have lost their job through no fault of their own, to modify payments on their student loans.

Recommended: What is Student Loan Forbearance?

Loan Forgiveness

Borrowers with federal student loans might be able to pursue loan forgiveness through federal programs such as Public Service Loan Forgiveness or Teacher Loan Forgiveness.

Private student loans are not eligible for federal loan forgiveness programs.

How to Apply for Private Student Loans

To apply for a private student loan, you’ll have to file an application directly with the lender of your choice. Some schools may provide a preferred lender list, but you aren’t necessarily required to borrow from a lender on this list.

If you’re interested in applying for a private student loan, it’s generally worth shopping around at a few different lenders so you can get a sense of the terms, conditions, and interest rates you may qualify for. Lenders will often allow borrowers to get a quote by filling out a pre-qualification application. This generally involves a soft credit inquiry, which won’t impact the applicant’s credit score.^*

The application process may vary by lender, but you’ll generally need to provide basic financial and personal information. Depending on your personal financial circumstances, you may consider applying with a cosigner which could potentially help you qualify for more competitive terms.

When evaluating a private lender, consider factors like the interest rate you may qualify for, the repayment plans available, and any fees.

Applying for Private Student Loans with SoFi

If you have exhausted your federal loan options and still need to cover tuition fees, private student loans with SoFi may be a great option for you.

SoFi offers competitive rate private student loans with flexible repayment options. There are absolutely no fees (no origination fees, no late fees, and no insufficient fund fees). Plus, it only takes minutes to check your rate.

SoFi Private Student Loans can also be used to pay off an outstanding tuition balance. As long as you are enrolled the next semester or have recently graduated, you may apply a SoFi Private Student Loan to a past-due balance up to 6 months after term.

If you are looking to borrow for school, SoFi can help.

See your interest rate in just a few minutes — with no pressure to sign up.

---

^*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. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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.
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.
Third-Party Brand Mentions: No brands, products, or companies 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.
SOPS20056

Read more