SoFi

Grad PLUS loans are federal student loans for graduate and professional students. Although Grad PLUS loans have higher interest rates and fees than some other types of federal student loans, they also have a major benefit — virtually no borrowing limits. You can borrow up to the full cost of attendance of your school, minus any other financial aid you’ve already received.

Read on for more on how Grad PLUS loans work, including their eligibility requirements, interest rates and repayment options.

What Are Grad PLUS Loans?

If you’re planning to attend a graduate or professional program, a Grad PLUS loan could help cover costs. Issued by the Department of Education, Grad PLUS loans are student loans designed for graduate and professional students.

PLUS loans are not the only federal loans available to you as a graduate student — you can also borrow Direct unsubsidized loans. Direct unsubsidized loans have lower interest rates and fees than PLUS loans, but they come with borrowing limits.

If you’ve hit your limit and need additional funding, a Grad PLUS loan could cover the gap. As mentioned above, you can borrow up to the full cost of attendance of your program, minus any other financial aid you’ve already gotten. This flexibility can be helpful for students who are attending pricey programs.

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

What Can Grad PLUS Loans Be Used for?

Grad PLUS loans can be used for tuition, fees and other education-related expenses. These expenses include,

•   Housing

•   Food

•   Textbooks

•   Computers and other supplies

•   Study abroad expenses

•   Transportation

•   Childcare costs

A Grad PLUS loan will first be disbursed to your financial aid office, which will apply the funds toward tuition, fees, room and board, and any other school charges. The financial aid office will then send any remaining funds to you.

Recommended: What Can You Use Student Loans For?

Who Is Eligible for Grad PLUS Loans?

To be eligible for a Grad PLUS loan, you must be a graduate or professional student enrolled at least half-time at an eligible school. What’s more, your program must lead to a graduate or professional degree or certificate.

You’ll also need to meet the eligibility requirements for federal financial aid (more on this below), as well as submit the Free Application for Federal Student Aid (FAFSA®).

Typical Grad PLUS Loan Requirements

Besides being enrolled in an eligible graduate or professional program, you need to meet a few other requirements to take out a Grad PLUS loan:

Meet the Requirements for Federal Student Aid

Since Grad PLUS loans are part of the federal student aid program, you must be eligible for federal aid to borrow one. Here are some of the criteria you need to meet:

•   Be a U.S. citizen or eligible noncitizen

•   Have a valid Social Security number (with some exceptions)

•   Have a high school diploma, General Educational Development (GED) certificate or other recognized equivalent

•   Maintain satisfactory academic progress while in school

•   Not already be in default on a federal student loan or owe money on a federal grant

If you’re a non-U.S. citizen or have an intellectual disability or criminal conviction, additional requirements might apply.

Submit the FAFSA

You’ll need to submit the FAFSA before you can borrow a Grad PLUS loan. After applying to grad school, you can submit this form, free of charge, on the Federal Student Aid website, with the myStudentAid mobile app or via the mail. Since the FAFSA only applies to a single academic year, you’ll need to submit it every year you’re in school and want to receive financial aid.

Complete the Grad PLUS Loan Application

Along with submitting the FAFSA, you’ll also need to fill out a separate application for the Grad PLUS loan. You can find and submit this application on the Federal Student Aid website, though some schools have separate processes. Your financial aid office can advise you on the steps you need to take.

If your application is approved, you’ll need to agree to the terms of the loan by signing a Master Promissory Note. If you haven’t borrowed a Grad PLUS loan before, you’ll also be required to complete student loan entrance counseling.

Not Have Adverse Credit History (or Apply With an Endorser)

While you don’t need outstanding credit to qualify for a Grad PLUS loan, you can’t have adverse credit. According to the Department of Education, you have adverse credit if one of the following applies to you:

•   You have accounts with a total balance greater than $2,085 that are 90 or more days delinquent

•   You’ve experienced a default, bankruptcy, repossession, foreclosure, wage garnishment or tax lien in the past five years

•   You’ve had a charge-off or write-off of a federal student loan in the past five years

If you have adverse credit, you have two options:

•   Appeal the decision due to extenuating circumstances. For example, you could provide documentation showing that you paid off a delinquent debt on your credit report.

•   Apply with an endorser who does not have adverse credit. Your endorser will be responsible for repaying the loan if you fall behind on payments.

Grad PLUS Loans Interest Rates

Grad PLUS loans come with fixed interest rates that will remain the same over the life of your loan. They also have a disbursement fee, which is a percentage of your loan amount that gets deducted from your loan.

Congress sets rates and fees on federal student loans periodically. These are the current Grad PLUS loan interest rates and fees:

Interest Rate (for loans disbursed on or after July 1, 2021 and before July 1, 2022)	Disbursement Fee (for loans disbursed on or after Oct. 1, 2021, and before Oct. 1, 2022)
6.28%	4.228%

Repaying Your Grad PLUS Loans

Grad PLUS loans are eligible for a variety of federal repayment plans:

•   Standard repayment plan, which involves fixed monthly payments over 10 years.

•   Income-driven repayment, specifically Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment or Income-Contingent Repayment. These plans adjust your monthly student loan payments to a percentage of your discretionary income while extending your loan terms to 20 or 25 years. If you’ve made on-time payments but still have a balance at the end of your term, it may be forgiven. The amount forgiven may be considered taxable income by the IRS.

•   Extended repayment, which extends your repayment term to 25 years and lets you pay a fixed or graduated amount.

•   Graduated repayment, which lowers your student loan payments in the beginning and increases them every two years. You’ll pay off your loan over 10 years, and your final payments won’t be more than three times greater than your initial payments.

Grad PLUS loans are also eligible for certain federal forgiveness programs, such as Public Service Loan Forgiveness.

Other Options to Pay for Grad School

Grad PLUS loans aren’t the only way to pay for graduate school. Here are some alternative options:

Direct Unsubsidized Loans

You can borrow up to $20,500 per year in Direct Unsubsidized loans as a graduate student with an aggregate loan limit of $138,500, including any loans you borrowed as an undergraduate.

Here are the interest rate and disbursement fee for graduate students:

Interest Rate (for loans disbursed on or after July 1, 2021 and before July 1, 2022)	Disbursement Fee (for loans disbursed on or after Oct. 1, 2020, and before Oct. 1, 2022)
5.28%	1.057%

Grants and Scholarships

Besides student loans, you can also pursue grants and scholarships for graduate school. You can find grants and scholarships from a variety of sources, including the Department of Education, your state, your school or a private organization. By earning grants and scholarships, you might not need to borrow as much in student loans.

Private Student Loans

You can also explore your options for private graduate student loans from banks, online lenders or credit unions. Some lenders offer interest rates that start lower than Graduate PLUS loan interest rates and don’t charge an origination fee.

Although private student loans aren’t eligible for federal repayment plans or programs, some lenders offer flexible repayment options or deferment if you need to pause payments. But, because private student loans aren’t required to offer the same borrower benefits as federal student loans, they are generally borrowed as a last resort option after all other sources of financing have been exhausted.

The Takeaway

If you’re looking for ways to pay for graduate school, a Grad PLUS loan could help. You can use this flexible loan to cover your school’s cost of attendance, as well as choose from a variety of federal repayment plans when it comes time to pay it back.

A Grad PLUS loan, however, might not be your most affordable borrowing option. Depending on your credit and other factors, it may be possible to find a private student loan with an even lower interest rate than a Grad PLUS loan.

SoFi offers private student loans with competitive rates, no fees and flexible repayment terms. Learn more about SoFi’s no-fee private student loans.

FAQ

What kind of loan is Grad PLUS?

The Grad PLUS loan is a federal graduate student loan issued by the Department of Education. It is designed specifically for graduate and professional students.

Is there a max on Grad PLUS loans?

There is virtually no limit on the amount you can borrow with a Grad PLUS loan. You can borrow up to your school’s cost of attendance, minus any other financial aid you’ve already received.

Can Grad PLUS loans be used for living expenses?

Yes, you can use Grad PLUS loans to cover your living expenses while at school. You must use your loan on education-related expenses, which can include housing, food, supplies, transportation and other costs related to attending school.

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Photo credit: iStock/PeopleImages
SOSL0222010

Read more

Savings accounts are designed to hold money that you don’t plan to spend right away. You can use them to save for short-term goals or long-term goals and most savings accounts pay interest on deposits, helping you to grow your money.

If you’re new to banking, you might have questions like:

•   Is a savings account necessary if you have a checking account?

•   Why would you put money in a savings account?

•   Is it worth putting money in a savings account?

•   What is the best savings account to have?

Understanding the basics of how savings accounts work matters for making the most of your money. So here, we’ll spell out what exactly a savings account is and how it works, the pros and cons of savings accounts, the various kinds of savings accounts, and how to open one if you feel it’s right for you.

What Is a Savings Account?

A savings account is a deposit account offered by banks, credit unions and non-bank fintech companies (like Chime or Current). Savings accounts are designed to hold money you want to save versus checking accounts, which are meant to hold money you plan to spend.

In terms of features and benefits, here’s what makes a savings account unique:

•   Interest-bearing. Banks and other financial institutions can pay savers interest on their deposits. Online banks like SoFi tend to offer a higher annual percentage yield (APY) than brick-and-mortar banks. For example, at this writing, SoFi was offering 1.25% APY which was 41 times the national average.

•   Withdrawal limits. Savings accounts are meant for saving, not spending. Banks can impose monthly withdrawal limits and charge an excess withdrawal fee if you go over that limit. For instance, the Federal Reserve Board had limited withdrawals and transfers from a savings account to six per month. This guideline however was suspended in 2020 due to the COVID-19 pandemic, but it could be reinstated.

•   Low minimums. Opening a savings account may only require as little as $1 to get started, though the usual range is $25 to $100. The minimum deposit may be higher at brick-and-mortar banks.

•   Automated growth. Savings accounts make it easy to grow your balance through automatic deposits. You can schedule part of your paycheck to be deposited to savings, for example, or set up recurring transfers from another bank account.

How Savings Accounts Work

Savings accounts work by letting you deposit money and then withdrawing it later while earning interest in the meantime. Here’s an example of how to spend (and save) with a savings account.

Say you want to open a new bank account to hold your emergency fund. Your savings goal is $5,000. You open a new account online that has no minimum balance requirements, no overdraft fees, and no monthly fees.

You deposit $100 into your account initially and set up an automatic deposit of $200 per month after you are paid. If the account offers a 1.00% APY, after one year, you’d have $2,514.04 in savings. Of that amount, you’ve deposited $2,500 and the remaining $14.04 is the interest earned.

So is it worth putting money in a savings account? It can be, if you’re earning a high APY on your balances. The more you deposit and the more interest you can earn, the faster your money can grow over time. Just make sure you don’t wind up having that interest eroded by fees.

Benefits of Savings Accounts

Why should I put my money in a savings account? It’s a good question to ask, since there are other places you keep your money instead. Here, we’ll share the advantages of having at least one savings account.

Earn Interest

The main reason to consider a savings account is the opportunity to earn interest. Think of the interest you earn on savings as a reward for keeping your money in the bank instead of spending it.

If you’re looking for the best savings account interest rate, online banks are a good place to start. Online banks tend to have lower overhead costs than traditional banks so they can pass that savings on to customers in the form of a higher APY on deposits. You can look for what are called high-yield savings accounts or growth savings accounts to help you maximize your interest earnings.

Fund Specific Goals

Savings accounts can help you fund different goals and dreams. For example, you might be interested in opening a savings account for a baby if you plan to grow your family. Or you may want to save for a vacation or even a down payment on a home.

One of the advantages of having multiple savings accounts is that you can keep funds for each goal separate. This can make it easier to decide how much to allocate toward each goal and track your progress over time.

Convenient Access

Savings accounts are highly liquid since the money that’s in them is easily accessible. You can connect them to other bank accounts in order to transfer funds back and forth. Or you might be able to access savings using an ATM card, debit card, or even checks if your bank offers those features. You’re also not locked into the account the way you might be with a CD account, which can impose a penalty if you withdraw money before it matures.

Security

If you open your savings account at a bank that has FDIC insurance or a credit union that’s insured by NCUA (and most of these financial institutions do carry this insurance), you are insured for up to $250,000 per depositor, per bank, per account category.

Disadvantages of Savings Accounts

There are lots of benefits to keep in mind when thinking about why you would put money into a savings account. But there are a few drawbacks to consider as well.

Low Rates

Savings account interest rates can vary from bank to bank. Again, online banks may offer the highest rates for savers, but rates can change over time. This is because banks will often adjust savings rates following movements in the federal funds rate. So it’s possible that you might find a savings account with a great rate initially, only to see that rate move up or down over time. For this reason, it’s a good idea to keep an eye on that APY you’re earning.

Withdrawal Limits

Savings accounts can offer convenient access, but there may be limits on how often you can make withdrawals. As mentioned, banks typically can charge an excess withdrawal fee if you withdraw money from savings more than six times per month, though this was suspended in 2020 due to the coronavirus pandemic. If you get in the habit of making excess withdrawals it can be costly. And in some cases, the bank might convert your savings account to a checking account or require you to close it.

Slower Growth

A savings account can grow your money, but you may see better returns by keeping money elsewhere. For example, you could open an investment account and use some of the excess money you have in savings to buy stocks, cryptocurrency, exchange-traded funds (ETFs) or IPOs. Over time, you may see much higher returns from your investments than you would from your savings.

How to Open a Savings Account

Opening a savings account isn’t difficult; most banks allow you to open checking and savings online in just a few minutes. It will go especially quickly if you have the documentation ready before you start the process. In many cases, you’ll need the following:

•   Your contact information

•   A driver’s license, passport, or other form of acceptable government photo ID

•   Social Security number or an ITIN number

•   Date of birth

•   Address (you may well need a utility bill to verify this)

Before you open an account, it’s important to do some research first. Here are some of the things to consider when choosing a savings account:

•   Minimum deposit requirements

•   Minimum balance requirements

•   Monthly service fees, if any

•   Interest rate you could earn

•   How you can access and manage your money (i.e. online banking, mobile app, ATM card, etc.)

•   Monthly withdrawal limits, if any

•   Added features or benefits, if any

Once you decide on an account, you can move on to account opening. You’ll need to link an existing bank account to make your first deposit if you’re saving with a brand new bank, or you could bring cash or a check if you go with a bricks-and-mortar bank. You’ll also need to decide how much of your paycheck you want to save if you’re setting up recurring deposits.

Alternatives to Savings Accounts

A savings account isn’t the only place to keep your money. Banks can offer other options for deposit accounts, including ones that earn interest. If you’re looking for other ways to hold funds, here are three possibilities.

Interest Checking

Interest checking accounts, also known as high-yield checking accounts, work like regular checking accounts but they also pay interest on balances the way a savings account might. They may require a minimum balance though.

Certificate of Deposit Account (CD)

A CD account is a time-deposit account in which you agree to save money for a set period of time. The balance earns interest, and, when the CD matures, you can withdraw the initial deposit and the interest that accrued or start a new CD. These accounts can be good for saving money you know you won’t need to spend in the near term. One thing to keep in mind, however, is that if you withdraw money before the CD matures, you will likely pay a penalty.

Money Market Account (MMA)

A money market account is a type of deposit account that combines features of checking and savings accounts. For example, the account may earn interest, and you might be able to write checks or make withdrawals using a debit card. But monthly limits on withdrawals may apply.

Worth noting: Some money market accounts can offer a higher APY than savings accounts, though you may have to make a higher minimum deposit or maintain a higher minimum balance to earn that rate.

The Takeaway

Is a savings account necessary? The answer can depend on your financial goals and how you prefer to manage your money. But a savings account can be a useful place to keep money that you plan to use in the future and earn a bit of interest while it sits. It can also be especially convenient if linked to your checking account, so you can set up automatic deductions when you are paid. This technique can seamlessly whisk away money before you spend it.

If you’re interested in finding the right checking and savings option, consider SoFi Checking and Savings If offers a competitive 1.25% APY, and no monthly, minimum-balance, or overdraft fees. So your money makes more money, faster!

Ready to bank smarter with SoFi?

FAQ

What are the requirements before opening a savings account?

Banks usually ask to verify your identity before opening a savings account and will collect your Social Security number, driver’s license or passport number, and other credentials. You’ll also need to make a minimum deposit to fund your account, though some banks will allow you to do this after the account is open. This will require an account number and routing number for an existing bank account that you’ll transfer funds from, cash, or a check.

Is the interest accrued from a savings account worth it?

Earning interest on a savings account is worth it if you’re getting a decent rate. Online banks can offer higher APYs to savers than traditional banks. But earning even some interest is better than nothing if the alternative is keeping your savings in a piggy bank or under the mattress.

Can you withdraw from a savings account anytime?

Banks usually don’t restrict when you can withdraw money from a savings account, though they may limit how often you can do so. It’s not uncommon for banks to limit you to six withdrawals per month and charge a fee if you go over that limit. However, this policy was suspended due to the COVID-19 pandemic.

---

Photo credit: iStock/Povozniuk

SoFi members with direct deposit can earn up to 1.25% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 0.70% APY on all account balances in their Checking and Savings accounts (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.25% APY is current as of 4/5/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOBK0222009

Read more

As a student (or parent) it can be easy to focus solely on the college application process, and completely forget about financial aid. You spend so much time studying for the SATs (or ACTs) and tweaking your college essay so it perfectly represents you, that after you’ve been accepted and the reality of tuition payments set in, you might feel momentary panic.

It’s no secret that college tuition is expensive. Students and parents save for years to pay for higher education, but sometimes that’s just not enough. According to a Sallie Mae® study, “How America Pays for
College 2021 ,” parent income and savings covered 45% of college costs while student income and savings covered 8% of the costs.

Many of us rely on financial aid to bridge the payment gap. Financial aid may come from multiple sources, including scholarships, grants, work-study, federal student loans, and private student loans.

Scholarships and grants are extremely useful forms of financial aid, since students are not typically required to pay back the money they receive. An online survey of students and parents found 72% of college families in 2021 relied on scholarships and grants to cover a portion of college expenses, according to Sallie Mae’s study.

Scholarships, grants, and savings often aren’t enough to cover the cost of attending college. Sallie Mae says 47% of college families borrowed money to help pay for college in 2021. Some families used home equity loans and credit cards, but federal student loans represented the most frequently used source of borrowed money followed by private student loans.

To top it all off, the financial aid application process can be confusing. Between federal aid and other scholarships, it can be difficult to keep everything straight.

Most often, the first step in applying for financial aid is filling out the Free Application for Federal
Student Aid (FAFSA®). You can begin filling out the FAFSA on October 1 for the following academic year. The federal FAFSA deadline for the 2022–23 academic year is June 30, 2023, while colleges and states may have their own FAFSA deadlines.

Some schools use an additional form to determine scholarship aid — the College Scholarship
Service Profile .

Taking the effort to apply for financial aid early can have a positive impact on your tuition bill. Below we highlight seven financial aid secrets you should know.

1. Decision Day vs Summer Melt

May 1 is usually decision day, the deadline when prospective college students must decide which college they plan to attend in the fall. But even after this deadline, students can change their minds. This phenomenon is known to industry professionals as “summer melt,” and sometimes it’s triggered by FAFSA verification setbacks.

Students who receive insufficient need-based financial aid, for example, might be compelled to reconsider their college enrollment decisions. Summer melt can give you an opportunity to select a more affordable school for you if you’ve encountered a FAFSA verification roadblock.

Summer melt is a common problem that causes schools to lose students during the summer. Because of this, schools may have a bit of secret wiggle room in their acceptance policy to admit new students over the summer for the fall semester.

2. Writing a Letter

You might be able to take advantage of summer melt with this secret: write a letter. After you get your financial aid offer, you could write a letter to your school’s financial aid office to open the lines of communication.

Let them know how excited you are to attend school in the fall. That’s where you could include a thoughtfully worded inquiry for any additional aid that you might qualify for as a result of summer melt.

When students decide to switch schools or not attend at the last minute, it means that they also won’t be using their financial aid award — which could now be available to other students.

3. Calling the Financial Aid Office

Another way to potentially take advantage of summer melt is to call your school’s financial aid office. Instead of calling immediately after you receive your financial aid award, think about calling in June or July. This allows financial aid offices time to account for students who have declined their financial aid packages.

An appropriately timed call to the financial aid office at your school could mean additional financial aid is allocated to your package — no guarantees, of course, but it never hurts to ask.

4. Submitting Paperwork and Applications On Time

Every school’s financial aid office has to follow a budget. Some financial aid is offered on a first-come, first-served basis, so it helps to submit forms, like the FAFSA, and other applications, on time or even ahead of schedule.

You may be out of luck if you apply for assistance after your university’s financial aid office has met their budget for the year. Some states have early winter deadlines for awarding scholarships and grants. Tennessee residents, for example, must complete their FAFSA by February 1 to be considered for a state-funded Tennessee Student Assistance Award grant.

You can check the deadlines for financial aid in your state through the U.S. Department of Education’s Federal Student Aid website .

5. Being Prepared

Have the basics ready to go before you sit down to fill out the FAFSA. If you have all of the information you need before you begin filling out the FAFSA, you’ll likely have an easier time filling out the information.

Usually, each parent and the student will need to create a username and password, which is called the Federal Student Aid ID (FSA ID). You’ll also need:

•   Social Security numbers (for you and your parents)

•   Bank statements and records of untaxed income (possibly)

•   You and your parents’ tax returns (aid awards are based on income from two years ago)

•   Any W2 forms

•   Net worth calculations of your investments (for students and parents)

6. Being Wary of Services that Charge You for Help

If you need assistance filling out the FAFSA, avoid any services that charge you. The first F of FAFSA stands for “Free,” so there is no need to pay for a service to fill the form out for you.

If you need assistance filling out the FAFSA, there are plentiful online resources through the U.S. Department of Education .

7. Filing the FAFSA Every Year

For every year you are a student and want to receive federal aid, you’ll have to file the FAFSA. Get in the habit of filing it every fall, so you’re closer to the top of the financial aid pile.

The Takeaway

Scholarships and grants can be super-helpful additions to a federal financial aid package. The money can reduce your tuition bill and doesn’t usually need to be repaid. Work-study can also be beneficial in helping college students make ends meet.

If you need additional help financing your college experience, SoFi offers private student loans with an entirely digital application process and no fees whatsoever. Potential borrowers can choose between a variable or fixed interest rate and have the option to add a cosigner to the loan.

Learn more about SoFi’s flexible repayment plans and application process for private student loans.

---

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
SOSL18228

Read more

Did you know that you may be able to draw out student loan repayment for 20 or 30 years? That means lower monthly payments (cool!) but more total interest paid (less cool).

But if your payments are a strain, consolidating and refinancing student loans are two ways to stretch out repayment terms and tame those monthly bills.

Federal student loans may be consolidated into one. Both federal and private student loans can be refinanced into one new loan, preferably with a lower rate. A guide of student loan refinancing could be a helpful read.

How Long Are Student Loan Repayment Terms Usually?

Federal student loan borrowers are placed on the standard repayment plan of 10 years unless they choose a different plan. They enjoy a six-month grace period after graduating, leaving school, or dropping below half-time enrollment before repayment begins.

You won’t see a standard repayment plan for private student loans, but the general repayment term for private student loans is also ​10 years.

In the case of both private and federal student loans, you may be able to extend your student loan payments.

For example, if you have federal student loans, you can explore the following options:

•   Graduated repayment plan: You’d start with lower payments, and payments would increase every two years for up to 10 years, or up to 30 years for Direct Consolidation Loans. Consolidation combines all of your current federal student loans into one, with a weighted average of the loan interest rates, and often extends your repayment time frame.

•   Extended repayment plan: With this plan, you can repay loans for up to 25 years, though you must have $30,000 or more in Direct or Federal Family Education Loan Program loans.

•   Income-driven repayment plan: The four income-based repayment plans allow you to make payments based on your income, particularly if your income is low compared with your loan payments. You can become eligible for forgiveness of any remaining loan balance after 20 or 25 years of qualifying payments or as few as 10 years if you work in public service.

Private student loans and federal student loans may be refinanced by a private lender to a long term.

What Are the Pros and Cons of Extending Repayment Terms?

Let’s take a look at three pros and three cons of extending your student loan repayment terms:

Pros	Cons
Allows for lower monthly payments	You’ll pay more total interest
Gives you more flexibility	Takes more time to pay off loans
Frees up cash for other things	May have to pay a higher interest rate

Lower monthly payments can give you more flexibility and free up your money to go toward other things. However, you could pay considerably more interest over time. You’ll also spend more time paying off your loans.

Here’s an example of what extending student loan repayment can look like, using a student loan calculator:

Let’s say you have $50,000 of federal student loan debt at 6.28% on a standard repayment plan. Your estimated monthly payments are $562.16, the total amount you’ll pay in interest will be $17,459, and your total repayment amount will be $67,459.

•   Term: 10 years

•   Monthly payments: $562

•   Total interest amount: $17,459

•   Total repayment amount: $67,459

Now let’s say you choose to refinance. Refinancing means a private lender pays off your student loans with a new loan with a new interest rate and/or term. In this case, let’s say you opt to refinance to a 20-year term and qualify for a 5% rate. Your estimated monthly payments would be $329.98. You’d pay $29,195 in total interest, and the total repayment would be $79,195 over the course of 20 years.

•   Term: 20 years

•   Monthly payments: $330

•   Total interest amount: $29,195

•   Total repayment amount: $79,195

In this example, doubling the term but reducing the interest rate results in lower monthly payments — a relief for many borrowers — but a higher total repayment sum.

Can you achieve a 25- or 30-year student loan refinance with private lenders? Yes. It’s called consecutive refinances.

How Long Can You Extend Your Student Loans For?

You can extend your federal student loan repayment to 30 years on a graduated repayment plan if you consolidate your loans.

Most private lenders limit refinancing to a 20-year loan term, but borrowers who are serial refinancers may go beyond that.

Consecutive Refinances

You can refinance private or federal student loans as often as you’d like, as long as you qualify, for no cost. Doing so can benefit you when you find a lower rate on your student loans, but be aware of the total picture:

Pros	Cons
May save money every time you refinance	Will lose access to federal programs like loan forgiveness, income-driven repayment, and generous forbearance and deferment if federal student loans are refinanced
May allow for a lower interest rate and lower monthly payments
No fees are required (such as origination fees or prepayment penalties)

How do you know when to refinance student debt? If you find a lower interest rate, you could save money over the life of the new loan.

You can use a student loan refinancing calculation tool to estimate monthly savings and total savings over the life of the loan.

Refinancing Your Student Loans to a 30-Year Term

You cannot directly refinance your student loans into a 30-year term because almost all refinance lenders offer a maximum of 15 or 20 years. But you could take advantage of consecutive refinances to draw out payments for 30 years.

Or you could opt for consolidation of federal student loans for up to 30 years.

Consecutive Refinance Approach

Since there’s no limit on the number of times you can refinance your federal and private student loans, as long as you qualify or have a solid cosigner, you can refinance as many times as you need to in order to lengthen your loan term.

Direct Consolidation Approach

If you have multiple federal student loans, you can consolidate them into a Direct Consolidation Loan with a term up to 30 years. Because the loan remains a government loan, you would keep federal student loan benefits.

You’d apply on the Federal Student Aid website or print and mail a paper application form.

Other Ways to Reduce Your Monthly Student Loan Payments

One of the best ways to reduce your monthly student loan payments is to talk with your loan servicer to determine your options.

Some student loan servicers shave a little off your interest rate if you make automatic payments.

More employers are considering offering help with student loan payments as an employee perk.

And through 2025, employers can contribute up to $5,250 per worker annually in student loan help without raising the employee’s gross taxable income.

Ready to Refinance Your Student Loans?

Is a 30-year student loan refinance a thing? It can be, for serial refinancers. Then there’s the 30-year federal student loan consolidation option. The point of a long term is to shrink monthly payments.

SoFi refinances both federal and private student loans. Find out if one new loan with a new rate and term could help, again paying heed to the fact that refinancing federal student loans will remove access to federal programs like income-driven repayment plans.

It might be the right time right now to refinance student loans with SoFi.

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL SEPTEMBER 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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.

Photo credit: iStock/blackCAT
SOSL1121001

Read more

Private lenders that refinance student loans base rates they offer on the loan term, the borrower’s risk profile, and a rate index. Typically, the most financially stable applicants get the lowest rates.

When the goal is a lower rate, lower monthly payments, or both, the fixed or variable rate you qualify for makes all the difference.

Here’s a look at what you need to know about how interest rates for student loan refinances work.

Student Loan Refinancing, Explained

When you refinance, you take out a new private loan and use it to pay off your existing federal or private student loans. The new loan will have a new repayment term and interest rate, which hopefully will be better.

Most refinancing lenders offer fixed or variable interest rates and terms of five to 20 years. Shortening or lengthening your existing student loan term or terms can affect your monthly payment and the total cost of your new loan. The two key ways to save money by refinancing are:

•   A shorter repayment term

•   A lower rate

Then again, someone wanting lower monthly payments might choose a longer term, but that may result in more interest paid over the life of the loan.

There are no fees to refinance student loans. Nor is there any limit to the number of times you can refinance. Lenders will want to see a decent credit score, a stable income, and manageable debt. Adding a cosigner may strengthen your profile.

Refinancing federal student loans into a private student loan renders federal benefits moot.

Is Consolidation the Same as Refinancing?

Student loan consolidation and refinancing are terms that are often used interchangeably, but they are not technically the same thing. Student loan consolidation most often refers to a federal program that allows you to combine multiple types of federal student loans into a single loan. The new loan will have a new term of up to 30 years, but the new rate will not be lower.

Refinancing of student loans is offered by private lenders, such as banks and credit unions. Federal and/or private student loans are refinanced into one new loan that ideally has a better rate.

What Are Interest Rates?

Interest rates are the amount lenders charge individuals to borrow money. When you take out a loan, you must pay back the amount you borrowed, plus interest, usually represented by a certain percentage of the loan principal (the amount you have remaining to pay off).

When interest rates are high, borrowing money is more expensive. And when interest rates are low, borrowing can be cheaper.

Interest rates can be fixed, variable, or a hybrid. For fixed interest rates, lenders set the rate at the beginning of the loan, and that rate will not change over the life of the loan.

A variable interest rate is indexed to a benchmark interest rate. As that benchmark rises or falls, so too will the variable rate on your loan. Variable-rate loans may be best for short-term loans that you can pay off before interest rates have a chance to rise.

Hybrid rates may start out with a fixed interest rate for a period of time, which then switches to a variable rate.

How Is Interest Rate Different From APR?

While interest rates refers to the monthly amount you’ll need to pay to borrow money, annual percentage rate (APR) represents your interest rate for an entire year and any other costs and fees associated with the loan.

As a result, APR gives you a better sense of exactly how expensive a loan might be, and helps when comparing loan options.

What Factors Influence Student Loan Interest Rates?

Interest rates for federal student loans are set by Congress each year. Federal loans use the 10-year Treasury note as an index for interest rates. These rates apply to all borrowers.

Private lenders, on the other hand, will look at other factors when determining interest rates, such as credit score. Typically, lenders see those with higher scores as more likely to pay off their loans on time, and may reward this with lower interest rates. Lenders see borrowers with lower scores as being at greater risk of defaulting on their loans. To offset the risk, they tend to offer higher interest rates.

Some lenders offer a rate discount if you sign up for their autopay program.

What Drives Student Loan Refinancing Rates?

Student loan refinancing rates are driven by many of the same factors that drive rates on your initial loan, such as credit score. You may want to consider refinancing during this era of low rates or if your financial situation has improved. For example, if you’ve increased your income or you’ve paid off other debts and your credit score received a boost, you may look into refinancing your loans at a lower interest rate.

Many graduates haven’t had much time to build a credit history. A cosigner with good credit may help an individual qualify for a refinance at a lower rate. Cosigners share responsibility for loan payments, of course. So if you miss a payment, they’ll be on the hook.

Refinance Student Loans With SoFi

You might choose to refinance student loans when interest rates remain low or your financial situation has improved, potentially providing access to a new private student loan at a lower rate.

Refinancing may be a good move for borrowers with higher-interest private student loans and those with federal student loans who don’t plan to use federal programs like income-driven repayment, Public Service Loan Forgiveness, or forbearance.

A student loan refinancing calculator can help you determine how much you might save by refinancing your student loans.

When you’re ready to refinance student loans with SoFi, get your rate in minutes.

FAQ

How are student loan refinancing rates calculated?

Lenders base interest rates largely on factors like an applicant’s credit history, income, and debt.

Does refinancing save you money?

When you refinance your student loans with a new loan at a lower interest rate, you will pay less interest over the life of the loan, given the same or similar loan terms.

What is an average interest rate for student loans?

Federal student loan interest rates currently range from 3.73% to 6.28%, not including disbursement fees. Private student loan rates have a wide range for fixed- and variable-rate loans. The average rate among all student loans, federal and private, is 5.8%, according to Education Data researchers.

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL SEPTEMBER 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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.

Photo credit: iStock/Kateryna Onyshchuk
SOSL0222023

Read more