Average Cost of Medical School

Did you declare you’d be a doctor someday back when you were just a little kid?

Perhaps your parents bought you one of those toy medical bags, with a plastic stethoscope and tiny bottles for candy pills. Or maybe you got your interest from a medical drama on TV, or while dissecting a frog in a sixth-grade science class.

Little did you know way back then what it would take to make that dream come true. Hard work. Great grades. Years of school and training. And lots and lots of money.

What Is the Average Cost of Medical School Per Year?

According to the Association of American Medical Colleges (AAMC) Summary Statistics , the average first-year medical student at a public medical school paid $31,905 for tuition alone during the 2018-19 academic year.
The average first-year med student at a private school paid $53,901 for tuition. Add in fees and health insurance costs, and the numbers increase to $36,755 and $59,076, respectively.

And that’s for students who had resident status. Non-resident first-year students paid an average of $55,291 in tuition ($60,802 with health insurance and fees) to attend a public medical school. The average cost was $55,310 for tuition ($60,474 with health insurance and fees) for a non-resident student at a private school.

That means the average cost of four years of medical school could range from a low of $147,020 up to $243,208. (And that’s if tuition doesn’t increase each year. Which it typically does, according to the AAMC summary.)
Remember, these are averages.

The maximum first-year cost (tuition, health insurance, and fees) reported to the AAMC was $99,014 for a non-resident student at a public medical school.

And those numbers don’t include the costs involved with applying to medical school (test fees, test prep, application fees, and college visits), or the expenses a student may have to cover once they get in and are living away from home.

The basic costs of living—housing, transportation, food, etc.—can vary widely depending on the location of the medical school. Finding a reasonable place to rent in New York City vs. Salt Lake City could mean a big difference to a student on a budget.

But no matter where a med student lands, he or she will likely have to pony up plenty for books and supplies; a cell phone; cable, Wi-Fi, and other utilities; health care and prescriptions; and, if there’s time, entertainment.

Because the class and study hours are so intense, it may be tough to squeeze a job into the mix.

Cutting Debt by Being Proactive

The AAMC reports that the median medical education debt balance for graduating students (public and private) in 2018 was $194,000. And it estimates students come in carrying a median pre-med education balance of about $25,000. That makes the total median student loan balance for a new doctor about $219,000.

It’s a lot to worry about for anyone—even with the potential of a big payday after graduation and residency.
Which is why it can be important to be proactive about how you’ll pay for medical school, starting with making a financing plan that could include:

Scholarships

Scholarships aren’t always easy to get at the graduate level. The competition can be tough for some programs, and to be eligible, a student may need a nominating letter or to meet specific qualifications (such as belonging to a particular minority or having a plan to go into a certain type of medical practice, for example).

Students can look online for various scholarship awards or ask for help from advisors at their current school. Sources such as CollegeScholarships.org and The American Academy of Family Physicians (AAFP) could be good starting points.

Military Service

Some medical professionals choose to obtain their medical degree by participating in a military or loan repayment program. The qualifications and commitment for each program vary, and the separate branches of the military, including the Army National Guard and Coast Guard, have different options.

The U.S. Department of Veterans Affairs lists some scholarships and programs on it’s website. Some students also may qualify for financial aid based on a family member’s military service.

Federal Aid

The first step in getting federal student loans is to complete the Free Application for Student Aid (FAFSA®). Students can check with the medical school they plan to attend to get filing date requirements and information on institutional financial aid (aid given by the school).

There are three types of federal student aid:

•   Grants: This is financial aid that doesn’t have to be paid back (unless the student withdraws from school and owes a refund). Grants are often need-based.
•   Work-Study: Federal work-study jobs are need-based and help students earn money to pay for school through part-time employment. A bonus for medical students is that the work often is tied to community service or may be related to the student’s course of study, so this type of job may be more interesting and manageable than some others.
•   Loans: A student who borrowed money as an undergraduate, and demonstrated financial need, may have been awarded a Federal Direct Subsidized Loan to help cover school costs. Those loans are not available to students in graduate and professional school programs. However, those students are eligible for other types of federal loans. They may receive a Direct Unsubsidized Loan, which is not based on financial need, or a Direct PLUS Loan, which, unlike other federal loans, will require a credit check.

What’s the difference between a subsidized and unsubsidized loan? With a Direct Subsidized Loan, the U.S. Department of Education pays the interest on the loan while the student is in school. With a Direct Unsubsidized Loan, the student isn’t required to make payments while in school, but the interest will continue to accumulate during that time and during the grace period and after leaving school. Graduate and professional students can borrow up to $20,500 each year in Direct Unsubsidized Loans, and Direct PLUS Loans can be used for college costs not covered by other financial aid.

Private Student Loans

Federal student loans offer certain benefits and protections that aren’t available through private student loans—including forgiveness and flexible, income-driven repayment plans—so borrowers typically look into those options first. But students may find there are also advantages of borrowing a private student loan.

Some students simply need more money than they can borrow based on federal loan limits, and certain private student loan lenders (including SoFi) allow borrowing up to 100% of the Cost of Attendance (COA).

Borrowers also sometimes prefer the variable interest rates that private lenders may offer, because they can start off with a lower monthly payment (although variable interest rates can increase over time).

But to get a private loan with a competitive interest rate, a borrower generally needs to have a strong credit report (among other financial health-related factors), while Federal Direct Subsidized Loans don’t require a credit check. So there are trade-offs.

There also can be big differences in what one private lender to the next has to offer, and not just when it comes to interest rates. It’s important to ask about fees, repayment options, and other benefits. (For example, SoFi offers unemployment protection to qualified borrowers, networking opportunities, and more.)

A Budget Plan

Finding the right resources to pay for medical school is important, but learning to live within a budget also can keep down the inevitable debt. Students who start with a spending plan as undergraduates may have it easier; they can probably modify what they’ve already been doing to work in medical school. But it’s never too late to start budgeting.

Once a student determines how much will be coming in from various sources (family, loans, scholarships, etc.), the next step is to list what will be going out for tuition and fees, housing, food, transportation, and other costs.

And then the cost-cutting options can kick in: Is there inexpensive public transportation available? Will there be roommates to split some bills? Can any of those roommates cook? Once classes start, a debt tracking app may help with staying on top of those expenses, and the budget tweaking can begin.

Light at the End of the Tunnel

It’s no secret that physicians have the potential to earn a higher-than-average salary once they finish their residency and start practicing.

Big money isn’t the goal for every med student, of course—that kid with the toy medical kit wasn’t thinking about dollars when the decision to be a doctor was first made. Still, that future income may feel like the light at the end of a long, dark tunnel if student debt is piling up.

Exactly how much money doctors make can vary depending on several factors, including experience, location, and the specifics of the job—including what specialty they choose and if they practice in their own office, in a hospital, outpatient care center, or elsewhere.

According to Bureau of Labor Statistics numbers from 2018, for example, anesthesiologists earned a mean annual wage of $267,020 ; surgeons earned $255,110 ; obstetricians and gynecologists earned $238,320 ; and family and general practitioners earned $211,780 .

The Profiles Physician Database reports even higher salary numbers based on a physician salary and compensation report compiled by Medscape in 2019.

It may take a while to get there, though. Residents and fellows earn far less than those amounts. So do doctors who choose lower-paying specialties or who may work in community medicine.

But there are ways to get to work on that medical school debt without waiting for a big payday.

Loan Forgiveness and Repayment Through Service

There are several forgiveness programs for physicians with student debt. Some are government-sponsored (federal and state), and some are private programs.

Benefits vary, but generally, participants provide service for two to four years (depending on the number of years they receive support) in exchange for repayment of student loans and possibly a stipend for living expenses.

One of the best-known of these programs is the federal Public Service Loan Forgiveness (PSLF) program, which was designed to encourage students to enter full-time public service jobs.

While the program isn’t specifically aimed at medical students, it could help those who choose to forgo the promise of a big salary in exchange for the reward of working for a government or not-for-profit organization.

Eligible borrowers could receive forgiveness of the remaining balance of their federal direct loans after making 120 qualifying payments while employed by certain public service employers.

Other programs include the National Health Service Corps (NHSC) Students to Service Loan Repayment Program, which provides loan repayment assistance in return for at least three years of service at an NHSC-approved site in a designated Health Professional Shortage Area. Students who are in their last year of medical or dental school may be eligible.

The NHSC also may provide up to $50,000 to repay a health profession student loan in exchange for a two-year commitment to work at an NHSC site. After completing the initial service commitment, a health-care professional can apply to extend his or her service to receive additional repayment assistance.

The AAMC provides a searchable database of state and federal loan repayment, loan, scholarship, and other programs on its website. Your medical school or financial aid advisor may have additional information.

Federal Repayment Programs

There are student loan several repayment plans for federal student loan borrowers. Some are based on graduated payments that start low and increase over time, and they are designed to ensure the loans will be repaid after a designated period. Others are based on a percentage of discretionary income or are completely income-driven.

Federal Loan Consolidation

A Direct Consolidation Loan allows borrowers to combine multiple federal education loans into one loan with a single monthly payment.

Consolidation also can give borrowers access to additional loan repayment plans and forgiveness programs. But there is a downside: The interest rate on the new loan will be a weighted average of prior loan rates (rounded up to the nearest eighth of a percent), not necessarily a new lower rate.

If the monthly payment is lower, it’s probably because the loan term is longer, which means the borrower is paying more interest over time. And federal loan consolidation is only for federal loans—the borrower can’t include private student loans.

Private Student Loan Refinancing

With student loan refinancing, all student loans are combined into one new loan with one new payment, with a new and possibly lower interest rate.

Some private lenders (including SoFi) will consolidate and refinance both federal and private student loans. But borrowers should be sure they are prepared to give up the benefits offered by their federal loans—like access to income-driven repayment and loan forgiveness.

Refinancing generally works best for borrowers who have improved their financial situation after graduation with a good job and solid credit.

Again, those who are taking advantage of federal programs such as income-driven repayment or public service loan forgiveness may find refinancing isn’t in their best interest. Still, it’s likely worth checking out all the options.

Making a Dream Come True

Few people dream of starting their careers with a mountain of debt to worry about. But with proactive planning on the front end, a realistic repayment plan on the back end, and multiple resources available for assistance, many med students are making it work as they pursue their calling.

Wondering how a private graduate student loan could help finance your dream to be a doctor? Check out what SoFi has to offer.


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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.

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IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF DECEMBER 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
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What is a Student Loan Grace Period and Should I Use it?

You made it through college. You stayed awake during three-hour lectures, pulled all-nighters leading up to finals week (and probably a few unsanctioned all-nighters with your friends), and ate more heat-lamp dorm pizza than you ever thought possible.

But you did it. It was fun, too, but it wasn’t easy—and neither is landing a job after you graduate. Landing a great gig requires persistence and patience, especially in this age of resume data scraping and HR bots.

As you begin to prepare for life after graduation, one of the most important first steps to take is figuring out whether you’re required to make monthly student loan payments right away or if you have what’s called a “grace period.”

The same thought process applies to those taking a break from full-time education, whether it’s a semester away to take care of a personal health issue or you’re leaving school indefinitely to pursue other opportunities; you may have a grace period or you may have to start paying back your loans.

Explaining Student Loan Grace Periods

A student loan grace period is typically a six-month allotment of time after a student graduates, leaves school, or drops below half-time enrollment, and before they must begin making student loan payments. (What constitutes half-time enrollment? It varies by school, so check with your counselor to find out.)

Whether you’re entitled to a grace period is a question that doesn’t come with a uniform answer, because it varies by loan type. While some government loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans do come with a six-month grace period, others, like federal PLUS loans, have no automatic grace period (although you can apply for deferment—more on that later.)

If you consolidate your government loans, you’ll lose your grace period (once your Direct Consolidation Loan is disbursed, repayment begins approximately two months later). And if you refinance, the terms are up to the lender.

If you are an active member of the military and are deployed for more than 30 days during your grace period, the grace period on federal student loans could be extended up to three years and will start over upon your return. This is, of course, if your federal loan offers a grace period.

The intent 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 loan repayment kicks in. And no one will argue that six months without student-loan payments can make a big difference in your bank balance. But it doesn’t come without a catch.

For most federal student loan types, interest will be charged during the grace period even if you aren’t making payments on the loan. These interest payments are then added to your total loan balance (in student loan terms, that interest is called “capitalized interest”). You will then have to pay that capitalized interest on top of your loan’s annual interest.

What are Student Loan Grace Periods Used For?

In addition to growing a bit of a savings account, the grace period also allows new grads some time to create a workable budget and/or decide on the best student loan repayment plan given their personal financial situation.

A grace period can also allow students the opportunity to take a break from school for a period of time (usually a max of six months) without student loan payments kicking in.

Using a 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 a much-needed breathing room.

For example, if you’re financially strapped and have high-interest credit card debt, it could be a chance to focus on those payments instead. (It’s likely that, unless you are paying off a promotional, no-interest credit card, those interest rates will be higher than your student loan’s interest rates.)

You may also want to consider taking advantage of a grace period if you need to either drop some classes (or drop out altogether) in order to care for a loved one, raise a newborn, or just take a brain break.

If you return to classes at least half-time before your federal loan grace period ends, the six months starts over . (Note, however, that if you consolidate your federal loans during your grace period, you lose any remaining time on your grace period.)

Ultimately, you should do what’s best for your financial situation. The grace period exists for a reason—it can be hard to go from borrowing relatively large sums of money to paying back large sums of money right after you’re handed your diploma.

What’s the Difference Between Grace Periods, Deferment and Forbearance?

If your loan doesn’t qualify for a grace period, you may still have options for delaying your federal student-loan repayment, including deferment and forbearance. What’s the difference? Both are similar to the grace period in that it’s a length of time that you’re not responsible for a student loan payment. The difference, however, is in the interest.

If a loan is in forbearance, the loan payments will be temporarily paused, but interest will continue to accrue during the forbearance period. This can lead to substantial increases in what you’ll pay for your federal loans over time, so you’ll likely want to consider forbearance very carefully, and look into other options that might be available to you, like income-driven repayment plans .

In deferment, some types of loans may continue to accrue interest, while certain types of loans will have the interest subsidized by the government. (View the full list of federal loan types here.)

Keep in mind that while grace periods are automatic, you’ll need to request a 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.

Tips for Navigating a Non-Payment Period

Depending on the type of federal student loan you have, interest will continue to accrue during periods of non-payment like a grace period. In that case, once payments restart, any outstanding interest will be capitalized—added to the principal balance—effectively leaving you to pay interest on your interest.

That said, if you are in a financial position to make interest-only payments during a grace period, doing so can help keep your loan’s principal balance from growing during that time. In other words, just because you don’t have to make payments toward your student loans during a grace period doesn’t mean you can’t.

Do Private Student Loans Have Grace Periods?

Private student loans are not as likely to come with a grace period—but there are some that do. Here at SoFi, for example, qualified private student loan borrowers can opt to take advantage of a six-month window before payments are due.

There are also up to four different repayment options, so borrowers can choose the one that makes the most financial sense for them. (Make sure you check with any loan provider to understand when you need to start paying back your private loans.)

It’s also important to note that most loan consolidation programs, whether private or federal, might effectively eliminate any remaining grace period. Alternatively, you could consider refinancing your student loans with SoFi—where existing grace periods are honored, even on a refinance.

It’s important to point out that refinancing federal student loans with a private lender, including SoFi, renders them ineligible for certain protections and benefits, like income-driven repayment plans, loan forgiveness, and deferment.

If you want to find out whether refinancing your student loans could help you lower your monthly payments or reduce interest, you can take a look at SoFi’s Student Loan Refinance Calculator, which lets you plug and play with various scenarios to see how you might benefit. If you’re ready to take that next step, checking your rate won’t affect your credit.1

You can find out if you’ll qualify for a low-rate student loan refinance in just two minutes. Learn more!


1Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF DECEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE
FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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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.

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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SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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When Do Student Loan Rates Increase?

Student loan rate increases are a daunting possibility when you’re facing taking out more loans every year. But unfortunately, student loan interest increases can be par for the course.

Thankfully, we have some good news: Federal student loan interest rates are down for the 2019–2020 school year. After two years of increasing rates, you’ve finally caught a break this year.

That doesn’t necessarily mean rates will stay low. It’s possible that rates will continue to decrease over the next couple years, but rates could also increase.

If you’re worried about an upcoming student loan rate increase, and wondering if the federal government might be raising student loan interest rates in the coming years, read on for more information.

There’s no way to know for sure what will happen with student loan interest rates, but it could help to know the landscape, understand how the rates have gone up in the past, and look at what’s being proposed for the future. The more you know, the more prepared you can be when it’s time to take out another loan.

Student Loan Interest Rates Change Annually

Under a law adopted by Congress in 1993, the federal government pegged federal student loan interest rates to the longer-term U.S. Treasury rates, and adjusts those interest rates annually for new federal student loans.

Each year, the new rates take effect on July 1 and apply to federal student loans taken out for the following academic year. Rates had increased from the 2017–2018 to the 2018–2019 school years, but have decreased for 2019–2020 and the 2020-2021 school years.

Student Loan Rates for the 2020–2021 School Year

The interest rates on Direct Subsidized and Unsubsidized Student Loans for undergraduates are 2.75% 2020-2021 academic year for any new loans made on or after July 1, 2020, and before July 1, 2021.

Student loan interest rates also decreased for Graduate or Professional Direct Unsubsidized Student Loans—dropping to 4.30%. Rates on Direct PLUS Loans, which are available to parents and graduate students, decreased to 5.30%.

In an effort to keep the interest rates on federal student loans from skyrocketing, Congress has set limits on how high-interest rates can go. Undergraduate loans are capped at 8.25%, graduate loans can’t go higher than 9.5%, and the limit on parental loans is capped at 10.5%.

If Your Loan Has a Variable Interest Rate, a Hike Could Be in the Cards

If you take out a new federal student loan, the loan’s interest rate is fixed. This means the interest rate stays the same over the life of the loan.

When you borrow a private student loan or refinance an existing loan, you can typically choose between a fixed and variable interest rate. If you take out a loan with a variable rate, the interest rate could fluctuate depending on market volatility.

When you take out a private student loan, the original rate depends on your credit score, employment history, and current income level—among other factors, which vary by lender.

If your loan has a variable rate, the rate you pay fluctuates as the economy changes. You might have mixed feelings when rates alter. Generally, rates tend to decrease when the economy takes a hit, and they tend to increase as the economy strengthens.

How do you know if a rate hike is in the cards? We can never be 100% sure, but it might help to look at trends in the market. You could consider looking at the London Interbank Offered Rate (LIBOR) , an interest rate index that is updated daily and shows how rates change along with the economy.

If you look at the LIBOR index in 2019, you can see that variable rates were steadily increasing from 2014 to January 2019, but they’ve been decreasing ever since.

Tuition and Fees Are No Longer Tax Deductible

The 2018 Tax Cuts and Jobs Act did not include an extension of the Tuition and Fees Deduction. In the past, taxpayers could use this tax provision to reduce their taxable income by up to $4,000 annually. The IRS currently has no plans to make tuition and fees deductible again in the future.

The Student Loan Interest Deduction May Be Eliminated

The Tax Cuts and Jobs Act originally proposed eliminating the student loan interest deduction, which allows you to deduct up to $2,500 annually on the interest you pay on a student loan. Ultimately, this deduction wasn’t eliminated and is still available, but it’s an issue to be aware of.

Refinancing Your Student Loans With SoFi

One way to navigate all these changes is to refinance your student loans with SoFi, allowing you to choose a monthly payment plan and loan term that works for you. Certain private lenders only refinance private student loans, but SoFi gives you the option to refinance both private and federal loans.

Refinancing your student loans involves taking out a brand new loan with a new interest rate. By refinancing, you have the opportunity to make only one monthly payment instead of balancing multiple payments. If your financial situation has improved since you took out your original loans, you might qualify for a lower interest rate.

If you’re currently enrolled in an income-driven repayment plan or are working toward loan forgiveness for your federal loans, refinancing might not be the best option for you because you lose access to federal loan benefits when you refinance.

But if you’re worried about rising variable rates on private student loans or are interested in seeing if you qualify for a new interest rate, now may be the time to look into refinancing.

When you refinance with SoFi, there are no origination fees or prepayment penalties. Take a look at SoFi’s student loan refinancing calculator to get an idea of what a new loan could look like for you.

If you’re looking to potentially get a better term or a lower interest rate, consider refinancing with SoFi. You can check your rate in under two minutes.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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

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Understanding How Direct Stafford Loans Can Help Fund Your Education

Direct Stafford Loans (also called simply Stafford Loans) are the most common federal student loans available for students seeking financial aid for college. While there are Stafford Loan limits, most students who fill out the Free Application for Student Aid (FAFSA®) can receive some amount of financial aid, whether those Stafford Loans (now more commonly known as Direct Loans) are subsidized or unsubsidized.

While the FAFSA is how to apply for a Stafford Loan before you enter college, students must remember to resubmit the form every year. Your needs may shift from year to year (especially with rising tuition costs) or your family’s financial situation might change.

Because of that, the federal government requires that you reapply for financial aid (including Stafford Loans) every year you’re enrolled in school. Here are some other important facts, deadlines, and tips to get you ready to apply.

What is a Direct Stafford Loan?

A Stafford Loan is a common name for the federal student loans available to eligible students directly from the U.S. Department of Education. These subsidized or unsubsidized federal loans are often referred to as Stafford Loans or Direct Stafford Loans, which are offered under the William D. Ford Federal Direct Loan (Direct Loan) Program.

In 1988, Congress changed the name of the Federal Guaranteed Student Loan program to the Robert T. Stafford Student Loan program in honor of higher education champion, Senator Robert Stafford. This is one reason why Stafford Loans are sometimes referred to by different names.

Direct Stafford Loans are taken out in the student’s (not a parent’s) name. Before accepting any loans as part of a financial aid package, it’s important to understand the fundamental differences between the two types of Stafford Loans you can apply for: subsidized or unsubsidized.

Subsidized vs Unsubsidized Loans

There are two different types of Direct Stafford Loans: subsidized and unsubsidized. With a subsidized Stafford Loan, the government will pay the interest that adds up while you are in school at least half-time, during the loan’s grace period (the first six months after graduating or dropping below half-time enrollment), and during a deferment—an official postponement of payments.

To be eligible for subsidized Stafford Loans, you must also meet income requirements for need-based aid. Your school determines the amount you can borrow. As of 2012, subsidized Stafford Loans were no longer available for graduate or professional students.

Unsubsidized Stafford Loans start to accrue interest as soon as the money is paid out to your school. These loans are available to undergraduate, graduate, and professional students, and there is no requirement to demonstrate financial need.

You do not necessarily need to start paying back these unsubsidized Direct Stafford loans while you are in school, but you are responsible for the interest at all times—including before you graduate and during your grace period.

You can also estimate your federal student aid eligibility before filling out the FAFSA. If you have the flexibility to only accept some of your financial aid package, you may want to consider accepting subsidized loans before unsubsidized (if you’re eligible) in order to take advantage of the potential interest savings.

Stafford Loan Limits and Rates

It is up to your school to determine which loan type and loan amounts you can receive every year. There are Direct Stafford Loan limits, which are determined by your current year in school and whether you are considered a dependent or independent student.

First-year undergraduate dependent students are eligible for Direct loans of up to $5,500, but only $3,500 of that amount can be subsidized. (Note: this excludes students whose parents are ineligible for Direct PLUS Loans.)
This amount can increase with each year you’re in school at least half-time, with higher limits for eligible graduate students.

Interest rates vary, and can change every year or so. For subsidized and unsubsidized Direct Stafford Loans disbursed between July 1, 2020 and July 1, 2021, the interest rates for undergraduates is 2.75%.

For undergraduate dependent students, the current annual loan limits are as follows:

•   First Year: $5,500 maximum, no more than $3,500 subsidized
•   Second Year: $6,500 maximum, no more than $4,500 subsidized
•   Third Year and Beyond: $7,500 maximum, no more than $5,500 subsidized
•   Total Direct Stafford Loan Limits: $31,000 max, $23,000 subsidized

As you can see above, the loan limit amounts are different depending on which year you are in school. Additionally, loan limits differ for dependent and independent students. Graduate or professional students can take out a maximum of $20,500 annually, but only in unsubsidized loans.

If you are a dependent student and your parents are not eligible for a Direct Parent PLUS Loan, you might be able to take out additional Direct Unsubsidized Loans.

Additionally, you can’t receive Direct Subsidized Loans for more than 150% of the published length of your degree program. For instance, if you are in a four-year bachelor’s degree program, the maximum amount of time you can receive Direct Subsidized Loans is six years.

How to Apply for a Direct Stafford Loan

In order to qualify for Direct Loans, you must be a U.S. citizen, permanent resident, or eligible non-citizen; enrolled at least part-time in an accredited college; and not in default on any other education loan.

Students can apply for all federal financial aid online via the FAFSA ® website. According to the Department of Education, almost every FAFSA applicant is eligible for some kind of student aid package that may include federal student loans. Unlike most private student loans, however, you don’t need a credit check or a cosigner for most federal student loans.

Your individual school will typically apply your student loans to pay for tuition, fees, room and board, and other school charges. (They factor in any federal grants and work-study you may be awarded as well.) If any additional funds remain, they will be returned to you, which is why it’s important to carefully consider the amount of loan funding you need.

While a loan refund may be nice in the moment, you still have to pay interest eventually on that leftover money—though some students might find the funds useful for other school-related items like books. (All Direct Stafford Loan funds must be used for education expenses.)

When Do You Have to Pay Back Your Direct Stafford Loan?

The simple answer is: after the grace period. This stretch of rejuvenation, self-realization, and rebirth is perhaps euphemistically called a grace period.

The grace period for Direct Stafford Loan repayment begins the day you officially leave school, and lasts for six months. Also, if you change your student status to less than half-time enrollment, that starts the clock on the grace period, too.

Take note: educational institutions define “half-time enrollment” in different ways. The status is usually, but not always, based on the number of hours and credits in which you’re enrolled. Check with your school’s student aid office to make sure you are in sync with their official definition to make sure everybody is on the same page before you assume that you are entitled to a grace period.

The total timeframe of the Direct Stafford Loan repayment grace period: six months, and not a day more (with a handful of exceptions ). Another thing to keep in mind about that grace period: you may want to make the most of it by starting to pay back that loan in whatever way that you can.

Even though grace periods are meant to give you time to reconfigure, the interest you’re being charged is still “capitalizing.” That means interest is still being added to the loan principal all during your grace period, and that’s not very graceful. (Keep in mind if you have Direct Unsubsidized Stafford Loans, that interest has already been accruing since the day the loan was disbursed.)

One quick thing to keep in mind while on the subject of grace periods: Make sure you know who your student loan servicer is in case you need to reach out to them. You don’t get to choose your own federal student loan servicer. They’re assigned to you by the Department of Education to handle billing and other services. If you have questions regarding your loan, consider contacting your loan servicer.

Repaying Your Direct Stafford Loans

Your initial repayment plan will probably be the Standard Repayment Plan, which sets your monthly payment to whatever amount will get your loans paid off in 120 payments, or 10 years. However, there are many alternative federal repayment plans to consider if you need more time to pay off your loans, or lower monthly payments for your Direct Stafford Loans.

There are also Direct Consolidation Loans which allow you to consolidate your federal student loans into one new loan, at an interest rate that’s the weighted average of all your interest rates (rounded up to the nearest eighth of a percent). That typically doesn’t save you money on interest, but does streamline repayment (one loan, one lender, one payment to make each month).

Another option is to refinance your student loans with a private lender, which may be appealing if you’re in a financially stable place and have federal and/or private student loans. If you qualify, you could refinance your Direct Stafford Loan by taking out a new loan with a private loan company at a hopefully lower interest rate.

Before you refinance, know the difference between refinancing and consolidating your loans. You can distinguish them as (broadly) two different strategies: taking out a new loan to replace all of your current student loans (refinancing) as opposed to merely reconfiguring (consolidation).

Refinancing lets you pay off the loans you already have with a brand-new loan from a private lender. This can be done with both federal and private loans. When you refinance, your original loans get paid off completely, and you put those original creditors behind you forever.

The new loan from a private company may allow you to breathe easier with interest rates and repayment terms that work better for you. You can also pick the private lender with the terms that best suit your needs. Don’t be afraid to comparison shop—and don’t forget that SoFi’s student loan refinancing has no prepayment penalties or origination fees!

But refinancing isn’t without its downsides. If you refinance federal student loans with a private lender, you’ll lose access to all the federal benefits and protections—like income-driven repayment options and loan forgiveness for public service work. If you’re looking to keep your federal student loans as federal student loans, you could consider consolidation instead.

Consolidating student loans is simply gathering up all of the loans you currently have and piling them into one loan. As we said above, you can only consolidate federal student loans into a Direct Consolidation Loan. With a Direct Consolidation Loan, your new interest rate is the weighted average of all your interest rates combined (rounded to the nearest eighth of 1%).

The SoFi student loan refinancing calculator can help estimate if you might save money in the long term by refinancing your student loans. Refinancing your student loans with a private lender is an alternative to federal loan repayment plans, and doesn’t offer the same federal benefits and protections that federal student loans do.

Student loans can get complicated—SoFi is here to help. From helping you finance your education to helping you get out of your college debt, we’ve got you covered.

Check out what kind of rates and terms you can get in just a few minutes.


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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF DECEMBER 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.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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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Why Are Student Loan Interest Rates So High?

Because education is a valuable asset, and seeing as college kids are unlikely to have amassed much wealth, you’d think that student loans would have some of the lowest interest rates around.

Unfortunately, that’s not always the case. Private and federal student loan interest rates tend to be a bit higher than other kinds of “good” debt, such as mortgages or car loans.

Current rates for federal student loans disbursed after July 1, 2019 are 4.53% for Direct Subsidized and Unsubsidized loans for undergraduates, 6.08% for Direct Unsubsidized loans for graduate or professional students, and 7.08% for Direct PLUS loans for graduate or professional students or parents of undergraduate students.

Current average interest rates for private student loans are as follows: 3.64% to 13.63% for fixed rate loans and 2.72% to 11.88% for variable rate loans.

When compared to other types of loans, these rates might still feel high. In early March 2020, the interest rate was around 3.77% for a 30-year fixed mortgage and around 4.46% for a 60-month new car loan.

In general, why do student loan interest rates tend to be somewhat higher than some other common loans? This (mainly) comes down to the differences between secured versus unsecured loans.

Unsecured loans, like student loans, are not tied to an asset that can serve as collateral. Secured loans, in comparison, are backed by something of value. If you don’t pay your mortgage or auto loan, the lender can seize your house or car.

But a lender can’t seize a college degree! In other words, student loan interest rates are typically higher than secured loans’ rates because the lender’s risk is higher.

How Have Federal Student Loan Interest Rates Changed?

Though interest rates on federal student loans have fluctuated over the last few decades, they’ve been fairly steady in recent years. From the 1960s to 1992, Congress set fixed interest rates for student loans that ranged from 6% to 10%.

Over the past couple of decades, federal interest rates varied depending on whether borrowers were in school, in the six-month grace period after leaving school, or in repayment.

Until 2006, rates for federal student loans were a bit all over the spectrum. After 2006, rates became fixed again, but differed based on the type of loan (for example, Direct Subsidized versus Direct Unsubsidized).

These rates hovered around 6% or 7% until the 2009 recession, then fell to 3% or 4% for undergraduate loans and closer to 5% for graduate ones. It remains to be seen what will happen in 2020 amid the coronavirus pandemic.

Compared to 2018, federal student loan interest rates have dipped. Comparing the 2018 to 2019 school year, rates for the current year are down 0.18 percentage points. (2020-2021 rates will be announced at the end of June, 2020.)

How Do Private Student Loan Interest Rates Differ From Federal Loan Rates?

Federal student loans have their interest rate set by Congress annually, based on the 10-year Treasury note. The interest rate is fixed over the life of the entire loan; meaning, if you get a federal student loan, the rate it was issued with won’t change despite Congress setting a new rate every year. But, if you need to take out an additional federal student loan, it will be set by the current rate, not your previous one.

With private student loans, lenders can determine their own rates based on the borrower’s creditworthiness and market conditions. Unlike federal student loans, private student loan interest rates can be either fixed or variable:

•   Fixed, meaning the rate might be a bit higher than a variable rate, but it won’t change over the life of the loan.
•   Variable, meaning they typically start out lower but can change over time depending on the market.

As with any choice, there are upsides and downsides to picking a fixed versus variable interest rate loan. Depending on your financial picture and the offered interest rate on the loan, the choice will likely vary.

Since so much depends on the applicant, the rates vary widely among private lenders. Private student loan rates will fluctuate with market trends, but they’re also dictated by additional factors. When applying for a private student loan, unlike with a federal student loan, private lenders will look at factors including (but not limited to):

•   Credit history. When entering college, most students have little to no credit history. That means the lender could be unsure of their ability to pay the loan back since students don’t typically have a history of paying any loans. This can lead to a higher interest rate.
•   The school you are attending. Most four-year schools are eligible for private loans, but some two-year colleges aren’t. Additionally, applicants typically have to be enrolled at least half-time to qualify for private student loans.
•   The finances of your cosigner. Since many private student loan applicants are relatively new to debt and have no credit history, they might be required to provide a cosigner. A cosigner shares the burden of debt with you, meaning they’re also on the hook to pay it back if you can’t. A cosigner with a strong credit history sometimes means a lower interest rate on private student loans.

In addition to the above factors, students can shop around for interest rates with private student loan providers, unlike the single rate set annually for federal student loans. Rates will likely vary at each lender based on their underwriting criteria and your financial profile.

While federal student loan rates are annually set, private student loans will vary across a variety of factors from lender to lender.

Wondering how you might be able to
lower your student loan interest rate?
Check out SoFi student loan refinancing.


Managing High Interest Rate Student Loans?

Student loan rates can be higher than that of other loans, and if you’re struggling to make your monthly student loan payments because of high interest, it might be time to consider an alternative.

Federal Repayment Plans

If you took out federal student loans, you qualify for various federal repayment plans. Borrowers are automatically placed on the Standard Repayment Plan, unless they select another option. The standard repayment plan splits repayment over 10 years.

Other options extend the repayment term, which can make payments more manageable in the present, but also means that you may pay more in interest over the life of the loan.

Those struggling to make payments on the Standard Repayment Plan might consider one of the other repayment plans available to federal borrowers. These include the Graduated and Extended repayment plans and other income-driven repayment options.

There are four income-driven repayment repayment plans to choose from; here is some basic information about each of these federal plans:

•   Revised Pay as You Earn Plan (REPAYE) — In this plan, payments will be 10% of discretionary income each month. The payment amount will be recalculated each year based on income and family size.
•   Pay as You Earn Plan (PAYE) — Similar to REPAYE, your payments will be 10% of monthly discretionary income, but they will never be more than what would be paid on the 10-year Standard Repayment Plan.
•   Income-Based Repayment Plan (IBR) — To qualify for this plan, borrowers must have high debt relative to income. Monthly payments will be 10% to 15% of discretionary income and will be reevaluated annually.
•   Income-Contingent Repayment Plan (ICR) — For ICR, repayment is either 20% of discretionary income, or “the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income.”
•   Income-Sensitive Repayment Plan — Loan payments will be based on the borrower’s annual income. Under this plan, a borrower’s loan will be repaid in 15 years.

Additional detail can be found on the Federal Student Aid website , which is operated by the Department of Education. To qualify for income-driven repayment, applicants must meet specific requirements. Private student loans aren’t eligible for the repayment plans described above.

Federal Student Loan Forgiveness

In some instances, you may qualify for forgiveness on some or all of your federal student loans. Loan forgiveness is possible under a few specific circumstances, including:

Public Service Loan Forgiveness — If you work for the government or a qualifying non-profit, you might be eligible to receive some form of loan forgiveness.

You have to make 120 qualifying on-time payments on the loan and generally work full time for the organization. Unfortunately, many applicants find the process of applying for public service loan forgiveness challenging, and not all non-profits or government work qualify.

Teacher Loan Forgiveness — Similar to Public Service Loan Forgiveness, teachers who work full-time for five years in a qualifying low-income school are eligible for forgiveness on their federal loans. If you qualify for forgiveness, you may be eligible for up to $17,500 on your Direct Subsidized and Unsubsidized Loans.

These student loan forgiveness plans are only for federal student loans, not private student loans.
The Public Service Loan Forgiveness program has a strict application process that requires a lengthy commitment from applicants. 2018 data shows that 99% of applicants were denied loan forgiveness that year. Pursuing federal loan forgiveness might require considerable attention to detail as there are many program requirements that must be met in order to get approved for loan forgiveness.

Refinancing Student Loans

If you’re saddled with high-interest student loan debt, and don’t qualify for one of the federal programs mentioned above, it might be time to consider your options around refinancing. Refinancing your student loans is one way to potentially lower your interest rate or your monthly payments.

Among many other factors that vary by lender, you could be a strong candidate for student loan refinancing if:
You’ve improved your credit score since you first took out your loans. Unlike when you were first headed into college, you may now have a credit history for lenders to take a look at. If you’ve never missed a payment, and continually grown your credit score, you might qualify for a lower interest rate.

You have a stable income. Being able to show consistent income to a private lender may help make you a less risky investment for them to lend to, which in turn could also help you secure a more competitive interest rate.

As we mentioned above, all student loans issued from the federal government after 2006 were offered as a fixed interest rate, whereas private refinancing can be offered as either a fixed or variable interest rate.

Be mindful of the fact that when you refinance with a private lender you can be offered both fixed and variable rate options. Be sure to understand which makes sense for your financial situation before choosing.

Also note that if you are refinancing federal loans with a private lender, you’ll give up all federal student loan protections such as forbearance, or benefits like income-driven repayment programs. Refinancing won’t be the right fit for everyone, but for qualified borrowers it could help them secure a more competitive interest rate.

SoFi is a leader in the student loan space, offering both private student loans to help pay your way through school, or refinancing options to help you save on the loans you already have. Check out your interest rate in just a few minutes—with no strings attached.


We’ve Got You Covered

Need to pay
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SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF DECEMBER 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.

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.

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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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