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Should You or Your Child Take Out a Loan for College?

Higher education might lead to higher earnings, but the increasing price tag can make it feel out of reach. For parents, the pressure to take out loans for their children’s education is high, with an estimated 42% of parents taking out student loans for their children in the 2017–2018 school year, according to Sallie Mae’s latest “How America Pays for College ” study.

What’s more, one in three parents say they’ll help their child pay back “all or some” of their student loans. Whether the loan is in your name or your child’s, many parents feel the pressure to help pay for education in some way.

While just over half of parents say they’ll take out loans in their name to cover their children’s education, the percentage of students who take out loans in their own name is nearly double. As of 2017, about 70% of students leave college with loan debt . The reality is, more students are paying for their education than their parents are.

The desire to help your kid pay for college so they can focus on their studies is a strong one, but it’s important to consider your options when it comes to borrowing money. Read on for a high-level overview of which types of student loans you could apply for, as well as some advantages and disadvantages of taking out those loans in your name.

Parent PLUS Federal Student Loans

In terms of federal student loans, parents can take out a Direct PLUS loan in their name to pay for their children’s education. These loans, also called Parent PLUS loans, can help pay for expenses not covered by other financial aid.

The benefits of a Parent PLUS loan can include:

•  A fixed interest rate (for loans first disbursed on or after July 1, 2019, and before July 1, 2020, the interest rate is 7.08% )

•  Deferment under certain conditions

•  Flexible repayment options

•  Possible eligibility for Public Service Loan Forgiveness

If you want to transfer the loan to your child’s name down the line, you may be able to do so if you refinance your PLUS loan with a private lender. Parent PLUS loans cannot be consolidated with loans held in the student’s name through a Direct Consolidation loan. They also cannot be transferred into the name of the student.

On the other hand, if your child is taking out federal student loans , they may be eligible for:

•  Direct Subsidized Loans

•  Direct Unsubsidized Loans

•  Direct PLUS Loans (for graduate school)

Depending on demonstrated financial need, your child might have more options for federal aid if they apply on their own. However, if all other federal aid is exhausted, the Parent PLUS loan might be a great supplement to your child’s tuition payments after federal aid, scholarships, or grants.

Private Student Loans for Parents

When federal student loan options are exhausted, some students and parents may turn to private loans to help fund their education. Parents can take out a private loan in their own name to pay for college for their student. If you have a strong credit history, you might consider a private loan over the PLUS loan—there’s a chance you could qualify for a lower interest rate.

With a private student loan, you may have the option of a fixed- or variable-rate loan, potentially giving you more flexibility on repayment. With a private student loan, you might have the chance to choose the term length of a loan as well.

Your child can also apply for private loans, but in most cases, they’ll require a cosigner. A 2012 study found that 90% of private student loans had a cosigner. With a cosigner, or when applying for student loans in your name, there’s a chance you’ll score a lower interest rate than your child would alone, depending on your income and credit history. But as a cosigner, you are (of course) held responsible if payments aren’t made by your child.

Pros and Cons of Taking the Loan Out in Your Name

Taking out a student loan for your child in your name—federal or private—could mean less of a financial burden on your child as they enter college. Since the loans are in your name, it’s not up to your child to pay them, even after a degree is earned.

Having a loan under your student’s name, however, could help build their credit history. But if you have a strong credit history (among other relevant financial factors), you’ll likely be able to secure private loans at a lower rate than they could, considering their limited or nonexistent credit.

Related: Can Parents Pay Off Their Children’s Student Loans?

However, if you are unable to make timely payments, your credit could take a hit . It could also take a hit if you are a cosigner on a loan that’s under your child’s name and they can’t make payments. It might help to talk through all these options with your child, making sure they understand what it means to cosign a loan for them. Similarly, if you decide to take out loans for them in your name, they should understand the responsibility you’re assuming.

There’s nothing wrong with wanting to borrow for your child’s future, just consider all your options and think about what you, or they, can afford to pay back. It’s almost always a good idea to maximize federal aid and scholarships before resorting to loans of any kind.

Refinancing

Some private lenders offer the option to refinance Parent PLUS loans. Depending on the lender, you might have the option to transfer the loan to your child’s name. If your child is confident in their ability to pay off the loan with on-time, monthly payments, having a student loan in their name could help build their credit history.

This would, of course, have to be something you and your child agree is the right path for all parties, especially since refinancing a federal loan may cause you to lose some of the benefits offered, like income-contingent repayment plans .

Ultimately, the choice as to how your child pays for college is personal. Whatever options you choose in terms of paying for school, take the time to appreciate all the hard work your student has put into their education and the pride you all will feel as they don their cap and gown.

Refinancing your federal or private loan with SoFi is simple, and might lead to lower monthly payments or shorter terms.


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 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 Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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Do I Need a Trust?

Where do you want your money and your assets to go when you die?

A trust might help ensure that the person or people you want to benefit from your assets, both while you’re living and after you pass, will be honored. Using a trust can often provide tax benefits as well as the ability for assets to change hands outside of probate. This can all be done with the help of a trustee, a person given control of a trust so that they can legally administer it according to specific wishes.

After someone dies, the legal process to settle an estate and distribute assets, also known as probate , begins. The probate process goes through a court of law and a judge will validate any existing will for the distribution of assets.

If you don’t have a will, assets are distributed according to state law and, since the process goes through the court, probate files are a matter of public record. If you have a trust, the probate process could be skipped, which might save time, ensure assets go to the chosen beneficiaries, and help maintain the family’s privacy.

What Is a Trust?

The IRS defines a trust as “a legal arrangement which can help you to control your assets and possessions. Often, trusts can help to reduce taxes on your estate and speed up the process of allowing beneficiaries access to those assets.”

A trust can hold cash, stock, real estate, and any other assets. You might meet with an attorney who specializes in trusts to officially name your beneficiaries and dictate how you want the trust to be handled.

You could also apply special rules to your trust, like how often the beneficiary can receive a payment from it, or how the money can be used (say, for education expenses or real estate investments).

The beauty of a trust is that you get to decide and control how you want your assets to be used.

The Difference Between a Trust and a Will

•  A will goes into effect only after you die. It’s also called a “last will and testament.”

•  A trust can go into effect while you are still alive.

The Difference Between a Trustee and a Beneficiary

A trustee holds legal title to the property or assets of another person, the beneficiary. A trustee is responsible for administering the trust on behalf of those beneficiaries.

There are at least two two types of beneficiaries :

•  One who receives income from the trust during their lives

•  One who receives the remainder of the estate after the first set of beneficiaries dies

Choosing the Right Type

A Living Trust

This is similar to a will, but not exactly the same. A living trust is a legal arrangement that you create during your lifetime (like a will), but instead you specify exactly the way you want your estate handled while you are still alive. A living trust might be used for people who have complex financial situations and more than one beneficiary.

When you die, the trustee you appoint carries out your instructions without having to go through the legal process of probate. A living trust might be more effective than a will in carrying out the transfer of assets according to your wishes. Types of living trusts include:

•  A revocable trust . This gives you continued control and access to the assets in the trust as well as the option to make changes to beneficiaries or even revoke the trust whenever you want. This keeps your decision-making flexible and fluid. Once you die, the revocable trust becomes irrevocable, and whatever wishes you’ve listed become final.

•  An irrevocable trust . This cannot be changed, modified, or adjusted. That means that any assets transferred into an irrevocable trust cannot be taken back. Irrevocable trusts might be appropriate for those who want to permanently remove assets from their estate. The IRS lists assets that are often included in an irrevocable trust as insurance policies, cash, and business investments. Once the ownership passes to the beneficiaries, the assets listed in the trust are no longer taxable as part of the individual’s estate.

Testamentary Trust

Then there is a trust that is not considered a living trust:

A testamentary trust is created by the person who writes a will, called a “testator.” These are not to be confused with living trusts. This type of trust would not go into effect until the death of the testator.

A Few Things to Consider

You may have to consider attorney fees if you set up a trust with the help of a lawyer—there are also options to set up the trust on your own, online. A good trust attorney should know the best ways to make your trust as airtight and efficient as possible. You may want to keep in mind the potential ongoing costs of maintaining a trust as well.

Depending on the type of trust established, the trust may become its own tax entity , and you might need to be prepared to pay an accountant to file a trust tax return each year. Should you elect to have a corporate trustee, where someone from a bank or trust company acts as trustee for the trust, there are typically ongoing fees associated with that service as well.

How to Choose a Beneficiary for Your Trust

Your beneficiaries will likely be members of your family. But a beneficiary of a trust can also be a group or an institution (like a nonprofit organization or a charity). Ultimately, your beneficiary is anyone or any group that receives beneficial enjoyment from your assets, like income, the ability to use property, or ultimate ownership on your say-so.

Where to Hold a Trust

Setting up a trust could ensure that your beneficiaries get what you intended them to have before and after you die. The IRS recommends opening a bank account for a trust, which would require the following:

•  Legal documents and identification that proves you are the legal trustee

•  A Trust Tax ID number

When opening a trust bank account after the grantor has passed away, you typically need a new Trust Tax ID number to replace the Social Security number of the deceased grantor. This number will be used on every trust-related document going forward.

Trusts and Taxes

Establishing and funding trusts could help you remove assets from your estate and reassign ownership to others. This might help reduce income taxes on the assets if transferred to a beneficiary in a lower tax bracket, or help you reduce or avoid estate and gift taxes.

Are Trusts Only for “Trust Fund Babies”?

Nope, although the common perception might be that trust funds are only for children of the super wealthy. A trust fund is meant to help you make sure your money is put to use the way you wish. If you have children or grandchildren, and you want to control how your money is used by them, a trust might help you do that.

Building Wealth for Trusts

When it comes to trusts, laws can change often and can differ from state to state. You might want to consider consulting an attorney who specializes in who needs a trust for the most updated direction and advice.

When do you need a trust? If you are looking for advice in regard to your assets and want to learn more about whether a trust is a good solution for you, you could consider talking with a SoFi Financial Planner.

We can help you better understand financial planning, based on your specific financial goals and life situation. Becoming a SoFi member allows you complimentary access to exclusive SoFi events, as well as exclusive rate discounts on SoFi loans and even professional career and salary guidance.

We’ll work with you to help you achieve your financial goals. It starts with mapping out a plan and sticking to it.

The first step is to make an appointment to talk with one of SoFi’s Financial Planners today.


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.
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.

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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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Can You Combine Your Student Loan Debt with Your Spouse?

If you’re engaged to be married or are already a newlywed, the spirit of togetherness is probably on your mind. And it’s no surprise if that extends to your finances. The two of you may be paying for a wedding, opening a common credit card, charting out a combined budget, or establishing a joint checking account.

In the midst of this, you may be asking yourself, “Can I consolidate student loans with my spouse?” The short answer is no, you can’t. But because it’s becoming more and more common for both partners to bring student debt along into a marriage, it’s a perfectly fair question. Americans owe nearly $1.5 trillion combined on their student loans, a total exceeded only by home loans.

About 70% of college graduates leave school with loans—an average of $37,172 per borrower. Once you get married, it makes sense to ask whether you should continue handling payments individually or find a way to merge your loans and tackle them together.

While you cannot combine your student loans with your spouse’s, you can potentially refinance your loans and add your spouse as a co-signer.

Since this is a move you’re likely to live with for many years to come, it’s worth familiarizing yourself with all sides of the issue before making a decision. Here’s what you need to know:

Consolidating Federal Loans

Between 1993 and 2006 , married couples could combine their federal student loans through a joint consolidation loan. However, Congress canceled this program on July 1, 2006 . One of the reasons legislators chose to eliminate this program is that each spouse had “joint and separate liability,” meaning that each borrower was individually responsible for the entire loan amount.

This caused issues for many people, since that responsibility continued even after a divorce and sometimes limited a borrower’s eligibility for income-driven repayment programs, like Public Service Loan Forgiveness, and other benefits that come with federal student loans. The bottom line is, you and your spouse can’t consolidate your federal loans through the government, because the program is no longer available.

Refinancing Student Loans with Your Spouse as a Co-signer

There is another way you may be able to have both your and your spouse’s name attached to your student loans: student loan refinancing. To be clear, you would not actually combine both of your loans through refinancing—that’s not possible.

However, you could refinance your student loans and add your spouse as a co-signer to put your combined earning power on the dotted line, hopefully getting you a lower interest rate. This process involves taking out a new loan with a private lender and using it to pay off all your previous loans, whether they were federal or private.

You would then both be responsible for paying off the entire amount of the new loan which comes with new terms. Refinanced loans typically come with either fixed or variable interest rates that may be lower than your current rates. Lenders like SoFi allow you to refinance your student loans without any origination fees or penalties for paying them off early.

However, refinancing with a private lender means forfeiting access to federal loan benefits such as income-driven repayment or Public Service Loan Forgiveness. If you think you might take advantage of federal programs like this, refinancing might not be the right choice for you right now. And, of course, if you add your spouse as a co-signer, they are equally responsible for your monthly loan payments. Should you miss a student loan payment, it could affect them as much as it affects you.

Advantages of Refinancing Student Loans after Marriage

Student loan refinancing, whether you do it on your own or with your spouse as a co-signer, could get you a lower interest rate, a reduced monthly payment, or more advantageous terms than your current loans have.

If one spouse has a better credit score, or a more solid income or employment history, by cosigning they could help the other spouse qualify for a lower interest rate than he or she would qualify for alone. That can be a way to nab substantial savings over the life of the loan.

Disadvantages of Refinancing Student Loans with Your Spouse

Unfortunately, if you and your spouse uncouple, having them as your co-signer could make things tricky. When you refinance and add your spouse as a co-signer, you are both equally responsible for the loan balance. As you can imagine, communicating with an ex-spouse on how to tackle a major chunk of debt can get challenging. The co-signer may also still have to pay off the entire loan if the other spouse dies or becomes permanently disabled, though some lenders do offer discharges in these situations.

Another big consideration about refinancing, in general, is that if you have federal loans, you will be giving up a number of potential benefits by refinancing with a private lender.

For instance, you will no longer be able to apply for deferment or forbearance if you go back to school, become unemployed, or encounter financial hardship. Some private lenders do offer flexibility for short-term economic difficulties, but it’s not guaranteed.

You also will no longer be eligible for income-driven repayment plans that tie your monthly payment to how much you earn.

Similarly, you won’t be able to apply for Public Service Loan Forgiveness or the Teacher Loan Forgiveness Program even if you work in a qualifying field.

If you don’t earn much money, if you work in a public interest field, or if you anticipate financial hardships in the future, you may want to think twice about giving up these federal loan benefits.

Other Tips for Tackling Debt as a Couple

Whether or not you decide to refinance your loans, you may still want to address your student loans as a team. Here are some smart steps to take as a married couple dealing with student loan debt:

•   Being honest—with yourself and your spouse. Having a high student loan balance might feel overwhelming, but avoiding your debt or hiding it from your spouse can affect your relationship. You can start by getting acquainted with exactly how much you each owe, your interest rates, and the loan terms.

Communicating with your spouse about any other sources of debt, as well as your assets and financial goals is equally important. Honesty and open communication are a good foundation for deciding how to confront your debt together.

•   Knowing your repayment options. If you have federal loans, it can be helpful to read up on the different plans available for student loan repayment and the pros and cons of each. If you’re having trouble making payments, you can look into income-driven repayment plans or other federal loan forgiveness programs. And you can check out refinancing options. Many private lenders allow you to get pre-approved online in a matter of minutes, so you can get a sense of what terms you might qualify for if you refinance. Having this knowledge is critical for deciding what course of action is best for you as a couple.

•   Making a budget. As you start to build a life together, getting on the same page financially can be helpful. Now that you’re a unit, it’s worth sitting down and listing out your combined income (after taxes) and expenses. If you’re not sure what you’re spending, a spreadsheet or budgeting app can help you track your outlays for a month. Once you have your current totals, you can think about how much you can afford to put toward student loans each month. That can help guide your decision on how aggressively to pay them off and whether to look for alternative repayment options. If you’re spending more than you make, it might help to discuss where you can trim, or how to increase your income.

•   Considering the big picture. In addition to paying off debt, you probably have other financial goals, such as starting a family, traveling, saving for retirement, or buying a home. You may also have other existing debt, whether a mortgage, car loan, or credit card balance. It’s important to talk about these obligations and goals when figuring out what you can afford to put toward your student loans.

Figuring Out the Financial Path that’s Right for You

While you and your spouse can’t jointly refinance your student loans, you can still take advantage of the benefits of refinancing individually. By communicating openly about your finances, you and your partner can figure out which option is right for you, whether that means they’d cosign your loans, or you’d refinance on your own.

Learn more about how refinancing your student loans with SoFi can help you manage your student loan debt.


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.
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 JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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What Parents Should Know About Student Loans

Has your soon-to-be college student chosen the school they’d like to attend in the fall? Or, are they just starting to think about the application process? Either way, it’s never too early to research ways to pay for college.

Student loans, federal and private, are one common method that students and their families use to help them afford college. If you’ve never taken out a student loan before, or you just want more information about the options, it can be difficult to know where to start.

We’re here to help you make sense of the student loan information parents need to know.

Not All Loans Are Created (or Repayed) Equally

When you think about different types of loans, you might think of a car loan, a home loan, and maybe a personal loan. When it comes to student loans, there are two main options:

•  Federal loans – Provided by the federal government

•  Private student loans – Handled by individual lenders with varying terms

Federal Student Loans

After scholarships, grants, and other gifted money opportunities, it is recommended that you first look for additional funding through federal student loans .

These are loans through the U.S. Department of Education, they have eligibility requirements and come in a few forms:

•  Direct Subsidized loans – These are for undergraduate students and are based on financial need.

•  Direct Unsubsidized loans – Undergraduates, graduate students, and professional students can apply for these loans; they are not based on financial need.

•  Direct PLUS loans –These are for graduate and professional students and parents of dependent undergraduates. They are not based on financial need and a credit check is required.

•  Direct Consolidation loan – This option combines all your federal loans into one loan payment under a single loan servicer.

All federal loans have fixed interest rates and are set by Congress each year on July 1st. For most students (Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans), federal loan repayment starts six months after graduation (also known as a grace period).

You can get federal student loans by submitting your Free Application for Federal Student Aid (FAFSA) .

Private student loans

Private student loans come from different institutions: banks, credit unions, and online lenders. Many private student loans mirror the terms and repayment periods of federal student loans, but not always. Differences include:

•  Credit checks – Most federal student loans don’t require a credit check (except PLUS loans); it’s required for private student loans and you’ll need to meet the lenders credit and other eligibility requirements to qualify.

•  Repayment start date – Some lenders might offer loan repayment that starts after you graduate from college, but it’s not always the case. Some lender programs require repayment while you’re still in school.

•  Interest rates – Federal student loans have fixed interest rates that don’t change over the life of the loan; private student loans offer fixed or variable interest rates.

•  Repayment terms – Federal loans have long repayment terms—from 10 to 30 years, depending on your plan. Private student loans also vary in term length, but might not be as long. This could cause you to have higher monthly and interest payments.

•  Loan forgiveness – Some federal student loans offer forgiveness options for certain career paths, or after a period of time has passed; private student loans aren’t required to offer this option to borrowers.

How Parents Can Help

If your college kid has explored all the options for scholarships, grants, gifts and has taken out all the student loans they can and they still need money to afford school, you can take out a Direct PLUS loan for them.

A Direct PLUS Loan is commonly referred to as a parent PLUS loan when made to a parent, and as a grad PLUS loan when made to a graduate or professional student. To get a PLUS loan, you can’t have an adverse credit history (there may be exceptions to this rule if you meet other eligibility requirements) and you must complete the FAFSA before applying.

Before you apply for a loan for or with your child, you can review your credit history annually for free at AnnualCreditReport.com to make sure it’s in top shape to take out a loan. It’s good to note that this free annual credit report does not show credit scores, only history.

Forgiveness Can Happen (But That Doesn’t Mean It Will)
Some student loan repayment plans, like income-driven plans, give graduates the opportunity to have their loans forgiven after a certain number of years. If you are seeking student loan forgiveness, it is recommended to have a thorough understanding of how the program works and to review your account annually to confirm all is in order.

Depending on which industry and sector your student goes into, there might be other chances to get loans forgiven. A qualifying employer includes a government organization , a 501(c)(3) organization, or a not-for-profit organization that is not a 501(c)(3) organization that provides a qualifying public service as its primary purpose.

A qualifying employer never includes a partisan political organization, a labor union, or a for-profit organization. However, it does include AmeriCorps and Peace Corps volunteers.

Some of these jobs include:

•  Public Service

•  Teachers

•  Nurses, doctors, and other healthcare professionals

•  Lawyers(public interest)

•  Armed forces members and veterans

Keep in mind that forgiveness isn’t guaranteed and it’s important to always make at least the minimum payments every month.

Repayment Matters

Regardless of circumstance, paying back student loans is vital. Grace periods help, but you may still struggle when the time comes to start repayment. However, not paying your student loans could have some serious consequences, including:

•  Credit rating – On-time payments have one of the biggest impacts on your credit rating. Delinquent student loan payments can have a negative affect on your credit.

•  Default – If you are having trouble making payments call the organization that notified you, explain your situation and discuss your options. Generally, delinquent payments after 90 days are reported to the credit bureaus. When a loan is considered to be in default can vary depending upon the loan program parameters. For a loan made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program, you’re considered to be in default if you don’t make your scheduled student loan payments for a period of at least 270 days (about nine months).

•  For a loan made under the Federal Perkins Loan Program, the holder of the loan may declare the loan to be in default if you don’t make any scheduled payment by the due date. Consequences of student loan default include but are not limited to – negative credit rating, loan due and payable in full (loan acceleration), loss of deferment, forbearance, loss of eligibility for other benefits.

•  Forgiveness – Regardless of repayment plan, one of the keys to forgiveness is making qualifying loan payments as defined under the program.

Keep in mind that borrowing a loan using your credit and income for your child impacts your credit history.

Considering SoFi Private Student Loans

Working on covering the cost of your child’s tuition? If you have exhausted all of your federal student loan options, private student loans might be next on your consideration list.

SoFi’s private student loans offer flexible repayment plans, no origination fees, and no late fees. Not only that, but the application is all-online and takes just a few minutes.

Is your child’s financial aid package not covering their full tuition cost? Learn more about how SoFi private student loans can help fund your child’s education.


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.

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Do You Qualify as a First-Time Home Buyer?

For most of us, buying a house will most likely be the biggest purchase we make in our lifetime. But if you haven’t done it yet, the process might seem overwhelming.

First step in the homebuying process is usually to get prequalified from a lender and identify the right mortgage program and provider for you. Next step is getting preapproved, a preapproval letter shows buyers you’re serious because at this stage your credit, income and assets have been reviewed and approved by a lender. Then, you are ready to find the house you want (subject to program eligibility).

Once you have found the home you want, it’s time to make an offer and negotiate with the seller. You also have to fill out the required mortgage paperwork, not to mention the other necessities such as: home inspections, property valuation, closing costs and more. Who qualifies as a first-time home buyer?

The process can seem overwhelming, but thousands of people every year purchase their first home. Homeownership in the U.S. is currently at 64% , and first-time home buyers make up 33% of all home buyers.

To get a sense of who qualifies for a mortgage as a first-time home buyer, let’s take a look at the governments definition. For conventional financing Fannie Mae defines a first time homebuyer as an individual who (1) is purchasing the security property; (2) will reside in the security property as a principal residence; and (3) had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property.

In addition, an individual who is a displaced homemaker or single parent also will be considered a first-time home buyer if he or she had no ownership interest in a principal residence (other than a joint ownership interest with a spouse) during the preceding three-year time period. For HUD (FHA) definition is similar.

Now, let’s look at the average first time home buyer numbers: The median age is 32 and the median income is $75,000. Most home buyers are married, have no kids, and previously rented. As of March 2019, the median home price for this purchasing group was $190,000—which differs from the general U.S. median home sales price of $307,700 ending 1Q19.

Lenders will look at things like your income, assets, credit history and property to determine eligibility for approval on different loan options. But many lenders allow you to explore upfront if you prequalify for a mortgage by submitting some personal information online.

After filling out the form, you might be shown some potential loan programs with rates and terms you may qualify for if you chose to continue with a formal application. If you don’t appear to qualify for a mortgage due to insufficient down payment amount or closing costs, there are home buyer down payment assistance programs that could work for you.

What to Look For in a Mortgage?

Before you even start looking at houses, the first step of the home-buying process could be to get your finances in order. When borrowing for a mortgage, lenders will review a variety of factors. Two of these factors are your debt-to-income ratio (DTI) and your credit score. These factors can come into play when determining eligibility for different loan options.

There are a variety of loan options available to choose from. On a conventional mortgage loan with no PMI, you would normally put down 20% of the purchase price and then pay off the remaining amount with a secured mortgage at your chosen terms.

There are also loans with lower down payment options, though some of those programs may have additional eligibility requirements along with mortgage insurance. And there are loans with shorter repayment periods and loans with variable interest rates.

When thinking about how much to put down on your new home, it may be a good idea to consider your budget in order to meet the new monthly mortgage payments in addition to your other expenses.

If your credit and income appears to be eligible, but you haven’t saved enough for a down payment , try exploring down payment assistance programs. These programs can vary depending upon many factors, so check the eligibility criteria for each program.

According to the FDIC , “Down-payment assistance second mortgages provide borrowers with financial assistance to pay for the required down payment and closing costs associated with purchasing a home and makes it possible for those who do not have sufficient savings to meet the standard program requirements to own a home.

In addition, subsidized interest rates on the down payment assistance second mortgage can increase the affordability of housing payment and the likelihood that the borrower will qualify for the loan.”

Down payment assistance programs can have additional qualifying criteria – for instance, some may have income and/or sales price limits. Let’s look at one program in particular to view how a down payment assistance (DAP) program works.

For our example, we will use CalHFAs DAP Program(s). First, check out the borrower eligibility page, this will walk you through the program criteria. Income and/or sale price may be subject to limitations. There is also a loan scenario calculator you can use to plug in some numbers. CalHFA’s subordinate loans are “silent seconds”, meaning payments on this loan are deferred so you do not have to make a payment on this assistance until your home is sold, refinanced or paid in full. This helps to keep your monthly mortgage payment affordable.

Some down payment assistance programs can be layered with other programs or grants. You may also see a requirement for HomeBuyer Education connected to these types of programs. It is also good to note that although these programs are termed down payment assistance, in some cases they can also be used towards eligible closing costs.

You can use our Home Affordability
Calculator to get an estimate of how
much house you can afford.


Down Payment Assistance for First-Time Home Buyers

Qualifying as a first-time home buyer can vary based on the definition under the program offered, but most programs follow the 3 year primary residence rule for eligibility. The following is a list of loan programs that may support a DAP second lien. These programs are not necessarily limited to first time homebuyers and it’s important to note that the eligibility requirements for a first lien loan program can vary from the requirements for a DAP second lien loan program. In the case of conflicting guidelines, the lender is usually advised to follow the more restrictive.

Freddie Mac’s Home Possible program and Fannie Mae’s 97% LTV : Both Fannie Mae and Freddie Mac are government-backed mortgage lenders. The Home Possible program offers low down payment options (as low as 3%) for low- and moderate-income first-time home buyers. There are also sweat equity down payment options and flexible terms. Fannie Mae’s program also offers 3% down payment loans and the Fannie Mae HomeReady mortgage provides some money back toward closing costs after an educational counseling session.

•  FHA loans : FHA stands for Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD). Basically, when you borrow this type of loan, the mortgage is insured by the FHA, which means it could be possible for you to borrow a loan with fewer requirements. If you have a credit score of 580 or higher , then you could get a loan with just 3.5% down. If you have a score below 580, you may still qualify for a loan with 10% down.

•  FHA Section 203(k): The FHA Section 203(k) loan is also administered by the FHA, but is designed for you to rehab a fixer-upper. The down payment can be as low as 3%, and the loan is based on the value of the home after the renovations. But you are required to spend a certain amount of the loan on repairs and improvements, and there are certain requirements on qualifying homes.

•  USDA loan : The U.S. Department of Agriculture offers home buyer assistance programs to buy (or, in some cases, even build) a home in certain rural areas. Eligibility for these loans is determined by your income. Income has to be within a certain percentage of the average median income for the area, which varies by region. If you qualify, the loan requires no down payment and offers a fixed interest rate over the life of the loan. However, this loan carries an up-front guarantee fee and an annual fee.

•  VA loan : A VA loan is a mortgage option with no down payment requirement that’s available for military members, veterans, and certain surviving military spouses. The Department of Veterans Affairs (VA) guarantees part of the loan, which is what makes it possible for lenders to offer competitive interest rates and no down payment. A VA loan is not subject to PMI, which is tied to conventional lending, and although a VA loan does not state a minimum credit score, lenders who make the loan will set their minimum score for the product based on their risk tolerance.

•  Good Neighbor Next Door program : If you’re a law enforcement officer, firefighter, EMT, or teacher, then the Good Neighbor Next Door program could be an option for you. This program, which is run by HUD, provides 50% off of the listing price of a home in specific revitalization areas. In turn, you have to commit to living there for 36 months. Homes are listed on the HUD website each week, and you have to put an offer in within seven days.

There are also local or state programs that offer down payment assistance in the form of tax refunds or credit. For example, California offers a tax credit to qualifying first-time home buyers.

You could check with your state housing agency to find out what refunds, credits, or even grants are available to you. This is also where a real estate agent or mortgage loan officer could come in handy, pointing you in the right direction and answer any potential questions.

Other Loan Options for First-Time Home Buyers

Before you start looking at potential houses to buy, it may be a good idea to know how much you can qualify for. As stated above, in order to determine program eligibility, a lender will likely look at things like your credit history, existing debt, income and assets.

Pre-qualification on a loan doesn’t include a full analysis of your credit, income, or assets, but it can give you a rough idea of how much of a loan you qualify for and at what possible rates. Preapproval is different and involves verification of your credit, income, and assets. It’s a step closer to final loan approval. If you have loan pre-approval in hand, then you might be able to close more quickly on a house, which is a big help if the market is competitive.

It might be worth reviewing offers from a variety of lenders to find the mortgage with the best rate and terms for you. Lenders typically offer fixed or variable interest rates and each program can offer differing down payment requirements, terms, and fees.

Want to see what loan terms you may qualify for? Fill out a pre-qualification application online to view your possibilities. Learn more about borrowing a mortgage with SoFi.


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.

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Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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