Student loans are complicated, especially when it comes to figuring out how much the loan will actually cost you over time. The annual percentage rate (APR) reflects the total cost of the loan, including the interest rate and any fees.
Knowing how the APR affects the cost of your student loans is an important part of maintaining financial health, and can even help you decide whether or not you should look into alternative loan repayment strategies, such as consolidation or refinancing.
• The APR reflects a loan’s total annual cost, including interest and certain fees.
• The interest rate and APR can be the same on loans with no fees, but the APR is often higher.
• Comparing APRs can help borrowers evaluate offers from different lenders.
• Fees such as origination charges can increase the true cost of a student loan.
• APR disclosures are required, so borrowers can typically find the APR on loan documents or billing statements.
What Is the APR for Student Loans?
Your APR is a broader measure of the cost of borrowing than the interest rate and generally reflects the interest rate plus fees or other charges you pay to get the loan (such as origination fees). Interest may also be capitalized (added to your loan balance) after certain periods, such as deferment or forbearance, which can increase what you owe over time.
APR vs Interest Rates on Student Loans
The interest rate on your student loan is the amount your lender is charging you for the loan, expressed as a percentage of the amount you borrowed. For example, the interest rate for Federal Direct Subsidized Loans and Unsubsidized Direct Loans (for undergraduate students) is 6.39% for loans first disbursed between July 1, 2025, and June 30, 2026, which means that you would be responsible for paying your lender 6.39% of the amount of money you borrowed in yearly interest.
That 6.39%, however, doesn’t include other costs considered in the APR, such as origination charges and other lender fees. For loans with no fees, it’s possible that the APR and interest rate will match. But in general, when comparing APR vs. interest rate, the APR is considered a more reliable and accurate explanation of your total costs as you pay off your student loans.
If you’re shopping around for student loans or planning to refinance your loans, the APR offered can help you decide which lender you would like to work with.
An Example of How APR Is Calculated for Student Loans
Let’s say you take out a student loan for $20,000 with an origination fee of $1,000 and an interest rate of 5%. An origination fee is the cost the lender may charge you for actually disbursing your loan, and it is usually taken directly out of the loan balance before you receive your disbursement.
So, in this example, even though you took out $20,000, you would only receive $19,000 after the disbursement fee is charged. Even though you only receive $19,000, the lender still charges interest on the full $20,000 you borrowed.
The APR accounts for both your 5% interest rate and your $1,000 origination fee to give you a new number, expressed as a percentage of the loan amount you borrowed. That percentage accurately reflects the true costs to the consumer. (In this example, if the loan had a 10-year term, the APR would be 6.125%).
What Is a Typical Federal Student Loan APR?
For federal student loans, interest rates are determined annually by Congress. Federal loans also have a loan fee, which is charged when the loan is disbursed.
Total borrowing costs for federal student loans may vary depending on the loan repayment term that the borrower selects. Federal student loans are eligible for a variety of repayment plans, some of which can extend up to 25 years. Generally speaking, the longer the repayment term, the larger the amount of interest the borrower will owe over the life of the loan.
Typical APR for Private Student Loans
The interest rate on private student loans will vary by lender, and so will any fees associated with the loan. As of February 26, 2026, private student loan interest rates ranged from about 2.99% to about 17.99%, depending on creditworthiness.
The interest rate you qualify for is generally determined by a variety of personal factors, including your credit score or credit history. In addition to varying rates and fees, private student loans don’t offer the same benefits or borrower protections available for federal student loans, such as income-driven repayment plans or deferment options. For this reason, they are generally considered only after all other sources of funding have been reviewed.
How to Find Your Student Loan APR
By law, lenders are required to disclose the APR on their loans — including private student loans. These disclosures help you make smart financial choices about your loans and ensure that you’re not blindsided by unexpected costs when you take out a loan.
For federal student loans, the government lists the interest rates and fees online, but make sure to carefully examine any loan initiation paperwork for your exact APR, which will depend on other factors, including the amount you plan to borrow, the interest rate, and origination fees.
If you’re currently paying off federal student loans, your student loan servicer can tell you your interest rate. If you use online payments, you can probably see your APR on your student loan servicer’s website or on your monthly bill.
If you’re shopping around for private student loans, your potential lenders must disclose the APR in their lending offer to you. Your APR will vary from lender to lender depending on many factors, which can include your credit score, any fees the lender charges, and how they calculate deferred interest, which is any unpaid interest that your minimum payment doesn’t cover.
One student loan tip — compare quotes and offers from various lenders closely. Once you’ve decided on a lender and taken out a loan, your APR should be reflected on your loan paperwork and usually on your lender’s online payment system.
The APR is a reflection of the total amount you’ll pay in both interest rate and fees for borrowing on a student loan. The interest rate is just the amount of interest you will be charged. On loans with no fees, the interest rate and APR can be the same. Interest rates and fees for different types of federal student loans are published, but individual APRs may vary based on the amount you borrow and the repayment term you select.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and 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
What is the APR on student loans?
The APR, or annual percentage rate, is a reflection of the interest rate plus any fees associated with the loan. It provides a picture of the total cost of borrowing a loan and is helpful in comparing loans from different lenders.
Is the APR the same on subsidized and unsubsidized student loans?
The interest rate for unsubsidized and subsidized federal student loans is set annually by Congress. These loans also have an origination fee. The interest rate on Direct Subsidized and Unsubsidized loans is 6.39% for loans first disbursed between July 1, 2025, and June 30, 2026. The APR for your loan will be determined by factors including the repayment term you select.
What is the typical interest rate on private student loans?
Interest rates on private student loans vary based on factors such as the lender’s policies and individual borrower characteristics, such as their credit score and income. As of February 26, 2026, private student loan interest rates ranged from about 2.99% to about 17.99%, depending on creditworthiness.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Not all repayment options may be available for all loans. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is current as of 3/2/2026 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).
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.
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.
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.
There are so many upsides to investing in your education — the personal enrichment and possibility of a bright and fruitful future being the most obvious. But, there are also some potential downsides that are hard to ignore, one of the main ones being the debt you may accrue.
If you’re a student loan borrower, you’ve probably noticed that your loans have a language all their own. Getting a grasp on terms such as interest rate vs. annual percentage rate (APR), subsidized vs. unsubsidized loans, and fixed vs. variable interest rates can help you make more informed, confident decisions.
Instead of enrolling in “Student Loan Language 101,” you can use our quick reference guide to find some answers without information overload. Borrowing money can have long-term financial consequences, so it’s important to fully understand the fees and interest rates that will affect the amount of money you owe.
• Understanding the specific vocabulary used in student borrowing is important for making informed financial decisions and managing educational debt effectively.
• Key concepts, such as interest rates, subsidized vs. unsubsidized borrowing, and repayment terms can impact the total amount owed.
• Understanding how interest accrues — and when it can be capitalized — can help borrowers estimate a student loan’s total cost.
• Federal borrowing options often offer lower interest rates and borrower protections, such as income-driven repayment plans and deferment, which are not typically available with private lenders.
• Knowing the differences between grants, scholarships, and various types of borrowing can help students prioritize sources of educational funding that do not require repayment.
Common Student Loan Terminology
Here are a few of the most important terms to understand before you take out a private or federal student loan.
Academic Year
An academic year is one complete school year at the same school. If you transfer, it is considered two half-years at different schools.
Accrued Interest
Accrued interest is the amount of interest that has accumulated on a loan since your last payment. You can keep private or federal student loan accrued interest in check by making your payments on time each month. However, after a period of missed or reduced payments, accrued interest may be “capitalized,” which essentially means you have to pay interest on the interest.
Adjusted Gross Income
Adjusted gross income (AGI) is an individual’s gross income, less any payroll deductions or adjustments. Income includes wages, salary, any interest or dividends you may earn, and any other sources of income. You can find your AGI on your federal income tax returns.
Aggregate Loan Limit
The aggregate loan limit is the maximum amount of federal student loan debt a borrower can have when graduating from school. The aggregate loan limits vary depending on whether you are a dependent or an independent student.
Amortization refers to the amount of loan principal and interest you pay off incrementally over your loan term. Each payment is a fixed amount that contributes to both interest and principal. Early in the life of the loan, the majority of each payment goes toward interest. But over time, as you pay down your loan balance, the ratio shifts, and most of the payment goes toward the principal.
Annual Percentage Rate
APR is the annual rate that is charged for borrowing, expressed as an annual percentage. APR is a standardized calculation that allows you to make a fairer comparison of different loans. Consider the difference between interest vs. APR — APR reflects the cost of any fees charged on the loan, in addition to the basic interest rate. Generally speaking, the lower your APR, the less you’ll spend on interest over the life of the loan.
Annual Loan Limit
The yearly borrowing limit set for federal student loans.
Automated Clearing House
An electronic funds transfer is sent through the Automated Clearing House (ACH) system. The ACH is an electronic funds transfer system that helps your loan payment transfer directly from your bank account to your lender or loan servicer each month.
The benefits of ACH are two-fold — not only can automatic payments keep you from forgetting to pay your bill, but many lenders also offer interest rate discounts for enrolling in an ACH program.
Award Letter
An award letter is sent from your school and details the types and amounts of financial aid you are eligible to receive. This will include information on grants, scholarships, federal student loans, and work-study. You will receive an award letter for each year you are in school and apply for financial aid.
Award Year
The academic year that financial aid is applied to.
Borrower
The borrower is the person who took out a loan. In doing so, they agreed to repay the loan.
Campus-Based Aid
Some financial aid programs are administered by specific financial institutions, such as the federal work-study program. Generally, schools receive a certain amount of campus-based aid annually from the federal government. The schools are then able to award these funds to students who demonstrate financial need.
This refers to the cancellation of a borrower’s requirement to repay all or a portion of their federal or private student loans. Loan forgiveness and discharge are two other types of loan cancellation.
Capitalization
Capitalization is when unpaid interest is added to the principal value of the private or federal student loan. This generally occurs after a period of nonpayment, such as forbearance. Moving forward, the interest will be calculated based on this new amount.
Capitalized Interest
Accrued interest is added to your loan’s principal balance, typically after a period of nonpayment, such as forbearance. When the interest is tacked onto your principal balance, your interest is now calculated on that new amount.
Most federal and private student loans begin accruing interest as soon as you borrow them. While you are often not responsible for repaying your student loans while you are in school or during a grace period or forbearance, interest will still accrue during these periods. At the end of said period, the interest is then capitalized, or added to the principal of the loan.
When interest is capitalized, it increases your loan’s principal. Since interest is charged as a percent of principal, the more often interest is capitalized, the more total interest you’ll pay. This is a good reason to use forbearance only in emergency situations and end the forbearance period as quickly as possible.
Cosigner
A cosigner is a third party, such as a parent, who contractually agrees to accept equal responsibility in repaying your loan(s). A federal or private student loan cosigner, also known as an endorser, can be valuable if your credit score or financial history is not sufficient to allow you to borrow on your own.
With a cosigner, you are still responsible for paying back the loan, but the cosigner must step in if you are unable to make payments. A co-borrower applies for the loan with you and is equally responsible for paying back the loan according to the loan terms on a month-to-month basis.
Consolidation (Through the Direct Loan Consolidation Program)
Private or federal student loan consolidation is the act of combining two or more loans into one loan with a single interest rate and term. The resulting interest rate is a weighted average of the original loan rates — rounded up to the nearest one-eighth of a percentage point.
Only certain federal loans are eligible for the Direct Consolidation Program. Consolidating can make your life simpler with one monthly bill, but it may not actually save you any money. You may be able to reduce your monthly payments by increasing the loan term, but this means you’ll pay more interest over the life of the loan.
Consolidation (Through a Private Lender)
Consolidation is the act of combining two or more loans into one single loan with a single interest rate and term. When you consolidate loans with a private lender, you do so through the act of refinancing, so you’re given a new (hopefully lower) interest rate or lower payments with a longer term.
By refinancing, you may be able to lower your monthly payments or shorten your payment term. Keep in mind that you may pay more interest over the life of the loan if you refinance with an extended term. And federal student loans come with a host of benefits and protections that are forfeited should you refinance.
Cost of attendance is the estimated total cost for attending a college based on the cost of tuition, room and board, books, supplies, transportation, loan fees, and miscellaneous expenses. Schools are required to publish the cost of attendance.
Credit Report
Credit reports detail an individual’s bill payment history, loans, and other financial information. These reports are used by lenders to evaluate your creditworthiness.
Default
Default is the failure to repay a loan according to the terms agreed to in the promissory note. Defaulting on your private or federal student loans can have serious consequences, such as additional fees, wage garnishment, and a significant negative impact on your credit. It’s always better to talk to your lender about potential hardship repayment options, such as deferment or forbearance, before defaulting on a loan.
Deferment
Deferment is the temporary postponement of loan repayment, during which time you may not be responsible for paying interest that accrues (on certain types of loans). Federal student loan deferment can be useful if you think you’ll be in a better place to pay your loans at a later date. However, deferment is usually only available for certain federal loans. To potentially cut down on interest, it may be wise to weigh your deferment options.
Delinquency
When you miss a student loan payment, the loan becomes delinquent. The loan will be considered delinquent until a payment is made on the loan. If the loan remains in delinquency for a specified period of time (which varies for federal vs. private student loans), it may enter default.
Direct Loan
The Direct Loan Program is administered via the U.S. Department of Education. There are four main types of direct loans, including, Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.
Direct PLUS Loan
Direct PLUS Loans are types of federal loans that are made to graduate or professional student borrowers or to the parents of undergraduate students. Direct PLUS Loans made to parents may be referred to as Parent PLUS Loans.
Note that, starting July 1, 2026, no new Direct PLUS loans will be offered to graduate and professional students. Any borrowers who received a Direct PLUS loan before that date can continue borrowing under the current terms through the 2028-29 academic school year.
Disbursement
When funds for a loan are paid out by the lender.
Discharge
Student loan discharge for private and federal loans occurs when you are no longer required to make payments on your loans. Typically, discharge occurs when there are extenuating circumstances, such as the borrower has experienced a total and permanent disability or the school at which you received your loans has closed.
Discretionary Income
Discretionary income is the money remaining after you pay for necessary expenses. An individual’s discretionary income is used to help determine their loan payments on an income-driven repayment plan.
Enrollment Status
Determined by the school you attend, your enrollment status is a reflection of where you stand with the school. It includes full-time, half-time, withdrawn, and graduated.
Expected Family Contribution
The expected family contribution was an estimation of the amount of money a student and their family were expected to pay out of pocket toward tuition and other college expenses. It is now known as the Student Aid Index (SAI).
Federal Work-Study
A type of financial aid, students who demonstrate financial need may qualify for the Federal Work-Study program, where they work part-time to earn funds to help pay for college expenses.
Financial Aid
Financial aid is funds to help pay for college. Financial aid includes grants, scholarships, work-study, and federal student loans.
Financial Aid Package
An overview of the types of financial aid you are eligible to receive for college, financial aid packages provide information on all types of federal financial aid and college-specific aid, such as scholarships, grants, work-study, and federal student loans.
Fixed interest rates remain the same for the life of the loan. The interest rate does not fluctuate.
Forbearance
Forbearance is the temporary postponement of loan repayment, during which time interest typically continues to accrue on all types of federal student loans. If your student loan is in forbearance, you can either pay off the interest as it accrues or allow it to accrue, and it will be capitalized at the end of your forbearance.
Use forbearance wisely, because interest that accrues during the forbearance period is typically capitalized, making your loan more expensive. If you can afford to make even small payments during forbearance, it can help keep interest costs down.
You will usually have to apply for student loan forbearance with your loan holder and will sometimes be required to provide documentation proving you meet the criteria for forbearance. For a loan to be eligible for forbearance, there must be some unexpected temporary financial difficulty.
Forgiveness
Loan forgiveness is another situation in which you are no longer responsible for repaying all or a portion of your federal student loans. Public Service Loan Forgiveness and Teacher Loan Forgiveness are two types of loan forgiveness programs in which your loans are forgiven after meeting specific requirements, such as working in a qualifying job and making qualifying loan payments.
Free Application for Federal Student Aid (FAFSA)
This is the application students use to apply for all types of federal student aid, including federal loans, work-study, grants, and scholarships. The FAFSA must be completed for each year a student wishes to apply for financial aid.
The grace period is a period of time after you graduate, leave school, or drop below half-time during which you’re not required to make payments on certain loans. Some loans continue to accumulate interest during the grace period, and that interest is typically capitalized, making your loan more expensive.
Grad PLUS Loans
Another term to refer to a Direct PLUS loan, specifically one borrowed by a graduate or professional student.
Graduate or Professional Student
A student who is pursuing educational opportunities beyond a bachelor’s degree. Graduate and professional programs include master’s and doctoral programs.
Graduated Repayment Plan
A type of repayment plan available for federal student loan borrowers. On this repayment plan, loan payments begin low and increase every two years. This plan may make sense for borrowers who expect their income to increase over time.
Students who are enrolled at least half-time in school are eligible to defer their federal student loans. This type of deferment is generally automatic for federal student loans. Note that unless you have a subsidized student loan, interest will continue to accrue during in-school deferment.
Interest
Interest is the cost of borrowing money. It is money paid to the lender and is calculated as a percentage of the unpaid principal.
Interest Deduction
A tax deduction that allows you to deduct the student loan interest you paid on a qualified student loan for the tax year. Interest paid on both private and federal student loans qualifies for the student loan interest deduction.
Lender
The financial institution that lends funds to an individual borrower.
Loan Period
A loan period is the academic year for which a private or federal student loan is requested.
Loan Servicer
A loan servicer is a company your lender may partner with to administer your loan and collect payments. For questions about your private or federal student loan payments or administrative details such as account information, you should contact your student loan servicer.
Origination Fee
Some lenders charge an origination fee for processing a loan application, or in lieu of upfront interest. To minimize incremental costs on your loan, look for lenders that offer no or low fees.
Part-Time Enrollment
Students who are enrolled in school less than full-time are generally considered part-time students. The number of credit hours required for part-time enrollment is determined by your school.
Pell Grant
The Pell Grant is awarded by the federal government to undergraduate students who demonstrate exceptional financial need.
Perkins Loan
Perkins Loans were a type of federal loan available to undergraduate and graduate students who demonstrated exceptional financial need. The Perkins Loan program ended in 2017.
PLUS Loans
Another way to describe Direct PLUS Loans, PLUS Loans are federal loans available for graduate and professional students or the parents of undergraduate students.
Prepayment
Prepayment is paying off the loan early or making more than the minimum payment. All education loans, including private and federal loans, allow for penalty-free prepayment, which means you can pay more than the monthly minimum or make extra payments without incurring a fee. The faster you pay off your loan, the less you’ll spend on interest.
Prime Rate
The Prime rate is the interest rate that commercial banks charge their most creditworthy customers. The basis of the prime rate is the federal funds overnight rate. The federal funds overnight rate is the interest rate that banks use when lending to each other. The prime rate can be used as a benchmark for interest rates on other types of lending.
Principal
The Principal is the original loan amount you borrowed. For example, if you take out one $100,000 loan for grad school, that loan’s principal is $100,000.
Private Student Loan
A private student loan is lent by a private financial institution, such as a bank, credit union, or online lender. These loans can be used to pay for college and educational expenses, but are not a part of the Federal Direct Loan Program. These loans don’t offer the same borrower protections available to federal student loans — like income-driven repayment plans or deferment options.
Promissory Note
A promissory note is a contract that says you’ll repay a loan under certain agreed-upon terms. This document legally controls your borrowing arrangement, so read it carefully. If you don’t fully understand the agreement, contact your lender before you sign.
Repayment
Repayment is repaying a loan plus interest.
Repayment Period
The agreed-upon term in which loan repayment will take place.
The Secured Overnight Financing Rate (SOFR) is an interest rate benchmark that is commonly used by banks and other lenders to set interest rates for loans. The SOFR is the cost of borrowing money overnight collateralized by Treasury securities.
Stafford Loans
Stafford loans were a type of federal student loan made under the Federal Family Education Loan Program. Beginning in 2010, all federal student loans are now loaned directly through the William D. Ford Federal Direct Loan Program.
Standard Repayment Plan
The Standard Repayment Plan is one of the repayment plans available for federal student loan borrowers. This repayment plan consists of fixed payments made over a 10-year period.
Student Loan Refinancing
Student loan refinancing is using a new loan from a private lender to pay off existing federal or private student loans. This allows you to secure a new (ideally lower) interest rate or adjust your loan terms. You may pay more interest over the life of the loan if you refinance with an extended term.
Subsidized Loan
A Direct Subsidized Loan is a type of federal loan available to undergraduate students where the government covers the interest that accrues while the student is enrolled at least half-time, during the grace period, and other qualifying periods of deferment.
Term
The Term is the expected amount of time the loan will be in repayment. Generally speaking, a longer term will mean lower monthly payments but higher interest over the life of the loan, while a shorter term will mean the opposite. Loan terms vary by lender, and if you have a federal loan, you are usually able to select your federal student loan repayment plan.
Tuition
The cost of classes and instruction.
Undergraduate Student
A college student who is enrolled in a course of study, typically lasting four years, with the goal of receiving a bachelor’s degree.
Unsubsidized Loan
A Direct Unsubsidized Loan is a type of federal loan available to undergraduate or graduate students. The major difference between subsidized vs. unsubsidized loans is that the interest on unsubsidized loans is not paid for by the federal government.
Variable Interest Rate
Unlike a fixed interest rate, a variable interest rate fluctuates over the life of a loan. Changes in interest rates are tied to a prevailing interest rate.
The Takeaway
Understanding key terms is essential for navigating student borrowing. Prioritizing sources of financial aid that don’t need to be repaid, such as scholarships and grants, can be helpful. But these don’t always meet a student’s financial needs.
Federal student loans have low interest rates and, for the most part, don’t require a credit check. Plus, they have borrower protections in place, such as income-driven repayment plans and deferment options, which make them the first choice for most students looking to borrow money to pay for college.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and 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
What are common student loan terms?
Common federal and private student loan terms include the principal (the original borrowed amount), interest rate (the cost of borrowing), and repayment term (the length of time to repay the loan). Other terms involve grace periods (time before payments start after graduation), deferment, forbearance (temporary relief from payments), and fixed or variable interest rates.
What are the most important loan terms to understand?
It’s important to understand terms associated with borrowing because you’ll be required to repay the loan. Understand the interest rate and any fees associated with the loan.
What does APR mean in relation to student loans?
APR is a reflection of the interest rate on the loan, in addition to any other fees associated with borrowing. APR helps make it easier to compare loans from different lenders.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Not all repayment options may be available for all loans. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is current as of 3/2/2026 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).
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.
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.
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.
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.
If you default on your federal student loans, the government can typically force you to pay without a court order through administrative wage garnishment. With this process, your student loan servicer can collect 15% of your paycheck and automatically apply it to your loan repayment.
Wage garnishment can happen if you’ve missed payments on federal student loans for at least nine months (and haven’t entered an agreement with your lender to pay them back), and may continue until your loan is paid in full or the default status is resolved. Your wages can also be garnished if you default on private student loans, but the process works differently.
The U.S. Education Department (ED) announced on January 16, 2026, that it would temporarily delay involuntary collections on defaulted federal student loans, including wage garnishment and Treasury offsets, while it implements new repayment reforms that simplify plan options, add a new income-driven plan, and give borrowers additional opportunities to rehabilitate their loans.
Learn what you can do to avoid wage garnishment on your student loans, plus how to get help with student loan garnishment once it has started.
• Federal student loans can be garnished without a court order through administrative wage garnishment.
• Private loans usually require a court judgment before garnishment can occur.
• Federal garnishment generally takes up to 15% of disposable pay and can increase to 25% if other debts or child support apply.
• To prevent garnishment, borrowers should pay on time and use deferment, forbearance, or switch to an income-driven or longer-term repayment plan.
• Borrowers can request a hearing for federal garnishment, negotiate settlements with private lenders, or consider refinancing to manage payments.
What Is Administrative Wage Garnishment?
Administrative wage garnishment (AWG) is a debt collection method at the federal level. A federal agency can require a nonfederal employer to withhold money from an employee’s paycheck to pay for a debt.
Typically, an employer may withhold up to 15% of your wages to repay a defaulted student loan. However, if you have multiple loans in default with different companies or have an existing child support order, garnishment can increase to 25%.
For federal student loans, you must miss 270 (or nine months of) payments before your loan goes into default and the government can garnish your wages. The time frame for default and garnishment varies for private loans, and will depend on the policy of the lender.
With federal student loans, wage garnishment can take place without your servicer taking you to court. With private student loans, on the other hand, most states require lenders to obtain a court order to garnish your wages if you default on a loan.
Generally, wage garnishment can continue until your loan balances plus interest and fees are paid back, or your loan is removed from default.
How Does Administrative Wage Garnishment Affect Student Loans?
If your federal student loan goes into default, the ED (the lender) is required to send you a notice of wage garnishment by mail to the last known address 30 days before wage garnishment starts. This notice must inform you of the nature and amount of the debt and the agency’s intention to initiate garnishment.
You’ll be given the option to establish a voluntary repayment agreement and request a court hearing.
If you don’t do either, wage garnishment will start. Your employer is required to comply with a government wage garnishment request. You’ll continue having money garnished from your paycheck until your loan is paid in full or has been removed from default.
If you request a hearing within the 30-day window, the government isn’t allowed to take money from your paycheck until the hearing is over and a decision is made.
With private student loans, wage garnishment follows a different process. For starters, private lenders may consider your loan in default after you’ve missed payments for three (rather than nine) months, though the time frame varies by lender. Once you default, a private lender may assign your loan to their collections department or sell your loan to a third-party debt collection agency. The lender or collector must then sue you, take you to court, and receive a court order before they can garnish your wages.
How to Protect Yourself From Student Loan Wage Garnishment
Making your student loan payments on time and in full is the simplest way to protect yourself from student loan wage garnishment.
If you’re having trouble keeping up with your payments, the best time to take action is when you begin missing student loan payments and before you actually default on the loan. At this point, you’ll want to reach out to your loan servicer to discuss options that can help keep your loan in good standing. Here are some steps that can help:
• Look into deferment and forbearance. The federal government has several deferment and forbearance options available, and some private lenders also offer forbearance programs. Keep in mind, though, that interest will likely still accrue on your loans during the deferment or forbearance period, which can make your loan more expensive in the end.
• Switch repayment plans to get a lower monthly payment. The ED offers a number of different repayment plans, including long-term plans that can last up to 30 years. You may be able to lower your monthly payment if you opt for a longer repayment term. Extending your repayment term generally means paying more in interest overall.
• Request an income-driven repayment plan. Income-driven repayment plans let you pay a percentage of your discretionary income toward federal loans for 20 to 25 years, at which point the remaining loan balances are forgiven. For some borrowers, payments on an income-driven repayment plan can be as low as $0 per month.
• Refinance your student loans for a cheaper rate. If you can qualify for a lower interest rate, refinancing your student loans with a private lender can lead to lower monthly payments. However, you may pay more interest over the life of the loan if you refinance with an extended term. If you have multiple loans, it can also simplify repayment by consolidating them into one loan. Just keep in mind that refinancing federal loans with a private lender means giving up federal protections such as deferment, forbearance, and access to income-driven repayment plans.
💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.
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Stopping Garnishment Orders
If your loans are already in default, you’ve received notice of wage garnishment, or you’re currently having your wages garnished, here are four steps you can take to remedy the situation.
1. Negotiate a Loan Settlement
You may be able to negotiate a loan settlement with a collections agency. Consider offering a lump sum or series of installment payments, and be sure to mention any specific financial hardships or medical issues you’re experiencing. A private lender or debt collector may be willing to settle the loan for less than the amount owed, such as principal and 50% interest, 90% principal and interest, or by waiving the collection fee (which may be 10% to 15% of the loan balance).
It is generally difficult to negotiate a loan settlement deal with federal student loans. Because federal loan servicers have multiple ways to recoup their money, including garnishment, they have less incentive to negotiate with borrowers. You can only qualify in extenuating circumstances, and you’ll likely still have to pay the majority of your debt.
2. Consolidate Defaulted Student Loans
If you have a federal loan already in default, you might consider loan consolidation. This allows you to pay off defaulted federal loans with a new loan (called a Direct Consolidation Loan) and new repayment terms. To consolidate a defaulted loan, you need to either agree to repay your new loan under an income-driven repayment plan or make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before consolidation. Also note that if you want to consolidate a defaulted loan that is being collected through wage garnishment, you can’t consolidate the loan unless the wage garnishment order has been lifted or the judgment has been vacated.
3. Enter a Loan Rehabilitation Program
One of the main ways to get out of federal student loan default is by rehabilitating your loans. Loan rehabilitation is a program offered by the federal government that involves entering into a repayment agreement to get your loan out of default and back into good standing. If you make a certain number of consecutive payments on time under the rehabilitation agreement, you can get your loan out of default and avoid wage garnishment. Contact your loan holder for more information.
Private lenders typically don’t offer a formal loan rehabilitation option. However, if you’ve defaulted on your private loans, it’s worth reaching out to your lender and seeing what payment assistance programs they provide.
4. Dispute the Wage Garnishment
If you receive a wage garnishment notice from the federal government, you have the right to dispute the notice and request a hearing, in writing, within 30 days.
This could be a good option if you do not agree that you owe the student loan debt you’re being asked to pay, disagree with the amount, or believe you weren’t properly notified about the garnishment.
You may also ask for a hearing if you believe that wage garnishment could create an extreme financial hardship in your life, or if you have been employed for less than 12 months after losing a previous job.
If any of these scenarios ring true, submit a written request for a hearing, and ensure the letter is postmarked no later than 30 days from the date the wage garnishment notification was sent. You’ll also want to include proof to support your objections to the debt or the garnishment.
The Takeaway
If you’re in danger of wage garnishment, refinancing your loans could be a way to get back on top of repayment. Refinancing involves getting a new student loan with a private lender and using it to pay off your existing federal or private student loans.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
How are administrative wage garnishments used?
Administrative wage garnishment is a debt collection process that allows a federal agency to order a non-federal employer to withhold up to 15% of an employee’s disposable income to pay a past-due (nontax) debt owed to the agency. For federal student loans, you typically must miss nine months of payments before the government can begin wage garnishment.
What happens if you get your wages garnished?
Wage garnishment happens when a court (or federal agency) orders that your employer withhold a specific portion of your paycheck and send it directly to the creditor or lender until your debt is resolved. Common sources of wage garnishment include child support, consumer debts, and student loans. Your wages will be garnished until the debt is paid off or otherwise resolved.
How do you respond to a wage garnishment?
If you believe the garnishment was made in error, you can file a dispute. If the garnishment is justified, it’s a good idea to call the creditor or loan servicer to see if you can work out a payment plan that brings the loan back to good standing and allows you to pay it off in a way that works with your budget. Or, you can simply accept the wage garnishment and pay off the debt in the installment plan instructed by the judgment.
About the author
Melissa Brock
Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.
Photo credit: iStock/fizkes
SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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Every college major requires work, but some fields of study are more rigorous than others. For instance, you won’t find many people who think that pre-med is a snap. While earning your undergrad degree won’t be effortless, there are definitely some college majors that won’t be as difficult.
Choosing a less challenging major doesn’t mean you’re doomed to a low-paying job for life. In fact, it can be quite the opposite. Read on to learn about 12 relatively easy college majors that can lead to jobs that pay well.
Key Points
• Some college majors are considered easier due to lighter workloads, fewer technical requirements, or more flexible coursework.
• Majors such as marketing, human resources, hospitality, communications, public relations, and sports management can lead to well-paying careers.
• Fields such as history, anthropology, liberal studies, and English can also offer high salaries in roles including public policy, publishing, or museum curation.
• Job outlook, passion for the subject, and the school’s prestige are worth considering when selecting a major.
• Regardless of the major chosen, financial planning is crucial, and students may need a mix of federal and private student loans to fund their education.
What Makes a Major “Easy”?
The workload for an easier major, such as creative writing, probably won’t be as intensive as, say, biomedical engineering, neuroscience, or applied mathematics. You likely won’t have long lab sessions, lengthy problem sets, and other arduous assignments.
This could make achieving higher grades a simpler proposition, and your good grades could give you an advantage after graduation. You might be able to step into a higher-paying job more easily, which could in turn help you pay off any private school loans for college you might have.
A college major can also feel easier if it’s a field you’re interested in and passionate about. Your excitement about a major will likely make going to class something you’ll look forward to, and the work required seem like less of a drag.
While getting an entry-level job paying a six-figure salary isn’t the norm for these easy college majors, you could still earn big bucks down the road.
Here, you’ll learn about 12 easy majors, along with some average entry-level salaries and mid-career pay for positions within each field, according to Salary.com.
1. Marketing
A marketing degree opens up many career possibilities. People who major in marketing can find positions in all types of companies, industries, institutions, and nonprofits. Jobs in marketing include positions focusing on a business’s or brand’s strategy, sales techniques, advertising, communications, or public relations.
Marketing careers that can pay off over time:
• Average entry-level salary: $35,220 for a marketing assistant
• Average mid-career salary: $121,658 for a marketing manager
As you see from that mid-career pay grade, a six-figure salary could be right around the corner.
2. Human Resources
With a college degree in human resources (HR), you can work in many different roles, including talent recruitment, benefits administration, payroll management, and workplace development training.
In terms of landing a well-paying job, here are some salaries to note:
• Average entry-level salary: $43,211 for an HR assistant
• Average mid-career salary: $123,167 for an HR manager
3. Hospitality
Do you love looking at fabulous resorts and restaurants in your social media feeds? This major might be a perfect fit for you. With a degree in this field (which likely doesn’t involve any science labs), you might work in an array of positions. Some examples: hotel, resort, or restaurant management; event planning; or travel booking and tourism, among others.
Some salaries to note for this college major:
• Average entry-level salary: $58,787 for an event planner
• Average mid-career salary: $95,667 for a hotel manager
These figures are notably higher than $48,403, which Indeed cites as the current average starting salary for new graduates in the U.S.
As one of the most popular college majors, a communications degree can prepare you for many different career paths. Marketing (mentioned previously) can fall under the umbrella of communications. Other areas for employment with this degree include public relations, advertising, journalism, writing, broadcasting, publishing, and social and digital media development.
A sample of the salaries you might expect at different points in your career:
• Average entry-level salary: $97,018 for a corporate communications assistant or $60,439 for a social media assistant
• Average mid-career salary: $122,341 for a corporate communications manager and $112,746 for a social media manager
5. Public Relations
Public relations (PR) has a broad reach. If you’re looking to capitalize on a degree in public relations, you might find a job in a small or large PR agency, a corporate PR department, or as an independent consultant to various clients. Since PR often involves frequent communication with clients and the public, this field can offer some of the best jobs for extroverts.
• Average entry-level salary: $62,703 for a public relations specialist
• Average mid-career salary: $133,149 for a public relations manager
6. Liberal Studies
A liberal studies or liberal arts major provides great flexibility and variety when it comes to job prospects. Students majoring in liberal arts or studies participate in a multi-disciplinary program, often including courses in humanities, history, art, literature, science, and philosophy. Earning a liberal studies degree can offer students a chance to develop many important “soft skills,” including problem solving, communication, and analytical and critical thinking.
Someone with a liberal arts degree may be drawn toward work in libraries, arts administration, government, education, or academia.
• Average entry-level salary: $89,771 for a public policy analyst
• Average mid-career salary: $150,417 for a public policy manager
7. Anthropology
Anthropology focuses on the study of humans in different cultures and societies, spanning various time periods and locations. It may not involve the same kind of coursework that studying law does, but it can be a fascinating field.
An anthropologist can work for ethnic or cultural organizations, museums, historical sites, research firms, or as a social or community services manager.
• Average entry-level salary: $59,847 for a museum curator
• Average mid-career salary: $86,261 for a museum director
8. History
Knowledge of the past can be a powerful career springboard. Besides becoming a historian, history majors may find work in journalism, teaching, and politics. People with history degrees can also possibly find work at historical societies, museums, and libraries.
• Average entry-level salary: $72,600 for a library archivist
• Average mid-career salary: $86,139 for a senior librarian
9. Advertising
Advertising often taps a student’s interest in sales and contemporary consumer culture. Careers for advertising majors range from creative pursuits (copywriting or art direction, for instance) to more business-driven ones, such as being an account coordinator or a sales rep.
• Average entry-level salary: $63,382 for a junior copywriter, $60,323 for a junior graphic designer, or $61,325 for a junior sales rep
• Average mid-career salary: $123,448 for a copywriting manager, $180,849 for a graphic design director, or $99,390 for a senior advertising account executive, all of which can be a good salary for a single person
10. English/Creative Writing
Many people may consider an English or creative writing major easy. Depending on the path you take, it could lead to a high-paying job. People who choose this field may pursue a job as a proofreader, copy editor, technical writer, book editor, author, or editor at a publishing company or magazine. These may all be lower-stress jobs that are good for introverts.
• Average entry-level salary: $62,287 for an entry-level proofreader
• Average mid-career salary: $96,100 for a senior editor
11. Sports Management
Anyone who loves sports (whether participating, watching, or both) may be attracted to a major in sports management. Sports management encompasses a wide array of jobs, including becoming a sports agent, an athletic director, or a sports facility manager.
• Average entry-level salary: $109,812for an athletics director
• Average mid-career salary: $116,629 for a sports facility manager
12. Criminal Justice
If you’re always watching true crime dramas on TV, you might be interested in majoring in criminal justice. While this field of study may be considered easy compared to a mathematics major, that doesn’t mean a career in criminal justice isn’t going to be challenging and rewarding.
Jobs for criminal justice majors can include working in the areas of law enforcement, forensics, investigations, and crime prevention.
• Average entry-level salary: $67,770 for a fraud investigation officer or $63,966 for a police officer (plus, you might eventually qualify for federal student loan forgiveness programs)
• Average mid-career salary: $124,496 for a fraud manager or $155,933 for a director of investigations
Factors Besides Difficulty
Now you know 12 relatively easy majors that can lead to jobs with high salaries. But it’s worthwhile to consider some other factors when choosing a college major.
Job Outlook
Some fields are growing faster than others. As you think about your major, it can be a good idea to make sure the one you choose will lead to a field that is growing and will have plentiful job opportunities after college. For instance, if you have a criminal justice degree and want to work in fraud investigations, you might find that there’s considerable growth in digital fraud and focus your education to prepare you for that kind of work.
Passion/Interest
Sometimes what makes coursework in college seem easy is that you love it. Ask any astrophysics major. They may think what they are studying is hard, but because they love it, the pursuit feels engaging and worthwhile.
In other words, if you are passionate about a subject, that can be a good reason to major in it, even if it has a reputation for being hard.
School Prestige
When it comes to getting a high-paying job after graduation, it can help if you pursue a program that your school is known for. For instance, some universities are renowned for having great journalism programs, and that reputation could give graduates an advantage in the job market.
The Takeaway
Getting an undergraduate degree, no matter what the major, requires hard work and dedication. However, there are some majors that fall into the “easier” category, such as communications, anthropology, and history. These majors may not require as intensive a curriculum as others (say, chemical engineering), but grads can still go on to earn high salaries.
Regardless of whether your major is considered hard or easy, you may need some help paying for your education.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and 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
Is an “easy” major looked down on?
There may be some people who think certain majors are easy, but virtually all college majors require hard work. After graduation, hiring managers are likely looking for someone who performed well in school, is enthusiastic about their studies, and wants to apply their skills to their chosen career.
Do easy majors require less study time?
The amount of time and effort a college major requires can depend on the school, the curriculum, the student’s approach to their studies, and their aptitude. It’s not possible to say that all easy majors require less study time.
What are the highest-paying majors overall?
According to a 2026 report from the National Association of Colleges and Employers, the highest-paying majors are those in the STEM (science, technology, engineering, and math) category. The three highest paying majors are computer science, engineering, and math and sciences.
Photo credit: iStock/Drazen Zigic
SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Not all repayment options may be available for all loans. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is current as of 3/2/2026 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).
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Depending on your specific financial circumstances, refinancing your student loans could save you money — though how much depends on your credit history, how much you owe, what kind of refinancing plan you choose, and more.
In this article, we’ll walk you through how student loan refinancing works and the various ways in which it may save you money in the long term.
• You could save money by refinancing your student loans, but it depends on several factors, including your credit history, how much you owe, and what kind of refinancing plan you choose.
• Refinancing your student loan can help you lower your monthly payment and interest rate and pay less interest over a shorter loan term.
• Most credit lenders will accept loan applications from people with a credit score of 670 and above, but they may not offer the lowest interest rates until your credit score is higher.
• Make sure to research how refinancing your student loans might impact you and the banks or financial institutions that offer student loan refinancing to get the best deal.
• Consider adding a cosigner to your application if your credit history needs work.
What Is Student Loan Refinancing?
Refinancing your student loans essentially means taking out a new loan to cover the cost of your existing loans and then paying that new loan off instead. You can think of it as trading your old student loan, or loans, for a new one.
Along with saving money, one of the primary reasons people refinance their student loans is to simplify their life and repayment schedule if they have multiple student loans they’re paying each month. Refinancing may allow the borrower to get a lower interest rate or change their loan terms. Keep in mind, though, that refinancing federal student loans with a private lender makes you ineligible for federal benefits, such as income-driven repayment plans and student loan forgiveness.
The money-saving aspect of refinancing student loans can work a couple of different ways. Let’s take a closer look.
How Does Refinancing Student Loans Save You Money?
Student loan refinancing can save you money in a couple of different ways:
• Refinancing may score you a lower monthly payment, which means you’ll have more income available in your budget each pay period.
• Depending on your credit score and how it’s shifted since you took out your original loans, refinancing could also result in a lower interest rate, which may help you spend less on your student loans as a whole (as well as potentially lowering your monthly payment amount).
• Finally, refinancing your student loans may also allow you to repay the loan over a shorter time span (in other words, get a shorter loan term), which can be an easy way to save money in interest over the course of the loan’s overall lifetime and simply help you get out of debt faster.
Of course, all of these various outcomes will depend on your credit history, what kind of refinancing loans you qualify for, and how they stack up compared to your original loan. And keep in mind that lowering your monthly payment might also mean a longer loan term, which means it doesn’t actually save you money in the long run. You may pay more interest over the life of the loan if you refinance with an extended term.
Still, for some, a lower monthly payment is a critical step toward a healthier overall financial life, so it may be worthwhile depending on your circumstances.
The best way to figure out if refinancing your student loans will actually save you money is to use a loan calculator to determine how much you’ll pay over the remaining term of your original loan versus the total amount you’ll pay over the entire lifetime of the new loan.
Whichever loan comes up with a lower overall number is the one that saves you the most, but again, under some circumstances, paying more over the long run may make your present-day financial life easier.
Take control of your student loans.
Ditch student loan debt for good.
How Much Could You Save by Refinancing Student Loans?
The specific amount you might save by refinancing your student loans depends on many factors, including how much you have left to pay off on your original loan (and its interest rate), your credit history, and your current financial standing.
However, in most cases, if your current loan’s interest rate is 10% or higher, and you have a credit score of 670 or more, chances are you could save some money by refinancing, although you may not be able to take advantage of the lowest interest rates. Let’s look at an example.
Let’s say you have $30,000 in outstanding student loans with eight years left on the loan’s term and a 10% interest rate. Over those eight years, with interest, you’d pay a total of $43,701.59, which means $13,701.59 in interest alone.
Now, say you refinance that loan and instead get a new one for the same amount — $30,000 — but with a five-year loan term and a 5% interest rate. Over the lifetime of that loan, you’d pay a total of $33,968.22, or only $3,968.22 in interest. That’s a pretty substantial savings!
However, your monthly payment would go up over $100 for the second loan, from $455.22 to $566.14, and that’s not including any origination fees or other expenses related to taking out the new loan.
Still, a savings of almost $10,000 in total interest might be worth it for some borrowers.
How Can I Refinance My Student Loans?
Refinancing your student loans is pretty simple these days, thanks to the internet. You’ve already embarked on the first step: research.
Along with researching what it means to refinance your student loans and how doing so might save you money, you should also research different banks and financial institutions that offer student loan refinancing. This allows you to compare and contrast the various programs, including their interest rates, their loan term options, and other features.
Once you’ve found a few companies you feel comfortable with, it may be worth requesting quotes from each of them to learn which will offer the lowest interest rate or monthly payment.
In the majority of cases, you’ll be able to complete the entire application process, from the initial rate quote to the official application, online. You’ll need to provide documentation proving your identity, residence, college graduation (or enrollment), and the loan payoff statements from your current lender.
Other Student Loan Refinancing Tips from SoFi
Ready to take the leap into refinancing for yourself? Here are some tips to help make the process as smooth (and helpful) as possible:
• Shop around for more than just rates. While low interest rates or monthly payments may be attractive, there are other important factors when choosing who to call your student loan refinancing servicer, such as whether or not you’re able to pay off the loan early without facing penalties.
• Get as many of your ducks in a row as possible ahead of time. The higher your credit score, the better your employment situation, and the lower your other existing debts, the more money you stand to save by refinancing your student loans. Tackle as many of those projects and save as much money as you can ahead of time before applying.
• Consider a cosigner. If your credit history could still use some shining up, adding a cosigner to your application could help boost your chances of getting approved, and possibly for a better rate. But proceed with caution: your cosigner is legally responsible for your loan to the same extent you are, and if you fall behind on your payments, it can impact their credit score, too.
The Takeaway
Refinancing your student loans can help you save money by lowering your interest rate, shortening your loan term, or both. Refinancing may also help you make ends meet in the short-term by lowering your monthly payment.
Note that by refinancing federal student loans, you lose access to federal benefits, such as income-driven repayment plans and student loan forgiveness. If you’re using or plan on using these benefits, it’s best to hold off on refinancing.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
What isn’t a good reason to refinance student loans?
Everyone’s financial circumstances and needs are different, but it’s important to keep in mind that if you refinance federal student loans with a private lender, you may lose access to income-driven repayment plans and federal student loan forgiveness programs, which aren’t available to those with private loans. However, some private lenders may offer hardship assistance and deferments.
Does refinancing student loans lower monthly payments?
Refinancing your student loans can lead to many different outcomes depending on your current loans, your credit history, and other factors related to your financial situation. But yes, in some cases, refinancing your student loans can lower your monthly payments. However, lower payments may also mean you end up paying more interest on the loan overall.
How much do you have to make to refinance student loans?
Each bank and lender has its own specific requirements as far as student loan refinance eligibility, and they may or may not specify a minimum income. It’s best to contact the lenders you’re considering and ask them directly what the income requirements are.
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SoFi Student Loan Refinance Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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