Feb
06
2026
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Understanding Student Loan Amortization

By | Fresh Out of School, Student Loans, student_loan, Terminology | No Comments

When deciding on a student loan repayment schedule, the option with the lowest possible monthly payment is not always best.

That’s because of amortization, the process of paying back a loan on a fixed payment schedule over a period of time. A repayment option with the lowest monthly payment typically means the loan is stretched out over a longer time frame. This results in the borrower paying more in interest than they would have with a shorter loan term and a higher monthly payment.

Read on to learn more about student loan amortization, how it affects your monthly payments, and ways to potentially lower the amount you pay in interest on your student loans.

Key Points

•   Amortization means paying off loans in fixed monthly payments that include both interest and principal, with early payments weighted more toward interest.

•   Longer loan terms lower monthly payments but increase total interest paid over time.

•   Negative amortization can occur on income-driven plans if payments are too low to cover monthly interest.

•   Paying extra toward principal or making extra payments can help reduce total interest owed.

•   Refinancing may lower your interest rate or term but removes federal protections if refinancing federal student loans.

Exploring Amortization

Student loans are amortized because they are installment loans that have fixed monthly payments. Here’s a closer look at the process of student loan amortization.

How Amortization Works for Student Loans

With an amortizing loan, a borrower pays both the principal balance and interest each month. This is called a student loan amortization schedule. The schedule begins with the full balance owed, and the payments are then calculated by the lender over the life of the loan to cover the principal and interest.

Interest vs Principal Over Time

At the beginning of a student loan amortization schedule, payments typically cover more interest than principal. As time goes on, a bigger amount goes toward the principal.

To help determine amortization on your student loans, it’s important to first calculate the cost of the loan. You’ll need to know these three variables:

1.    The loan principal, which is the original amount you borrowed

2.    The loan’s interest rate and annual percentage rate (APR)

3.    The duration, or term, of the loan

Using this information, you can calculate student loan payments, including both the monthly amount and the total interest paid on the loan.

The next step is to determine how much of each monthly payment is going toward both interest and principal. That’s when the loan’s amortization schedule comes into play.

Student Loan Amortization Examples

To see how amortization works, we’ll look at a student loan that’s being paid by the borrower under the standard 10-year repayment plan. We’ll also look at how amortization changes when the borrower directs extra money to pay off the loan faster and reduce the amount of interest paid overall.

Standard Repayment Schedule Example

Let’s say a borrower takes out a $30,000 student loan at a 7.00% interest rate, amortized over a 10-year repayment period.

The borrower’s monthly payment is approximately $348. Each year, the borrower will pay about $4,180 in total on their loan. While these monthly and yearly amounts will remain the same, the proportions allocated to the principal and interest will change.

The chart below shows you what the student loan amortization schedule might look like for this loan. The chart illustrates the principal and interest amounts monthly for the first year and the last year of the loan, and annually for the years in between.

Amortization schedule for $30,000 student loan with 7.00% interest over 10 years

Date Interest Paid Principal Paid Balance
January 2025 $175 $173 $29,827
February 2025 $174 $174 $29,652
March 2025 $173 $175 $29,477
April 2025 $172 $176 $29,301
May 2025 $171 $177 $29,123
June 2025 $170 $178 $28,945
July 2025 $169 $179 $28,765
August 2025 $168 $181 $28,585
September 2025 $167 $182 $28,403
October 2025 $166 $183 $28,221
November 2025 $165 $184 $28,037
December 2025 $164 $185 $27,852
2025 $2,032 $2,148 $27,852
  
2026 $1,877 $2,303 $25,852
  
2027 $1,710 $2,470 $23,079
  
2028 $1,532 $2,648 $20,431
  
2029 $1,340 $2,840 $17,591
  
2030 $1,135 $3,045 $14,546
  
2031 $915 $3,265 $11,281
  
2032 $679 $3,501 $7,780
  
2033 $426 $3,754 $4,026
  
January 2034 $23 $325 $3,701
February 2034 $22 $327 $3,374
March 2034 $20 $329 $3,045
April 2034 $18 $331 $2,715
May 2034 $16 $332 $2,382
June 2034 $14 $334 $2,048
July 2034 $12 $336 $1,712
August 2034 $10 $338 $1,373
September 2034 $8 $340 $1,033
October 2034 $6 $342 $691
November 2034 $4 $344 $346
December 2034 $2 $346 $0
2034 $154 $4,026 $0

Using this estimated example, during the first year, the borrower’s monthly payments would be about half interest and half principal. With each passing month and year of paying down the debt, more of each payment is allocated to the principal. By the final year, the borrower pays only $154 to interest and $4,026 to principal.

Accelerated Payments and Interest Savings

Using the example above, a borrower would pay $11,799.05 in interest on the loan overall. That brings the full cost of the loan to $41,799.05, and it will take 10 years to pay off.

However, making accelerated payments can help a borrower pay off the same loan faster and save a significant amount of interest.

Here’s how accelerated payments work: Let’s say you pay an additional $50 on the loan every month. So instead of a monthly payment of $348, you make payments of $398. Each year, you’ll pay $4,776 on the loan. As your loan balance goes down faster, the amount of interest you owe will also decrease.

The total interest you’ll pay overall using this method is $9,627.27. That brings the full cost of the loan to $39,627.27. So you’ll save more than $2,100 by making accelerated payments. And you’ll pay off the loan in 8 years and four months, instead of 10 years — almost two years early.

Recommended: The Average Cost of College Tuition

Alternative Repayment Plans and Amortization

The 10-year Standard Repayment Plan isn’t the only option for repaying your student loans. There are alternative plans that lower your monthly payments, and some that also extend the repayment term. When you switch to a new repayment plan, your amortization schedule changes.

Income-Driven Repayment Plans

Income-driven repayment (IDR) plans base your payments on your discretionary income and family size. The monthly payments with IDR plans are generally lower than with the current standard plan because repayment is stretched out over 20 or 25 years rather than 10.

As of January 2026, there are three IDR plans available: Pay as You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). On the Income-Based Repayment plan, if you still have a balance at the end of your term, the remaining amount might qualify for student loan forgiveness.

While IDR may be an option if you’re struggling to make your current monthly payments, it’s important to understand that not only will you likely pay more in total interest on one of these plans because the repayment term is longer, but it’s also possible that your payments will dip into what is called negative amortization.

Negative amortization on a student loan is when your monthly payment is so low that it doesn’t cover the interest for that month. When this happens, it can cause the loan balance to increase.

This is not ideal, of course, but utilizing an income-driven repayment plan is a far better option than missing payments or defaulting on a federal student loan.

Graduated and Extended Repayment Options

Other federal loan repayment plans that can currently lower your monthly payments are the Graduated and Extended Repayment plans.

The Extended Repayment Plan allows borrowers to repay their loans over a period of up to 25 years. Because of the long loan term, monthly payments will generally be lower, but borrowers will pay more in interest over the life of the loan compared to plans with shorter terms. To qualify, a borrower must have more than $30,000 in outstanding Direct Loans or more than $30,000 in outstanding Federal Family Education Loans (FFEL) loans.

Under the Graduated Repayment Plan, a borrower starts with lower monthly payments that are gradually increased, typically every two years, over the course of 10 years. Your payments will never be less than the amount of interest that accrues between payments.

Managing Student Loan Amortization

To avoid the full impact of an amortized student loan, there are strategies that can potentially help lower your interest payments.

Strategies to Pay Down Principal Faster

•   Pay extra on your loan. You can do this by paying more than you owe each month, or by making additional payments on your student loan, if you can afford to. Paying off the loan early may help you to pay less interest over the life of the loan.

•   Take advantage of financial windfalls. If you get a bonus at work, a tax refund, or a generous gift from a relative, use that money to put additional funds toward your student loans.

•   Make biweekly payments. With this strategy, you pay half your monthly payment every two weeks. After a year, you will have made one additional month’s payment on your loans, without it feeling like a heavy financial burden.

Using Extra Payments Effectively

If you opt to pay more than your minimum payments or make additional payments on your loans, let your lender know that the additional amount or payment should be applied to the principal of the loan, not the interest. That way, the extra funds can help lower the principal amount, which in turn reduces the interest you owe and can help shorten your loan term.

How Refinancing Affects Amortization

When you refinance student loans, you replace and pay off your existing loans with a new loan from a private lender, which changes your amortization schedule.

Resetting the Loan Term and Its Impact

Because you take out a new loan when you refinance, the repayment term gets reset and the new loan gets a new amortization schedule. You might be able to shorten the repayment term to pay off the loan faster (which would mean higher monthly payments), or lengthen the term to lower your monthly payments.

Just remember, you may pay more interest over the life of the loan with a longer loan term. A student loan refinancing calculator can show you how much you might save by refinancing.

Potential for Interest Savings

Ideally, with refinancing, you may get a lower interest rate if you qualify. A lower student loan interest refinancing rate would save you money in interest and lower the cost of the loan overall.

One important thing to be aware of is that if you’re refinancing federal loans, you lose access to federal benefits and programs such as income-driven repayment and federal forgiveness. When considering whether to refinance, borrowers should think carefully about whether they might need these benefits.

Recommended: Consolidation vs. Refinancing

The Takeaway

With student loan amortization, more money typically goes to interest than loan principal, especially at the beginning of the repayment term. The type of repayment plan and strategy a borrower chooses can make an impact on amortization.

A longer repayment plan may lower monthly payments, but cost more in interest over the life of the loan. Accelerated payments could save money on interest and the overall cost of the loan, and result in paying off the loan faster. And if a borrower is eligible for a lower interest rate, student loan refinancing is one alternative that may reduce monthly payments and interest paid over the life of the loan.

Weighing all of the options can help determine what course of action makes the most sense for you.

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 is amortization and how does it apply to student loans?

Amortization is when loan payments are spread over a set period of time with fixed regular payments going toward the interest and loan principal; at the beginning of the repayment term, more interest goes toward the interest than the principal. Student loans are amortizing loans because they have fixed monthly payments.

Can I change my student loan amortization schedule?

Yes, there are a few different ways you can change your amortization schedule. First, you can do it by changing your repayment plan. With federal student loans, you could switch from the 10-year Standard Plan to an income-driven plan, for example. Another way to change your amortization schedule for federal or private loans is to make extra payments toward the principal, which reduces the interest you pay and shortens your loan term. Finally, refinancing student loans can also change your amortization schedule.

How can I reduce the interest paid over the life of the loan?

To reduce the interest paid over the life of the loan, you can pay more than the minimum amount due on your loan or make additional payments. Just be sure to direct that extra money toward the loan principal. Paying down the principal reduces the amount of interest you’ll pay overall and may even help you pay off your loan faster.

Does paying more than the minimum affect amortization?

Yes, paying more than the minimum affects the amortization of your loan, especially when you direct the extra money toward the loan principal. Reducing the principal means you’ll pay less in interest and typically pay off the loan faster.

How does refinancing impact my amortization schedule?

Refinancing affects your student loan amortization schedule because when you refinance, you get a new loan with new rates and terms and a new amortization schedule. If you qualify for a lower interest rate, you could save money in interest and on the cost of the loan overall. You could also choose to shorten or lengthen your loan term. Just be aware that lengthening your loan means you’ll pay more in interest over the life of the loan.

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).

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. 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 subject to change. This information is current as of 4/22/2025 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.

SOSLR-Q126-006

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Feb
06
2026
A Look at the Average Cost of Nursing School

How Much is Nursing School? Average Cost of Nursing Degrees

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

Pursuing a career in nursing can be both personally fulfilling and financially rewarding, but it also comes with significant upfront education costs. The price of nursing school varies widely depending on the degree level, institution type, and length of study. Understanding these costs ahead of time can help you plan realistically, compare programs, and avoid unnecessary debt.

Below we break down the average cost of nursing school by credential, explore additional fees students often overlook, and outline common ways nursing students pay for their education.

Key Points

•   The total cost of nursing school varies significantly based on the degree level and whether the institution is public or private.

•   ADN programs are the fastest and most affordable route to becoming an RN, while BSNs offer higher salaries and more career advancement opportunities.

•   Graduate degrees like the MSN and DNP prepare nurses for advanced practice and leadership roles, commanding the highest average salaries.

•   Beyond tuition, nursing students must budget for additional expenses, including uniforms, lab fees, and licensing exam costs.

•   Financial aid options, including student loans, scholarships, grants, and specialized programs can help offset the cost of nursing education.

Typical Nursing School Costs and Salaries

Nursing education costs generally increase with each academic level, but so does earning potential. While you can access entry-level nursing roles with an associate degree, advanced degrees open the door to leadership, specialization, and higher salaries.

💡 Quick Tip: You can fund your education with a competitive-rate, no-fees-required private student loan that covers up to 100% of school-certified costs.

Associate Degree in Nursing (ADN)

An Associate Degree in Nursing (ADN) is one of the fastest and most affordable ways to become a registered nurse (RN). ADNs are offered by community colleges, private technical colleges, and some four‑year institutions, and typically take around two years to complete.

While ADN graduates often qualify for similar entry-level health care jobs as those with a Bachelor of Science in Nursing (BSN), the salary is generally lower and there may be less opportunity for advancement. Also, some hospitals require nurses to have a BSN.

Average cost of an ADN at a public school:

•   Annual tuition and fees: $3,000 – $12,000

•   Annual room and board: $7,000 – $9,000

•   Total cost for an ADN: $20,000 – $42,000

Average cost of an ADN at a private school:

•   Annual tuition and fees: $15,000 – $30,000

•   Annual room and board: $10,000 – $13,000+

•   Total cost for an ADN: $50,000 – $86,000+

Average ADN salary: $81,000

Bachelor of Science in Nursing (BSN)

A Bachelor of Science in Nursing is a four-year undergraduate degree that prepares students for Registered Nurse (RN) licensure and offers broader training in leadership, research, and public health. BSN programs are offered at public and private colleges nationwide.

BSN-prepared nurses often have access to more job opportunities, higher starting salaries, and greater long-term earning potential compared to nurses with ADNs.

Average cost of a BSN at a public school:

•   Annual tuition and fees: $15,000 – $30,000

•   Annual room and board: $12,000 – $14,000

•   Total cost for a BSN: $108,000 – $176,000

Average cost of a BSN at a private school:

•   Annual tuition and fees: $30,000 – $60,000+

•   Annual room and board: $13,000 – $16,000

•   Total cost for a BSN: $172,000 – $304,000+

Average BSN salary: $99,000

Master of Science in Nursing (MSN)

A Master of Science in Nursing (MSN) is a graduate-level degree that prepares registered nurses for advanced clinical practice, leadership, education, or administrative roles. For many nurses, an MSN is a gateway to advanced practice specialities, such as nurse practitioner, nurse midwife, clinical nurse specialist, or nurse anesthetist.

Depending on the school and entry point, students can pursue an MSN after a BSN or via an RN-to-MSN bridge program designed for nurses with an associate degree.

MSN programs typically take two years of full-time study to complete. Part-time options are also available for working nurses.

Average cost of an MSN at a public school:

•   Annual tuition and fees: $10,000 – $30,000

•   Total cost for an MSN degree: $20,000 – $60,000

Average cost of an MSN at a private school:

•   Annual tuition and fees: $20,000 – $50,000+

•   Total cost for an MSN degree: $40,000 – $100,000+

Average MSN salary: $109,000

Doctor of Nursing Practice (DNP)

A Doctor of Nursing Practice (DNP) is an advanced degree for nurses who want to reach the highest level of clinical practice. Unlike research-focused doctoral degrees (such as a Ph.D. in Nursing), the DNP prepares nurses for leadership roles by focusing on applying research to improve patient care, quality, and health care systems,

DNP programs typically require two to three years of full-time study beyond a BSN, though some schools offer BSN-to-DNP pathways that can vary in length. Part-time options are also available for working nurses.

Average cost of a DNP at a public school:

•   Annual tuition and fees: $20,000 – $45,000+

•   Total cost for a DNP (three years): $60,000 – $135,000+

Average cost of a DNP at a private school:

•   Annual tuition and fees: $30,000 – $80,000+

•   Total cost for a DNP (three years): $90,000 – $240,000+

Average DNP salary: $117,000

Other Fees While Studying to Be a Nurse

Tuition is only one part of the total cost of nursing school. Students also need to budget for a variety of additional expenses that can add up quickly over the course of a program.

Uniforms, Lab Fees, and Equipment

Nursing students are typically required to purchase textbooks, uniforms (scrubs), a stethoscope, and other supplies, which can add to the total cost of your education. Nursing schools also typically charge lab or clinical fees to fund the specialized equipment and simulation centers necessary for hands-on training.

Here’s a look at how these costs break down:

•   Lab fees: $100 – $500 per course

•   Books and supplies: Around $625 per term

•   Uniform: A set of scrubs can cost anywhere from $30 to over $100, depending on brand, fabric, and features.

Licensing Exam and Review Course Costs

After completing a nursing program, graduates must take and pass the NCLEX-RN licensing exam, which runs a couple of hundred dollars. Many graduates also invest in NCLEX review courses to increase their chances of passing on the first attempt. In addition, graduates typically need to pay for state licensure applications, background checks, and fingerprinting.

Here’s what you can expect to pay before you can start practicing:

•   NCLEX-RN registration fee: $200

•   NCLEX prep: Prep books run $30 – $100; online review courses are $100 – $500; live prep classes range from $300 to $1,000

•   State licensing fees: $50 – $350+ depending on the state

•   Live scan fingerprinting: $50 – $80

•   FBI Criminal Background Check: $20 – $50

Refi now to pay off loans &
reach your goals faster with a shorter term.

How to Pay for Nursing School

Paying for nursing school can feel overwhelming, but there are many options to help manage costs, including federal and private student loans, scholarships, grants, and graduate student loans.

Federal Student Loans

Federal student loans are a common funding option for nursing students. Undergraduate students may qualify for:

•   Direct Subsidized Loans: Offered to students with financial need, the government pays interest while you’re in school and for six months after graduation.

•   Direct Unsubsidized Loans: These are not based on financial need and are available to most undergraduate students.

Graduate nursing students are eligible for only Direct Unsubsidized Loans.

You can apply for federal aid — including federal student loans, scholarships, grants, and work-study — by completing the Free Application for Federal Student Aid (FAFSA®) every year.

When it comes to paying federal loans back, many nurses choose to work for qualifying nonprofit or government organizations to take advantage of the federal Public Service Loan Forgiveness program, typically pairing it with an income-based repayment plan.

💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too.

Scholarships and Grants

Scholarships and grants for nurses provide valuable financial assistance to help cover the cost of education without the need for repayment. Many programs are available for nursing students at all levels, including undergraduate and advanced degrees.

Scholarships are often merit-based, while grants are typically need-based. Organizations such as the American Association of Colleges of Nursing and local health care providers offer funding opportunities. These resources reduce financial burdens, making a nursing career more accessible and affordable.

Recommended: College Scholarship Finder

Private Student Loans

Private student loans can help cover remaining costs when federal aid and scholarships are not enough. These loans are offered by banks, credit unions, and online lenders.

Private loans allow borrowers to cover up to the total cost of attendance (minus other aid), offering higher borrowing limits than federal loans, which have annual and aggregate caps. However, rates are set by individual lenders and depend on the credit profile of the borrower (or their parent cosigner). A higher score increases the likelihood of receiving the lowest available rate. Private student loans also lack federal borrower protections, such as income-driven repayment and forgiveness programs.

Recommended: Student Loan Payment Calculator

Work-Study Programs and Employer Tuition Assistance

Some nursing students qualify for the Federal Work-Study program, which provides part-time employment to help cover education expenses. These jobs are often located on campus or within health care settings.

In addition, many hospitals and health care systems offer tuition assistance or reimbursement programs for employees pursuing nursing degrees. These benefits may require a work commitment after graduation but can significantly reduce out-of-pocket costs.

Financial Aid Options Specific to Nursing Students

Beyond traditional financial aid, nursing students may qualify for specialized programs designed to address health care workforce shortages.

Nurse Corps Loan Repayment Program

The Nurse Corps Loan Repayment Program is a U.S. federal program that helps registered nurses and advanced practice nurses repay a significant portion of their student loans in exchange for a work commitment. Participants are required to work for at least two years at an eligible health care facility with a critical shortage of nurses or at an eligible nursing school as nurse faculty.

State-Based Forgiveness Programs

Many states offer loan repayment or forgiveness programs for nurses who work in designated shortage areas or high-need specialties. Program requirements and benefits vary by state, but they often provide substantial financial relief.

It’s worth researching options in your state or the state where you plan to practice to determine eligibility and application timelines.

The Takeaway

The cost of nursing school varies based on the degree level you pursue and the institution you choose. While an ADN offers a lower-cost entry into nursing, advanced degrees like MSN or DNP require a greater financial investment but can lead to higher salaries and expanded career opportunities.

By understanding tuition costs, planning for additional fees, and exploring all available aid options, you can make an informed decision that balances education costs with future earning potential. With careful planning, nursing school can be a worthwhile investment in a stable and in-demand career.

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

How much is nursing school for four years?

The cost of a four-year Bachelor of Science in Nursing (BSN) degree varies significantly by institution. If you attend a public school as an in-state student, the total cost typically ranges from $108,000 to $176,000, including annual tuition, fees, and room and board. If you attend a private institution, the total cost is generally higher, ranging from $172,000 to $304,000.

Is nursing school worth it financially?

Yes, nursing school is generally considered a worthwhile financial investment. Registered nurses can earn a solid median salary, often with strong job security and benefits. While tuition and time costs can be significant, especially for BSN, MSN, or DNP degrees, many nurses recoup their investment within a few years of working. Opportunities for overtime, specialization and advanced practice roles can further increase earning potential over time, making nursing a financially sustainable and flexible career choice.

What is the average debt after nursing school?

The median student loan debt for graduates with a Bachelor of Science in Nursing (BSN) is $23,506.

What financial aid is available specifically for nursing students?

Nursing students can access federal student loans (Direct Subsidized and Unsubsidized), private student loans, and various scholarships and grants specifically for nursing. Specialized options include the federal Nurse Corps Loan Repayment Program, which offers loan forgiveness for nurses who commit to working in critical shortage facilities, and various state-based forgiveness programs that incentivize practice in high-need areas.

How do nursing salaries compare to the cost of education?

Nursing salaries generally compare favorably to the cost of education, especially over the long term. While tuition for nursing programs can be significant, particularly for bachelor’s or advanced degrees, nurses often earn stable, competitive salaries with strong job security. Many graduates recoup their education costs within a few years of working. Financial aid, scholarships, and employer tuition reimbursement can further reduce upfront expenses, improve the overall return on investment for a nursing education.

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. 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 subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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.

SOISL-Q126-002

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Feb
04
2026
Student Loan Forgiveness Tax Bomb, Explained

Do You Have to Pay Taxes on Forgiven Student Loans?

By | Fresh Out of School, Student Loans, student_loan | Comments Off on Do You Have to Pay Taxes on Forgiven Student Loans?

The Internal Revenue Service (IRS) generally requires that you report a forgiven or canceled debt as income for tax purposes. But tax on student loan forgiveness is a different matter.

The American Rescue Plan (ARP) Act specifies that student loan debt forgiven between 2021 and 2025, and incurred for postsecondary education expenses, will not be counted as income, and therefore does not incur a federal tax liability.

This includes federal Direct Loans, Family Federal Education Loans (FFEL), Perkins Loans, and federal consolidation loans. Additionally, nonfederal loans such as state education loans, institutional loans direct from colleges and universities, and even private student loans may also qualify.

However, some states have indicated that they still count canceled student loans as taxable income. Read on for more information about taxes on student loans, including which forgiven student debt is taxable and by whom.

Key Points

•   Because of the American Rescue Plan Act, student loans forgiven between 2021 and 2025 are exempt from federal taxation.

•   Eight states — Arkansas, California, Illinois, Indiana, Minnesota, Mississippi, North Carolina, and Wisconsin — still tax forgiven loans.

•   Use a student loan forgiveness tax calculator to estimate potential state tax liability.

•   Set aside monthly payments to save for potential tax bills on forgiven student loans after 2025.

•   Explore the student loan interest deduction to help reduce federal taxable income.

Types of Student Loan Forgiveness Programs

Federal student debt can typically be canceled through an income-driven repayment plan (IDR) or forgiveness programs. However, as of February 2026, applications for some income-driven repayment plans are on hold due to legal challenges. You can find out more about this situation on the Federal Student Aid (FSA) website.

Here are some common federal forgiveness programs and how typically they work.

Public Service Loan Forgiveness (PSLF)

If you are employed full-time for the government or a nonprofit organization, you may be eligible for Public Service Loan Forgiveness for federal student loans like federal Direct Loans.

After you make 120 qualifying payments under an income-driven repayment plan for an eligible employer, the PSLF program forgives the remaining balance on your federal student loans.

However, because IDR plans are currently not accepting applications, and you must achieve forgiveness by repaying your loans under one of these plans, you will likely need to wait before you can start working toward PSLF. You can get more details about PSLF on the FSA website.

Income-Driven Repayment (IDR) Forgiveness

IDR options generally offer loan forgiveness after borrowers make consistent payments for a certain number of years. However, forgiveness on all but one of the IDR plans is paused as of February 2026.

On an IDR plan, how much you owe each month is based on your monthly discretionary income and family size. These are the types of IDR plans.

•   Income-Based Repayment: With IBR, payments are generally about 10% of a borrower’s discretionary income, and any remaining balance is forgiven after 20 or 25 years. On the IBR plan, forgiveness (after the repayment term has been met) is still proceeding as of February 2026, since this plan was separately enacted by Congress.

•   Pay As You Earn (PAYE): The monthly payment on PAYE is about 10% of a borrower’s discretionary income, and after 20 years of qualifying payments, the outstanding loan balance is forgiven. As of February 2026, forgiveness has been paused for borrowers who were already enrolled in this plan.

•   Income-Contingent Repayment (ICR): The monthly payment amount on ICR is either 20% of a borrower’s discretionary income divided by 12, or the amount they would pay on a repayment plan with a fixed payment over 12 years, whichever is less. After 25 years of repayment, the remaining loan balance is forgiven. As of February 2026, forgiveness has been paused for borrowers who were already enrolled in the plan.

Teacher Loan Forgiveness

With Teacher Loan Forgiveness (TLF), teachers who have been employed full-time for five consecutive years at an eligible school and meet certain other qualifications may be eligible to have up to $17,500 of their federal Direct Subsidized and Unsubsidized Loans and federal Stafford Loans forgiven.

Recommended: Do Student Loans Count as Income?

Which Student Loan Cancellations Are Not Federally Taxed?

When it comes to student loan forgiveness and taxes, under the provisions of the ARP Act, private or federal student debt for postsecondary education that was or is forgiven in the years of 2021 through 2025 will not be federally taxed. This means that these borrowers are not required to report their discharged loan amount as earned income, and the forgiven amount is not taxable.

Beyond the special five-year window of tax exemption provided by the ARP Act, participants in the Public Service Federal Loan program who receive forgiveness don’t have to pay taxes on their canceled loan amount. The PSLF program explicitly states that earned forgiveness through PSLF is not considered taxable income.

Which Student Loan Cancellations Are Federally Taxed?

Borrowers who receive loan cancellation after successfully completing an income-driven loan repayment plan can generally expect to pay taxes. However, those whose debt was or will be discharged in the years 2021 through 2025, will not need to pay federal taxes on their forgiven loans due to the ARP Act.

Forgiven amounts that are taxable are treated as earned income during the fiscal year it was received. Your lender might issue tax Form 1099-C to denote your debt cancellation.

💡Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

Which States Tax Forgiven Student Loans?

Typically, states follow the tax policy of the federal government. But some states have announced that their residents must include their forgiven or canceled student loan amount on their state tax returns.

As of February 2026, the eight states that say certain forgiven loans are taxable are:

•   Arkansas (except for loans forgiven through PSLF)

•   California (except for loans forgiven through PSLF)

•   Illinois (except for loans forgiven through PSLF)

•   Indiana (except for loans forgiven through PSLF, TLF, and certain other programs)

•   Minnesota (except for loans forgiven through PSLF)

•   Mississippi

•   North Carolina

•   Wisconsin (except for loans forgiven through PSLF and TLF).

Additional states tend to conform to federal tax laws, so it’s important to consult a qualified tax professional who is knowledgeable about forgiveness of student loans in your state to confirm the latest information of how much you owe.

How to Prepare for Taxes on Forgiven Student Loans

If you’re anticipating a tax liability after receiving loan forgiveness, there are a few steps you can take to get ready.

Step 1: Calculate Your Potential Tax Bill

The first step when preparing for a student loan forgiveness tax bill is calculating how much you might owe come tax season. This can be influenced by factors including the type of forgiveness you are receiving and the forgiven amount.

To avoid sticker shock, you can use a student loan forgiveness tax calculator, like the Loan Simulator on StudentAid.gov. It lets you see how much of your student loan debt might be forgiven, based on your projected earnings.

Step 2: Choose the Right Plan

Although IDR plans are not currently accepting applications, they are designed to help keep borrowers’ monthly payments to a manageable amount while they’re awaiting loan forgiveness. All of these repayment plans calculate a borrower’s monthly payment based on their discretionary income and family size.

Step 3: Prioritize Saving

If you’re expecting loan forgiveness after 2025, it might be beneficial to start allocating extra cash flow to a dedicated tax savings fund now. Incrementally setting money aside over multiple years can ease the burden of a sudden lump-sum tax bill down the line.

Another way to potentially save some money is to take the student loan interest deduction on your taxes each year, if you qualify. The deduction, which is up to $2,500 annually, can reduce your taxable income.

You’ll need your student loan tax form to make sure you are eligible for the deduction. The form should be sent to you by your loan servicer or lender. You’ll file the form with your taxes.

Recommended: Guide to Student Loan Tax Deductions

What If I Can’t Afford to Pay the Taxes?

If you can’t afford to cover an increased tax bill, contact the IRS to discuss your options. Inquire about payment plans that can help you pay smaller tax payments over a longer period of time. However, be aware that fees and interest may accrue on such plans.

The Takeaway

Thanks to a special law passed by Congress in 2021, post-secondary education loans forgiven from 2021 through 2025 will not count as earned income and will not be federally taxed. That said, state taxes may be due on forgiven loans, depending on where the borrower lives.

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

Is loan repayment considered taxable income?

If your employer offers loan repayment assistance benefits, they would typically be considered taxable income. However under the CARES Act, which was signed into law in 2020, employer assistance loan payments up to $5,250 made each year from 2021 through 2025 are tax-free.

Will refinancing my student loans help me avoid taxes?

Refinancing student loans does not involve taxes. However, the interest you pay on a refinanced student loan may qualify for the student loan interest deduction. If you’re eligible, you may be able to deduct up to $2,500, which could lower your taxable income.

Will student loan forgiveness be taxed after 2025?

The American Rescue Plan Act stipulates that forgiven student loans will not be taxed from 2021 through 2025. Currently, there are no plans to extend that tax relief beyond 2025.

Are state taxes different for forgiven student loans?

While states typically follow the federal tax policy, five states say that certain forgiven loans are taxable. Those five states are: Arkansas (except for loans forgiven through Public Service Loan Forgiveness), Indiana (except for loans forgiven through PSLF, Teacher Loan Forgivenesss, and certain other programs), Mississippi, North Carolina, and Wisconsin (except for loans forgiven through PSLF and TLF).

What steps should I take if I owe taxes on forgiven student loans?

If you owe taxes on forgiven student loans, calculate how much you’ll owe in taxes with the forgiven loan amount factored into your taxable income. Then, once you have the estimate of what you owe, you can start saving up to pay it. One way to do this is to put away the monthly amount you previously paid on your student loans to help offset the amount you owe. So if your student loan payment was $100 a month, deposit that amount monthly into a savings account, and use it to help pay what you owe in taxes.

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).

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.


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.

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

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.

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.

SOSLR-Q125-020

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Feb
02
2026
Three female college graduates in caps and gowns talk and laugh together as they walk on campus.

Student Loan Grace Period: How Long Is It?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

As you prepare for life after graduation, one important step is figuring out whether you’re required to make monthly student loan payments right away or if you have what’s called a student loan grace period.

Read on to learn what a student loan grace period is, when it starts, the student loan grace period ending date, and how you might extend yours. You’ll also find tips on how to use your grace period to help get your finances in order before you start making student loan payments.

Key Points

•   Grace periods allow new graduates time to get settled before starting student loan payments.

•   Federal student loans typically have a six-month grace period; some Perkins loans have nine months.

•   Private student loans may or may not offer a grace period. Those that do typically offer a six-month grace period for undergraduates.

•   Interest accrues during the grace period for most federal and private student loans.

•   Making early payments can reduce interest costs and the principal balance of student loans.

What Is a Grace Period for Student Loans?

A student loan grace period is a window of time after a student graduates and before they must begin making loan payments. The purpose of a grace period is to give new graduates a chance to get a job, get settled, select a repayment plan, and start saving a bit before their student loan grace period ending date arrives and their payment due dates kick in. Most federal student loans have a grace period, and some private student loans do as well.

Grace periods also apply when a student leaves school or drops below half-time enrollment. Active members of the military who are deployed for more than 30 days during their grace period may receive the full grace period upon their return.

How Long Do Student Loan Grace Periods Last?

The grace period for federal student loans is typically six months. Some Perkins loans can have a nine-month grace period. When private lenders offer a grace period on student loans, it’s usually six months as well.

Keep in mind that, as noted above, not all student loans have grace periods.

Recommended: The Average Cost of College Tuition

Which Student Loans Have a Grace Period?

Whether you have a grace period depends on what kind of loans you have. There are two main types of student loans: federal and private student loans.

Federal Student Loans

Most federal student loans have grace periods.

•   Direct Subsidized Loans and Direct Unsubsidized Loans have a six-month grace period.

•   Grad PLUS loans technically don’t have a grace period. But graduate or professional students get an automatic six-month deferment after they graduate, leave school, or drop below half-time enrollment.

•   Parent PLUS loans also don’t have a grace period. However, parents can request a six-month deferment after their child graduates, leaves school, or drops below half-time.

Keep in mind: Borrowers who consolidate their federal loans lose their grace period. Once your Direct Consolidation Loan is disbursed, repayment begins approximately two months later. And if you refinance, any grace period is determined by your new private lender.

Private Student Loans

The terms of private student loans vary by lender. Some private loans require that you make payments while you’re still in school. When private lenders do offer a grace period, it’s usually six months for undergraduates and nine months for graduate and professional students.

At SoFi, qualified private student loan borrowers can take advantage of a six-month grace period before payments are due. SoFi also honors existing grace periods on refinanced student loans.

If you’re not sure whether your private student loan has a grace period, check your loan documents or call your student loan servicer.

Will Interest Accrue During the Grace Period?

For most federal and private student loans, interest is charged during the grace period — even though you aren’t making payments on the loan. In some cases, this interest is then added to your total loan balance (a process called interest capitalization), effectively leaving you to pay interest on your interest.

In 2023, federal regulations changed so that the interest that accrues during a borrower’s grace period is not capitalized. According to the Federal Student Aid website, “the interest that accrues during your grace period will be added to the outstanding balance of your loan, but it will not be capitalized.”

Smart Ways to Use Your Student Loan Grace Period

If you are in a financially tight spot after you graduate or during your break from school, a student loan grace period can offer some much-needed breathing room. Here’s how you can put your grace period to good use.

Organize Your Finances Before Payments Begin

Take this time to create a new post-grad budget. Which approach you use is up to you: the 70-20-10 Rule, the envelope budget method, or zero-based budgeting. The important thing is to determine your monthly income and expenses, setting aside enough to pay down debts and save a little.

Enroll in Autopay to Avoid Late Fees

Missed student loan payments can incur penalties and hurt your credit score. Setting up autopay means one less thing you have to remember. Some student loan lenders (like SoFi) will even discount your interest rate for setting up automatic payments. Federal student loans also offer a discount for enrolling in autopay.

Make Early Payments to Reduce Interest Costs

Just because you don’t have to make payments toward student loans during a grace period doesn’t mean you can’t. If you are in a financial position to make payments during a grace period, you should. It can help keep your loan’s principal balance from growing on certain types of student loans and the accruing interest from potentially capitalizing during your grace period.

If you can, direct some extra money toward your principal balance. Because student loans are amortizing loans, when you enter repayment, your early payments largely go largely toward the interest. Making additional principal payments can help reduce the total amount of interest you’ll pay, and even potentially reduce your loan term.

Explore Repayment Plan Options Before the Grace Period Ends

Once your grace period is over for your federal loan, you’ll be automatically enrolled in the 10-year Standard Repayment plan. However, if you’re concerned about making your payments, several income-driven repayment plans are currently available. These plans generally reduce your payment to a small percentage of your discretionary income.

You can use a student loan repayment calculator to calculate your monthly payments and what they might be.

Consider Consolidating or Refinancing Your Student Loans

These two terms are often used interchangeably, but there are important differences between them. When it comes to student loan consolidation vs refinancing, both options combine and replace existing student loans with a single new loan.

Student loan consolidation with a Direct Consolidation Loan allows you to combine several federal student loans into one new federal loan. The resulting interest rate is the weighted average of prior loan rates, rounded up to the nearest ⅛ of a percent. However, as noted above, borrowers who consolidate their federal loans lose their grace period.

Student loan refinancing is when you consolidate your student loans with a private lender and receive new interest rates and terms. Your student loan refinancing rate — which ideally would be lower — is determined by your credit history.

Using a student loan refinancing calculator can help you estimate how much refinancing might save you.

Can You Extend Your Student Loan Grace Period?

If your loan doesn’t qualify for a grace period or if your student loan grace period is ending and you want to extend it, you have options. You may delay your federal student-loan repayment through deferment and forbearance.

Both options are similar to a grace period in that you won’t be responsible for student loan payments for a length of time. The difference is in the interest.

When a loan is in forbearance, loan payments are temporarily paused, but interest will accrue on all loan types during the forbearance period. This can lead to substantial increases in what you’ll pay for your federal loans over time. You’ll want to consider forbearance very carefully, and look into other options that might be available to you, like income-driven repayment plans. (The good news is that for most types of loans, the interest that accrues during forbearance no longer capitalizes.)

During deferment, by contrast, interest will not accrue on Direct Subsidized Loans, Subsidized Federal Stafford Loans, Federal Perkins Loans, and subsidized portions of Direct Consolidation Loans or Federal Family Education Loan Program (FFEL) Consolidation Loans. Other types of federal loans may still accrue interest during deferment, and that interest will capitalize upon exiting deferment unless you were enrolled in an income-driven repayment plan.

While grace periods are automatic, you’ll need to request a student loan deferment or forbearance and meet certain eligibility requirements. In some cases — during a medical residency or National Guard activation, for example — a lender is required to grant forbearance.

Pros and Cons of Using Your Full Grace Period

A grace period can be beneficial since it gives you time to get your financial situation in order before you need to start repaying your loans. However, there are also disadvantages to a grace period. Here are some pros and cons to weigh as you’re thinking about when to start paying student loans.

Pros

•   A grace period gives you time to find a job after graduation and start earning a salary.

•   You can create a budget and start saving money to put toward your student loan payments.

•   For those with Direct Subsidized loans, interest does not accrue on these loans during the grace period

Cons

•   With many student loans, interest does accrue, which increases the overall amount you need to repay.

•   The interest may also capitalize and be added to the principal balance of your loan so that you’re effectively paying interest on the interest.

•   Having more debt to repay can increase your debt-to-income (DTI) ratio, which could impact your credit score and your ability to borrow money for other purposes, such as taking out a mortgage.

The Takeaway

Federal student loan grace periods are typically six months from your date of graduation, during which you don’t have to make payments. Most federal student loans have grace periods. Private student loan terms vary by lender. However, some lenders, like SoFi, match federal grace periods for undergrad loans.

During your grace period, you may want to make payments anyway, even interest-only payments, to prevent your balance from growing. The grace period is a good time to create a new budget, choose a repayment plan, and set up autopay.

If you have trouble making your payments, you have options, from income-driven repayment plans to loan consolidation to 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

How do I know if my student loan has a grace period?

To find out if your student loan has a grace period, check your loan documents. As part of the terms and conditions stated on the documents, you should find information about a grace period if there is one, including how long it is. If you can’t find your loan documents or you’re still not sure if your loan has a grace period, call your loan servicer.

Can I start making payments before my grace period ends?

Yes, you can start making payments before your grace period ends. If you can afford to do so, making early payments can help keep your principal balance from growing and interest from accruing and potentially capitalizing. Even if you make interest-only payments, it can help reduce the total interest you’ll pay on the loan.

What happens if I don’t make a payment after my grace period?

If you fail to make student loan payments after your grace period ends, your loan could eventually go into default. A student loan is considered in default once you are nine months late on your payments. This could damage your credit rating and your future ability to take out a loan. If you’re having trouble making your loan payments, contact your loan servicer right away to see what your options are. You may be able to apply for income-driven repayment, forbearance, or deferment.

Does refinancing affect my grace period?

Whether refinancing affects your grace period depends on the lender. Some private lenders, like SoFi, will honor your grace period, but with others, student loan repayment may begin right away. Check with your refinancing lender.

Are grace periods the same for federal and private student loans?

No, grace periods are not the same for federal and private student loans. Federal student loans typically have a six-month grace period, though some Perkins loans have a nine-month grace period. Not all private lenders offer a grace period. Those who do typically offer a six-month grace period for undergraduates, and nine months for graduate students.

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).

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. 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 subject to change. This information is current as of 4/22/2025 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.

SOSLR-Q126-005

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Feb
02
2026
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Should I Refinance My Federal Student Loans?

By | Fresh Out of School, Student Loans, student_loan | No Comments

Refinancing federal student loans can either help you pay down your loans sooner (by shortening your term) or lower your monthly payment (by extending your term). However, when you refinance federal student loans with a private lender, you may lose federal benefits and protections.

Refinancing is not a simple decision to make. Read on to learn more about federal student loan refinancing and whether it’s right for you.

Key Points

•   With refinancing, you can pay off your federal student loans sooner or lower your monthly loan payments.

•   Refinancing involves rolling your private and federal loans into a new private loan with a different term and interest rate.

•   The benefits of refinancing include potential savings on interest, lower monthly payments, and streamlined repayments.

•   Refinancing your student loans with a private lender involves careful consideration, as you lose the benefits and protections that come with government-held student loans.

•   Factors such as your credit score, your income, and market conditions can influence the terms of your student loan refinancing.

What Is Federal Student Loan Refinancing?

If you graduated with student loans, you may have a combination of private and federal student loans. Federal student loans are funded by the federal government. Direct Subsidized Loans and Direct PLUS Loans are both examples of these.

Interest rates on federal student loans are fixed and set by the government annually. The rate for the 2025-26 school year is 6.39% for undergraduate students. Private student loan rates are set by individual lenders. If you’re unhappy with your current interest rates, you may be able to refinance your student loans with a private lender and a new — ideally lower — interest rate.

Recommended: Types of Federal Student Loans

Can I Refinance My Federal Student Loans?

It is possible to refinance your federal student loans with a private lender, but you lose the benefits and protections that come with a federal loan, such as income-based repayment plans and public service-based loan forgiveness. On the plus side, refinancing may allow you to pay less interest over the life of the loan or pay off your debt sooner.

💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-hidden-fees loans, you could save thousands.

How Do Refinancing and Consolidation Differ?

Student loan consolidation and student loan refinancing are not the same thing, but it’s easy to confuse the two. In both cases, you’re signing different terms on a new loan to replace your old student loan(s).

Consolidation bundles multiple federal student loans together, allowing borrowers to repay with one monthly bill. However, it does not typically get you a lower interest rate. When you consolidate federal student loans through the Direct Consolidation Loan program, the resulting interest rate is the weighted average of the original loans’ rates, rounded up to the nearest one-eighth of a percent. This means you don’t usually save any money. If your monthly payment goes down, it’s usually because the loan term has been extended, and you’ll spend more on total interest in the long run.

Refinancing, on the other hand, rolls your existing federal and private loans into a new private loan with a different loan term and interest rate. When you refinance federal and/or private student loans, you get a new interest rate. This rate can be lower if you have a strong credit history, saving you money. You may also choose to lower your monthly payments or shorten your payment term (but not both).

Recommended: Student Loan Consolidation vs Refinancing

What Are the Potential Benefits of Refinancing Federal Student Loans?

Potential Savings in Interest

The main benefit is potential savings. If you refinance federal loans at a lower interest rate, you could save thousands over the life of the new loan. Plus, you may be able to switch out your fixed-rate loan for a variable-rate loan if that makes more financial sense for you (more on variable rates below).

Lower Monthly Payments

You can also lower your monthly payments, which typically involves lengthening your loan term and paying more in overall interest. (Shortening your term usually results in higher monthly payments but more savings in total interest.)

Streamlining Repayments

Refinancing multiple loans into a single loan can help simplify the repayment process. Instead of multiple loan payments with potentially different servicers, refinancing allows you to combine them into a single monthly payment with one lender.

What Are the Potential Disadvantages of Refinancing Federal Loans?

When you refinance federal loans with a private lender, you lose the benefits and protections that come with government-held student loans. Those benefits fall into three main categories:

Deferment/Forbearance

Most federal loans will allow current borrowers to put payments on hold through deferment or forbearance when they are experiencing financial hardship. Student loan deferment allows you to pause your subsidized loan payments without accruing interest, while unsubsidized loans continue to accrue interest.

With student loan forbearance, you can reduce or pause your payments, but interest usually accrues during the forbearance period. Some private lenders do offer forbearance — check your lender’s policies before refinancing.

Special Repayment Plans

Current federal loans offer extended, graduated, and income-driven repayment plans (such as Pay As You Earn, or PAYE), which allow you to make payments based on your discretionary income. However, it’s important to note that these plans typically have a higher total interest over the life of the loan. Private lenders do not offer these programs.

Student Loan Forgiveness

Teachers, firefighters, social workers, and other professionals who work for select government and nonprofit organizations may apply for Public Service Loan Forgiveness (PSLF). Changes made by the former Biden Administration have made qualifying easier — even for borrowers who were previously rejected. Learn more in our guide to PSLF.

The Teacher Loan Forgiveness program is available to full-time teachers who complete five consecutive years of teaching in a low-income school. Find out more in our Teacher Loan Forgiveness explainer.

You may be eligible for forgiveness under an income-driven repayment (IDR) plan after 20 or 25 years of payments. Most of the current plans are scheduled to close in the coming years, leaving only Income-Based Repayment for current borrowers or the new Repayment Assistance Plan, which launches in July 2026. Learn about your options in our guide to IDR plans.

Private student loan holders are not eligible for these programs.

Potential Advantages of Refinancing Federal Student Loans Potential Disadvantages of Refinancing Federal Student Loans
Lower Interest Rate: Refinancing provides an opportunity to qualify for a lower interest rate, which may result in cost savings over the long term. There is also the option to select a variable rate for individual financial circumstances. Loss of Deferment and Forbearance Options: These programs allow borrowers to temporarily pause their payments during periods of financial difficulty.
Adjustable Loan Term: This allows borrowers to make lower monthly payments, usually by extending the loan term, which could make loan payments easier to budget for but may increase the total amount of the loan in the long run. Loss of Federal Repayment Plans: Loan holders become ineligible for special repayment plans, such as income-driven repayment.
Getting a Single Monthly Payment: Combining existing loans into a new refinanced loan can help streamline monthly bills. Loss of Loan Forgiveness: Borrowers become excluded from federal forgiveness programs, including Public Service Loan Forgiveness.



How Many Times Can You Refinance Your Student Loans?

There is no limit to the number of times you can refinance your student loans. Each time you refinance, you essentially take out a new loan to pay off the old one, ideally with better terms. However, it’s important to ensure that refinancing is beneficial for your financial situation. Here are some key considerations:

Improved Financial Situation

You might qualify for better loan terms if your credit history or financial circumstances have changed for the better.

•   Credit Score: If your credit score has improved, you may qualify for a lower interest rate.

•   Income: A higher or more stable income can make you eligible for better loan terms.

•   Debt-to-Income Ratio: A lower debt-to-income ratio can also help you secure more favorable terms.

Market Conditions

•   Interest Rates: If market interest rates have decreased since your last refinancing, you might be able to get a better rate.

•   Promotional Offers: Keep an eye out for new promotional rates or special offers from lenders.

Loan Terms

•   Shorter Terms: Refinancing to a shorter loan term can reduce the overall interest you pay.

•   Extended Terms: If you seek lower monthly payments, extending the loan term can provide relief, though it may increase the total interest you pay over the life of the loan.

•   Consolidation: Refinancing multiple loans into a single loan can simplify your payments and possibly offer you better terms.

The Takeaway

If you’re looking to pay off your federal student loans sooner or lower your monthly payments, refinancing could be a feasible option. Potential benefits include getting a lower interest rate, adjusting the loan term, and streamlining repayments into a single loan.

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.



FAQs on Refinancing Your Federal Student Loans

Who typically chooses federal student loan refinancing?

Many borrowers who refinance have graduate student loans, since federal unsubsidized and Grad PLUS loans have historically offered students less competitive rates than federal student loans. To qualify for a lower interest rate, it’s helpful to show high income and a history of managing credit responsibly, among other factors. The one thing many refinance borrowers have in common is a desire to save money.

Do I need a high credit score to refinance federal loans?

Generally speaking, the better your history of dealing with debt (which is reflected in your credit score), the lower your new interest rate may be, regardless of your chosen lender. However, though many lenders look at credit scores as part of their analysis, it’s not the single defining factor. Underwriting criteria vary from lender to lender, so shopping around is advisable.

For example, SoFi evaluates a number of factors, including employment and/or income, credit score, and financial history. Check here for current eligibility requirements.

Are there any fees involved in refinancing federal loans?

Fees vary and depend on the lender. That said, SoFi has no application or origination fees.

💡 Quick Tip: Enjoy special member benefits and no hidden fees when you refinance student loans with SoFi.

Should I choose a fixed- or variable-rate loan?

Generally speaking, a variable-rate loan can save you money if you’re reasonably certain you can pay off the loan somewhat quickly. The more time it takes to pay down that debt, the more opportunity there is for the index rate to rise — taking your loan’s rate with it.

Most federal student loans are fixed-rate, meaning the interest rate stays the same over the life of the loan. When you apply to refinance, you may be given the option to choose a variable-rate loan.

Fixed-rate refinancing loans typically have:

•   A rate that remains the same throughout the life of the loan

•   A higher rate than variable-rate refinancing loans (initially, at least)

•   Payments that stay the same over the life of the loan

Variable-rate refinancing loans typically have:

•   A rate that’s tied to an “index” rate, such as the prime rate

•   A lower initial rate than fixed-rate refinancing loans

•   Payments and total interest costs that vary based on interest rate changes

•   A cap, or a maximum interest rate

What happens if I lose my job or can’t afford loan payments?

Some private lenders offer forbearance — the ability to put loans on hold — in case of financial hardship. Policies vary by lender, so it’s best to learn what they are before you refinance. For policies on disability forbearance, check with the lender directly, as this is often considered on a case-by-case basis.

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).

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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