How to Pay for Grad School

Graduate school can be expensive and students who graduate with a master’s degree carry an average debt of $71,287, according to the Education Data Initiative. There are numerous ways to finance your advanced degree (even ways without taking out loans), and investing in graduate education is frequently worth it; the right degree has the potential for a massive return on investment.

The complicated part is determining what options are available to you and figuring out how to hack your way through grad school with the smallest bill. If you’re considering going to grad school, we’ve laid out some key financing options. Read on to learn how to formulate a plan to pay for your graduate education.

Ways to Pay for Grad School Without Taking on Debt

Things like filling out the FAFSA, applying for scholarships and grants, or working for an employer who offers tuition reimbursement while you are going to school can all help you lower your tuition bill during grad school. Continue reading for even more strategies to pay for grad school without taking on debt.

Fill Out The FAFSA

If you received financial aid or federal student loans during undergrad, you’re probably familiar with the Free Application for Federal Student Aid, usually called by its friendlier name: the FAFSA®. The FAFSA is an application to determine what types of federal financial assistance you might qualify for.

Many students who are applying for grad school are considered “independent,” for FAFSA purposes. This means that even if your mom is supplementing your monthly groceries with weekly homemade lasagnas and you’re still using your parents’ password to binge watch Netflix, you may not need to include their financial information on your FAFSA application.

Your FAFSA will determine your eligibility for federal student loans, federal work-study, and federal grants. In addition, your college may use your FAFSA to determine your eligibility for aid from the school itself. Here’s a closer look at the federal options, excluding federal student loans which will be discussed in detail in a later section.

Federal Grants

Unlike student loans, federal grants do not need to be repaid. It may be possible to receive some grant funding to help you pay for graduate school. Filling out the FAFSA is the first step to determine whether you’re eligible. Federal grant programs include the Pell Grant, which is generally only available to undergraduate students who demonstrate exceptional financial need.

Recommended: What Are Pell Grants?

Another federal grant that may be available to graduate students is the TEACH grant, or Teacher Education Assistance for College and Higher Education grant. This grant has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduating.

Federal Work-Study Program

Just like undergrad, you might be eligible for work-study jobs during grad school. Eligibility for work-study jobs is also based on your FAFSA. These jobs often pay you to work at your university for a set number of hours.
They can oftentimes be doubly beneficial because in addition to earning money, you can sometimes secure a work-study position that is relevant to your field of study. You usually have to go through an application process in order to secure a work-study job.

Work-study is a type of financial aid available to students who qualify based on their financial need. You can apply for the program when you fill out your FAFSA. If you qualify for work-study it will be part of your federal financial aid award.

Even if you receive your work-study award you may still have to find a job that qualifies. Many schools have online databases where you can look for and apply to jobs.

Typically, financial aid is awarded on a first-come, first served basis, so the earlier you file your FAFSA the better chance you’ll likely have of securing work-study as a part of your financial aid award.

Figuring out What Your University Can Offer You

After narrowing down your federal options, make sure to consider what university-specific funding might be available. Many schools offer their own grants, scholarships, and fellowships. Your school’s financial aid office likely has a specific program or contact person for graduate students who are applying for institutional assistance.

Many schools will use the FAFSA to determine what, if anything, the school can offer you, but some schools use their own applications.

Although another deadline is the last thing you need, seeking out and applying for school-specific aid can be one of the most successful ways to pay for grad school: Awards can range from a small grant to full tuition remission.

Employer Tuition Reimbursement

It might sound too good to be true, but some employers are happy to reimburse employees for a portion of their grad school costs. Employers that have tuition reimbursement plans set their own requirements and application process.

Make sure to consider any constraints your employer puts on their tuition reimbursement program, including things like staying at the company for a certain number of years after graduation or only funding certain types of degree programs.

If your employer doesn’t already have a program in place, don’t despair. It is almost always worth asking your company if they offer any benefits to employees pursuing a higher degree.

Some employers might offer professional development funding that can be used to help you pay for school or let you keep a more flexible work schedule to accommodate your classes.

Becoming an In-State Resident

If you’re applying for graduate school after taking a few years off to work, you might be surprised to find how costs have changed since your undergraduate days. Graduate students interested in a public university can save tens of thousands of dollars by considering a university in the state they already live in.

Each state has different requirements for determining residency, so if you are planning on relocating to attend grad school be sure to look into the requirements for the state the school you are planning to attend.

Certain states require only one year of full-time residency before you can qualify for in-state tuition, while others require three years. During that time, you could work as much as possible to save money for graduate school. More savings could mean fewer loans.

Becoming an Resident Advisor (RA)

You probably remember your undergrad Resident Advisor (RA). They were the ones who helped you get settled into your dorm room, showed you how to get to the nearest dining hall and yelled at you for breaking quiet hours.

RAs may be under-appreciated, but they’re often compensated handsomely for their duties. Students are typically compensated for a portion or all of their room and board. Some schools even include a meal plan and sometimes even reduced tuition or a stipend. The compensation you receive will depend on the school you are attending, so check with your residential life office to see what the current RA salary is at your school.

While there are plenty of perks to being an RA, don’t underestimate the responsibility that comes with the position. It can be a time-intensive position, requiring round-the-clock supervision.

Still, the perks of being an RA may be measured in saving money each year. By having a free place to live and a free meal plan, you could save more and eat a diet that doesn’t just consist of ramen and stale pizza. RAs rarely have to share a room, so you’ll also have more privacy than you would in an apartment with roommates.

Because RAs receive so many benefits, competition for the job can be fierce and selective. Polish your resume and hone your interview skills before applying. The difference between working as an RA and having to take out loans for rent could affect your life for years to come.

Serious savings. Save thousands of dollars
thanks to flexible terms and low fixed or variable rates.


Finding a Teaching Assistant Position

If you’re a graduate student, you can often find a position as a Teaching Assistant (TA) or Research Assistant (RA) for a professor. The position will be related to your undergrad or graduate studies and often requires grading papers, conducting research, organizing labs, or prepping for class. You probably had several TAs during your undergraduate classes and didn’t even realize they were students too.

TAs can be paid with a stipend or through reduced tuition depending on which school you attend. Not only can the job help you to potentially avoid student loans, but it also gives you networking experience with people in your field.

The professor you work with can recommend you for a job, bring you to conferences, and serve as a reference.
Being a TA may help boost your resume, especially if you apply for a Ph.D. program or want to be a professor someday. According to PayScale.com, the average TA earns around $13 an hour, as of September 2022.

Similarly to a job as an RA, securing a TA position can be competitive. Apply early and get to know the professors who will make the decisions.

Applying for Grants and Scholarships

Do you remember all those random essay contests and company scholarship applications your classmates fired off senior year of high school? Well, grad school is no different. There are private scholarships out there, you just need to find them.

Scholarship for the unusually tall? Check. Essay contest on automatic sprinkler systems? You betcha. In addition to the weird and wonderful one-off scholarships, there are industry-specific scholarships that are intended to help graduate students pursuing your specific field of study.

An easy way to search for scholarships is through one of the many websites that gather and tag scholarships by criteria. Keeping all your grad school and FAFSA materials handy means that you’ll have easy access to the information you’ll need for scholarship applications.

Recommended: Guide to Unclaimed Scholarships

As we mentioned at the top of this post, grad students have to submit the Free Application for Federal Student Aid (FAFSA®) in order to potentially qualify for federal grants — just as undergrads do. Grants and scholarships are a great source of financing for graduate school because they don’t need to be repaid.

Grants are available from both the federal and state governments, as well as from the university itself (again, many universities use the FAFSA to determine their own institutional aid, so filling it out is essential). Some companies provide their own grants or scholarships, and many private organizations sponsor grants.

It never hurts to apply for a grant or scholarship, no matter how small it might seem. Think of it this way — every dollar received is one less dollar you need to borrow or earn.

Recommended: Scholarship Search Tool

How to Pay for Grad School With Student Loans

Grad students may rely on a combination of financing to pay for their education. Student loans are often a part of this plan. Like undergraduate loans, graduate students have both federal and private student loan options available to them.

Federal Loans for Graduate School

Depending on the loan type, payments on these student loans can be deferred until after graduation and sometimes qualify you for certain tax deductions (like taking a tax deduction for interest paid on your student loans).
There are different types of federal student loans, and each type has varying eligibility requirements and maximum borrowing amounts. Graduate students may be eligible for the following types of federal student loans:

•   Direct Unsubsidized Loans. Eligibility for this loan type is not based on financial need.

•   Direct PLUS Loans. Eligibility for this loan type is not based on financial need. A credit check is required to qualify for this type of loan.

•   Direct Consolidation Loans. This is a type of loan that allows you to combine your existing federal loans into a single federal loan.

Federal Student Loan Forgiveness Programs

Federal student loan forgiveness programs either assist with monthly loan payments or can discharge a remaining federal student loan balance after a certain number of qualifying payments.

One such program is the Public Service Loan Forgiveness (or PSLF) program. The PSLF program allows qualifying federal student loan borrowers who work in certain public interest fields to discharge their loans after 120 monthly, on-time, qualifying payments.

Additionally, some employers offer loan repayment assistance to help with high monthly payments. While loan forgiveness programs don’t help you with the upfront cost of paying for grad school, they may offer a meaningful solution for federal student loan repayment. (Unfortunately, private student loans don’t qualify for these federal programs.)

Private Loans for Graduate School

If you’re not eligible for scholarships or grants, or you’ve maxed out how much you can borrow using federal student loans, you can apply for a private student loan to help cover the cost of grad school.

Private graduate school loan rates and terms will vary by lender, and some private loans have variable interest rates, which means they can fluctuate over time. Doing your research with any private lender you’re considering is worth it to ensure you know exactly what a loan with them would look like.

Make sure to consider several different types of private student loan lenders before you make your decision. Private student loans are one area where it pays to be a savvy shopper. You’ll want to consider origination fees, payment schedules, and interest rates.

Steps to Take Before Applying to Graduate School

Before applying to graduate school it’s important to consider things like the earning potential offered by the degree in comparison to the cost. At the end of the day, only you can decide if pursuing a specific graduate degree is worth it. Here are a few steps to take before applying to grad school.

1. Research Potential Earnings by Degree

Perhaps you are already committed to one degree path, like getting your JD to become a lawyer. In that case you should have a good idea of what the earning potential could be post-graduation.

If you’re considering a few different graduate degrees, weigh the cost of the degree in contrast to the earning potential for that career path. This could help you weigh which program offers the best return.

2. Complete the FAFSA

Regardless of the educational path you choose, filling out the FAFSA is a smart move. It’s completely free to fill out and you may qualify for aid including grants, work-study, or federal student loans. Federal loans have benefits and protections not offered to private loans, so they are generally prioritized over private loans.

3. Explore Financing Options

As mentioned, you may need to rely on a combination of financing options. When scholarships, grants, and federal student loans aren’t enough — private loans can help you fill in the gaps.

When comparing private lenders be sure to review the loan terms closely — including factors like the interest rate, whether the loan is fixed or variable, and any other fees. Review a lender’s customer service reputation and any other benefits they may offer too.

The Takeaway

Grad school is a big investment in your education, but the good news is there are grants and scholarships that you won’t have to pay back. Some employers may also offer tuition reimbursement benefits, or you could find work as a resident advisor or teaching assistant to supplement your tuition costs. If you need more funding to cover the cost, there are federal and private student loans.

Taking the time to find the best combination of loans and funding is crucial. Taking it one step at a time can help you to assess all the options available and make the best financial decision for you. If you’re interested in private student loans, consider SoFi. Interested applicants can easily apply online and SoFi private student loans have zero fees.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Understanding How Income Based Repayment Works

All You Need to Know About Income-Based Student Loan Repayment

Editor's Note: Since the writing of this article, the federal student loan payment pause has been extended into 2023 as the Supreme Court decides whether the Biden-Harris Administration’s Student Debt Relief Program can proceed. The U.S. Department of Education announced loan repayments may resume as late as 60 days after June 30, 2023.

If your federal student loan payments with the standard 10-year repayment plan are high relative to your income, an income-based repayment plan may be an option. New changes to the plans will curtail interest accrual and cut many borrowers’ payments in half.

You might want to weigh the pros and cons before enrolling.

What Is Income-Based Student Loan Repayment?

Income-based repayment plans were conceived to ease the financial hardship of government student loan borrowers and help them avoid default when struggling to pay off student loans.

Those who enroll in the plans tend to have large loan balances and/or low earnings. Graduate students, who usually have bigger loan balances than undergrads, are more likely to enroll in a plan.

The idea is straightforward: Pay a percentage of your monthly income above some threshold for 20 or 25 years and you are eligible to get any remaining balance forgiven. (New amendments would forgive balances after 10 years for borrowers with original loans under $12,000.)

By mid-2021, 33% of Direct Loan borrowers were enrolled in an income-based repayment plan, according to the National Student Loan Data System. But borrowers often fail to recertify their income each year, as required, with one exception, and are returned to the standard 10-year amortizing plan.

4 Income-Driven Student Loan Repayment Plans

While people often use the term “income-based repayment” generically, the Department of Education calls them income-driven repayment plans. There are four.

•   Income-Contingent Repayment (ICR)

•   Income-Based Repayment (IBR)

•   Pay As You Earn (PAYE)

•   Revised Pay As You Earn (REPAYE)

Your payment amount is a percentage of your discretionary income, defined for IBR, PAYE, and REPAYE as the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.

For the ICR plan, discretionary income is the difference between your annual income and 100% of the poverty guideline for your family size and state of residence.

For IBR, PAYE, and REPAYE, the payment is generally 10% of discretionary income. Proposed changes to REPAYE would lower payments to 5% of discretionary income for undergrads, and expand the pool of borrowers making $0 monthly payments.

Recommended: REPAYE vs PAYE: What’s the Difference?

For ICR, the payment is the lesser of these: 20% percent of discretionary income or what you would pay on a repayment plan with a fixed payment over 12 years, adjusted using a formula that takes income into account.

Parent PLUS borrowers may access ICR if they consolidate into a Direct Consolidation Loan.

Got it? But wait; there’s more. Note the number of years in which consistent, on-time payments must be made and after which a balance may be forgiven, as well as who qualifies.

Plan

Monthly Payment

Term (Undergrad)

Term (Graduate)

Who Qualifies

ICR 20% of discretionary income (or income-adjusted payment on 12-year plan) 25 years 25 years Any borrower (this is the only plan that includes parent PLUS Loan holders if they consolidate)
IBR 15% of discretionary income but never more than 10-year plan) 25 years 25 years Borrowers who took out loans before July 1, 2014
Newer IBR 10% of discretionary income (but never more than 10-year plan) 20 years 20 years Borrowers who took out their first loans after July 1, 2014
PAYE 10% of discretionary income (but never more than 10-year plan) 20 years 20 years Borrowers who took out first loan after Sept. 30, 2007, and took out a new loan or consolidated existing loans after Sept. 30, 2011
REPAYE Currently 10% of discretionary income, with no cap (5% if new amendments are approved) Currently 20 years (10 years if new amendments are approved) 25 years Any borrower

How Income-Based Student Loan Repayment Works

In general, borrowers qualify for lower monthly loan payments if their total student loan debt at graduation exceeds their annual income.

To figure out if you qualify for a plan, you must apply (go to StudentAid.gov/IDR) and submit information to have your income certified. Your monthly payment will then be calculated. If you qualify, you’ll make your monthly payments to your loan servicer under your new income-based repayment plan.

You’ll have to recertify your income and family size every year. Your calculated payment may change as your income or family size changes.

What Might My Student Loan Repayment Plan Look Like?

Here’s an example:

You are single and your family size is one. You live in one of the 48 contiguous states or the District of Columbia. Your adjusted gross income is $40,000 and you have $45,000 in eligible federal student loan debt.

The 2022 government poverty guideline amount for a family of one in the 48 contiguous states and the District of Columbia is $13,590, and 150% of that is $20,385. The difference between $40,000 and $20,385 is $19,615. That is your discretionary income.

If you’re repaying under the PAYE or REPAYE plan or if you’re a newer borrower with the IBR plan, 10% of your discretionary income is about $1,962. Dividing that amount by 12 results in a monthly payment of $163.46. (New changes would lower REPAYE payments to $81.73.)

Under the ICR plan, if income is $40,000 and 100% of the poverty guideline is $13,590, discretionary income is $26,410. If you qualify to pay 20% of discretionary income, your monthly payment would be about $440.

The Federal Student Aid office recommends using its loan simulator to compare estimated monthly payment amounts for all the repayment plans.

Which Loans Are Eligible for Income-Based Repayment Plans?

Most federal student loans are eligible for at least one of the plans.

Federal Student Aid lays out the long list of eligible loans, ineligible loans, and eligible if consolidated loans under each plan.

Of course, private student loans are not eligible for any federal income-driven repayment plan, though some private loan lenders will negotiate new payment schedules if needed.

Serious savings. Save thousands of dollars
thanks to flexible terms and low fixed or variable rates.


Pros and Cons of Income-Based Student Loan Repayment

Pros

•   Borrowers gain more affordable student loan payments

•   Any remaining student loan balance is forgiven after 20 or 25 years of repayment

•   An economic hardship deferment period counts toward the 20 or 25 years

•   The plans provide forgiveness of any balance after 10 years for borrowers who meet all the qualifications of the Public Service Loan Forgiveness program

•   The government pays all or part of the accrued interest on some loans in some of the income-driven plans

•   Low-income borrowers may qualify for payments of zero dollars, and payments of zero still count toward loan forgiveness

•   New federal regulations will curtail instances of interest capitalization and suspend excess interest accrual when monthly payments do not cover all accruing interest.

Cons

•   Stretching payments over a longer period means paying more interest over time

•   Negative amortization may occur when your loan payment is less than the new interest that accrues that month, causing the total balance to grow. (This is set to change in July 2023 for all but the IBR plans.)

•   Forgiven amounts of student loans are free from federal taxation through 2025, but usually the IRS treats forgiven balances as taxable income (except for the PSLF program)

•   Borrowers in income-based repayment plans need to recertify income and family size every year

•   If a borrower gets married and files taxes jointly, the combined income could increase loan payments

•   The system can be darned confusing

Student Loan Refinancing Tips From SoFi

Income-driven repayment plans were put in place to tame the monthly payments on federal student loans for struggling borrowers. Many borrowers of federally held loans do not qualify, and those who have private student loans do not.

If your income is stable and credit good, and you have no need for federal programs like income-driven repayment plans or deferment, refinancing your student loans is an option. The goal is to pay off your existing loans with one new private student loan that has a lower interest rate.

SoFi refinances both federal and private student loans and offers low fixed or variable rates. If you’d like to refinance your student loans, get your interest rate in two minutes.

FAQ

Is income-based repayment a good idea?

For borrowers of federal student loans with high monthly payments relative to their income, it can be.

What is the income limit for income-based student loan repayment?

There is no limit. If your loan payments under the 10-year standard repayment plan are high for your income level, you may qualify.

What are the advantages and disadvantages of income-based student loan repayment?

The main advantage is lowering your monthly payments, with the promise of eventual loan forgiveness if all the rules are followed. A disadvantage is having to follow all the rules for 20 or 25 years.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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.
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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Can You Refinance Student Loans?

Guide to Who Can Refinance Student Loans

When you refinance student loans, you pay off your existing loans with a new loan with new terms from a private lender. The primary benefit of refinancing is that you can save money over the life of the loan if you’re able to lower your interest rate.

While certain lenders will refinance federal and private loans together, you’ll lose access to federal benefits and protections if you refinance a federal loan, so it only makes sense if you don’t plan to use any federal programs.

So can you refinance student loans? Here’s what to know about who is eligible for refinancing, types of student loans that can be refinanced, and more.

Who Is Eligible for Student Loan Refinancing?

A borrower generally needs to meet specific credit score, income, and degree requirements to qualify for a student loan refinance. Ideally, a borrower will qualify at better terms than their existing loans, such as at a lower interest rate. As mentioned, the main goal of refinancing is to lower your interest rate so you can save money over the life of the loan.

The process of refinancing student loans involves shopping around for a lower interest rate and then filling out an application for a refinance. Once a refinance is approved, your new lender pays off your old lender. After you receive the new loan, you make payments to your new lender. Here are some of the common requirements to qualify for a student loan refinance.

Credit Score Requirement

Your credit score is a three-digit number that summarizes how well you pay back debt. For refinancing student loans, you’ll typically need to have a credit score in the high 600s to qualify.

You may need to raise your credit score before you apply for student loan refinancing. You may be able to raise your credit score by doing the following:

•  Pay your bills on time

•  Dispute errors on your credit report

•  Keep your credit utilization rate — the amount you use on your revolving accounts such as credit cards — low compared to your total available credit

•  Increase your credit limits

•  Remove negative entries to your credit report (if old collection accounts show up on your credit report, request that they be removed)

Recommended: How Do Student Loans Affect Your Credit Score?

High Enough Income

Student loan lenders often require you to show proof of a certain level of income in order to qualify for a student loan refinance. They want to make sure you can repay your new loan.

They will want to know how your income compares against the amount of debt you have and they’ll calculate your debt-to-income (DTI) ratio to find out if you qualify. A DTI ratio compares the amount you owe each month to the amount of income you bring in—it’s your total monthly debt payments divided by your gross monthly income. It’s a good idea to shoot for a debt-to-income (DTI) of under 50%, though a lower DTI (such as under 35%) is even better.

Wondering “Can I refinance my student loans if I don’t have a high enough DTI ratio?”
To improve your DTI ratio, consider making more payments toward your debt, avoid taking on more debt, increase your income, and postpone making large purchases so you’re not using as much of your credit.

Degree Requirements

In most cases, you’ll have to have a degree or leave college in order to qualify for a refinance. Some lenders won’t allow a refinance if you attended a school that didn’t allow students to accept federal aid dollars.

What Types of Student Loans Can Be Refinanced?

Can you refinance private student loans? Can you refinance federal student loans? Yes, if you choose a lender that refinances both, but note that you can only refinance with a private lender — you cannot refinance federal loans and private loans into a new federal loan. (When you combine several federal student loans into a single loan through the federal government, that’s federal student loan consolidation, which is different from refinancing and generally doesn’t save you money.)

Private Student Loans

Private student loans are issued by a credit union, bank, or online lender, not the federal government. They typically carry a higher interest rate compared to the interest rate on federal student loans.

You may be able to get a lower interest rate on your existing private student loans if you refinance. You may want to consider prequalifying for a loan, which means that a lender will do a soft credit check. Checking with several lenders can help you compare the interest rates among lenders. It might be a good idea to consider refinancing private student loans if you know you’ll get a lower interest rate. A student loan refinance calculator tool for comparing refinance rates can help.

Federal Student Loans

Federal student loans come directly from the federal government and specifically, from the U.S. Department of Education. Can you refinance federal student loans? Yes, but refinancing your federal student loans turns your student loans into private student loans—and you’ll lose access to federal benefits and protections.

When you refinance federal student loans, you lose access to federal loan programs like income-driven repayment, which sets your payments at an amount based on your family size and income. It could also mean that you might forgo loan forgiveness, which means you don’t have to pay back some or all of your loan. You should consider whether it makes sense for you to give up these federal loan programs before you refinance.

Why You Might Consider Refinancing Your Student Loans

If your main goal is finding a way to pay less on your student loans and you’re able to find a lower interest rate on your student loans, refinancing might make a lot of sense for you.

It can also be a good option if you’re interested in merging your student loans together to simplify your payments. And if you’re sure you won’t need to access federal benefits because you have a reliable income and job security, it may also be a better option than federal student loan consolidation, which usually doesn’t end up saving you money.

Recommended: How Student Loan Refinancing Works

Why You Might Avoid Refinancing Student Loans

Despite the attraction of saving money with a possibly lower interest rate or merging several loans together, you might not want to lose out on federal student loan protections. You could lose out on temporary loan payment relief (deferment or forbearance) or loan forgiveness and discharge.

Losing out on federal student benefits may hurt you later on. Be sure to consider what you’ll do if you lose your job or have trouble making your student loan payments down the road.

Can You Refinance Student Loans While Still in School?

You may not be able to refinance your student loans while you’re still in school. However, your best bet is to ask your lender directly. Refinancing with a co-signer may help you improve your application and secure better terms.

If you decide you want to go for it, you can submit a formal application, which includes the lender looking into details like the ones listed above, like income degree requirements and personal details. At this point, a lender does a hard credit check. Once your old loan is closed, you’ll then make regular payments to your new lender.

Student Loan Refinancing With SoFi

So can you refinance student loans? Lenders generally review information like your credit history, income, debt-to-income ratio, and other factors to determine what type of interest rate and loan terms you may qualify for.

Refinancing can save you money over the life of the loan—especially if you can refinance at a lower interest rate. But it’s important to understand that if you refinance a federal loan, you’ll lose access to federal benefits and protections.

If you’re considering refinancing your student loans, SoFi offers flexible terms, competitive rates, and no fees.

Learn more about whether SoFi student loan refinancing is right for you.

FAQ

Can you refinance your student loans if you didn’t graduate?

Yes, you can refinance your student loans if you didn’t earn a degree, though it may be more difficult. Ask various lenders the same question: “Can I refinance my student loans?” and learn more about your refinancing options. If you have federal student loans, you can also look into other options to reduce your monthly repayment amount, such as extending your loan term (although you’ll end up paying more in interest over the life of the loan) or explore whether you might qualify for an income-driven repayment program or forgiveness. Contacting your loan servicer is a good place to start.

What credit score do you need to be able to refinance student loans?

Every lender is different and requires different requirements to be able to refinance. Your personal qualifications also matter. However, in general, it’s important to have a credit score in the high 600s in order to qualify for a refinance. Ask lenders for more information before you make a final decision. You may also want to use a calculator tool for comparing refinance rates.

Can both federal and private student loans be refinanced?

You’re asking good questions if you’re wondering, “Can I refinance federal student loans?” or “Can I refinance private student loans?” The quick answer is that yes, both federal and private student loans can be refinanced, but you must refinance both types into a private student loan, and you’ll lose access to federal benefits and protections if you refinance federal student loans.


Photo credit: iStock/Andrii Sedykh

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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 Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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
.

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.
Checking 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. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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Using a Credit Union to Refinance Student Loans

Credit Union Student Loan Refinancing: All You Need To Know

In addition to typical banking and lending services, some credit unions also offer student loan refinancing opportunities. Refinancing student loans means that you pool all or some of your existing federal or private student loans into a new loan with a new, private lender. The goal is to achieve some sort of advantage when you refinance: for example, a lower interest rate or a lower monthly payment by extending your loan term.

It’s important to note that if you refinance federal student loans, you will forfeit access to federal repayment plans, such as the Standard, Graduated, and Extended Repayment plans.

Keep reading to learn more about how credit unions differ from traditional banks and why you may want to consider a credit union for student loan refinance.

How Credit Unions Differ from Traditional Banks

A credit union is a financial services cooperative that exists to serve its members. Products and services of a credit union typically include member education, financial planning help, mobile and online banking, checking and savings accounts, and the usual menu of loans.

Banks deliver many of the same types of services as credit unions. Their main goals are to benefit stakeholders and customers. But credit unions differ from traditional banks in one main way — they are nonprofit, whereas traditional banks are for-profit. Take a look at the comparison table below to learn more about the differences between credit unions vs. banks.

Credit Unions

Banks

Nonprofit organizations For-profit institutions
Must be a member; they are member-owned Anyone can be a customer; they are owned by shareholders
Dividends issued to members and also to benefit capital development for the overall benefit of members Stockholders receive dividends
More-limited product offerings Wide variety of product offerings
Deposit insurance, which helps provide insurance in case of institution failure, is provided by the National Credit Union Administration (NCUA) Deposit insurance in case of bank failure is provided by the FDIC
May offer lower rates and better fees Rates and fees may be higher due to for-profit status
Fewer locations and ATMs More branches and ATMs

Pros and Cons of Refinancing Student Loans With a Credit Union

Credit unions can offer benefits that other lenders might not give you, but there are some downsides to watch out for as well. It’s a good idea to take a look at both the pros and cons before refinancing student loans with a credit union.

Pros of Credit Union Refinancing

Cons of Credit Union Refinancing

May charge lower interest rates and fees May encounter limits on how much you can refinance
Credit unions have a greater understanding of member needs (such as alumni, military, or community credit unions) May offer less flexible repayment options
May earn discounts if you’re already a member or if you make your loan payments on time Interest rates and fees may cost more than with other types of financial institutions
Potentially better customer service due to dedication to members compared to large banks or online lenders Must apply to become a credit union member

If you’re looking for more in-depth information, SoFi offers a comprehensive student loan refinancing guide.

Finding a Credit Union That Refinances Student Loans

Which credit unions refinance student loans? It’s a good idea to consider a wide variety of lenders before you land on a credit union, including national credit unions, local credit unions, alumni credit unions, and even church credit unions. Not every credit union offers student loan refinancing, so you’ll have to do a little homework based on where you’re likely to be able to tap into membership opportunities.

By the time you finish comparing and contrasting all of your options (including interest rates), you’ll have a better idea of what type of lender you should choose. In addition to searching around for the right lender, you can do a few other things to strengthen your overall profile.

Review your FICO® credit score, the three-digit number that tells lenders how well you handle debt. Your credit score can reveal the rate and terms you will likely receive. It’s a good idea to try for the highest credit score you can get. The higher your credit score, the more favorable your terms will be, which can help you save a significant amount of money over time.

Consider paying down other debts you have, such as personal loans or credit card debt. Lenders take a look at your debt-to-income (DTI) ratio, which compares your monthly debt to the income you bring in. The lower your DTI, the better your opportunities may be.

You can also assemble the types of documents that you know your lender may need, including government-issued identification (such as your driver’s license), pay stubs from your employer, and recent tax returns. It may speed up the process of loan approval once you apply for a student loan refinance with the credit union.

Recommended: What Is a Bad Credit Score?

Comparing Credit Union Loan Terms

Loan terms refer to all the conditions and options available to you when borrowing money. The key elements you should look for in a refinance lender are:

•   Interest rate: What interest rate will you receive from the lender? You want to be able to get a lower interest rate than what you have on your current loan(s). The lower the interest rate, the more money you’ll be able to save on your loan over time.

•   Payoff amount: Know the total “payoff amount” for each loan offer. Getting a round figure from each lender will let you determine the interest amount you’ll pay over your entire loan period. A student loan refinancing calculator can also help you calculate your final costs. You can also find out whether a 20-year student loan refinance or 30-year student loan refinance makes sense for your needs.

•   Fees. Some lenders charge fees to help cover the cost of servicing a loan. These may include origination fees, prepayment penalties, and late fees.

Besides loan terms, consider asking about flexible repayment options and customer service:

•   Flexible repayment options: What happens if you have trouble making your payments? Will your lender work with you? It’s a good idea to ask questions about the types of repayment options they offer in the case of a job loss or a demotion, for example.

•   Customer service: Will you get good customer service from the credit union you’re considering? Ask for references from current customers. You may also know of student loan refinance customers in your community who already use a particular credit union and who can talk to you about their experiences.

Recommended: When Should I Refinance My Student Loans?

Alternatives to Credit Unions for Student Loan Refinancing

What alternatives to credit unions do you have, and should you refinance student loans in the first place? You can refinance with banks, online lenders, and other financial institutions.

Some online banks and lenders differ in that they cannot accept cash deposits (to savings or checking accounts) from customers. Or they may only offer loans, lines of credit, and credit cards. Because they don’t accept cash deposits, online lenders face less stringent government requirements than traditional banks and credit unions.

Before you make a final decision about a credit union student loan refinance or alternative banking solution, take a look at the interest rates, overall payoff amounts, repayment options, and customer service reviews.

The Takeaway

You can refinance private student loans with a credit union (as well as federal student loans), but it isn’t your only option. Credit unions differ from traditional banks due to their nonprofit status, membership requirements, dividends offered to members, limited product offerings, and backing by the NCUA rather than the FDIC. Shop around to find the best loan terms (interest rate, repayment period, and fees) before you settle on a lender.

If you think refinancing might make sense for your situation, consider refinancing your student loans with SoFi. You can refinance online and pay zero fees.

Check out student loan refinance rates offered by SoFi.


Student Loan Refinancing Tips

1.   Refinancing student loans is a way to lower your monthly payments by either getting a lower interest rate and/or extending the loan term. Please note: If you refinance a federal loan, you will no longer have access to federal protections and benefits.

2.   When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

3.   It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.


Photo credit: iStock/SDI Productions

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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 Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Refinancing Student Loans Without a Cosigner: Is It Possible?

Refinancing Student Loans Without a Cosigner: Is It Possible?

As long as you meet lender requirements, it’s possible to refinance student loans without a cosigner. Refinancing means that a private lender bundles some or all of your loans, pays them off, and structures them into one new loan. A private lender can be a bank, school, credit union, or state agency. Federal student loans are funded by the federal government.

A cosigner is an individual with a good credit record who agrees to repay the loan if the primary borrower cannot. If you prefer to apply for a student loan without a cosigner, you may pay more for your loan over the long term through higher interest rates.

Keep reading for more information about student loan refinancing without a cosigner and what it involves.

What Is Student Loan Refinancing?

Student loan refinancing means that a private lender pays off your existing loans (which can be a mixture of private and federal student loans) and puts all of your loans under one roof. This means you don’t have to keep track of various loan payments.

Refinancing student loans allows you to lower your interest rates or extend your loan payoff. Your interest rate, which is a percentage of your principal amount borrowed, is the amount you pay to your lender in exchange for borrowing money. Extending your loan payoff means that you will increase the number of years you take to pay off your loan. It’s important to note that in this case, you will pay more over the life of your loan because you increase the number of years that you will pay for your loan.

You can refinance both federal and private student loans, but note that you must do so with a private lender. You cannot refinance any type of loan into a federal student loan. However, refinancing federal student loans means that you’ll lose access to federal protections such as federal loan forgiveness and income-driven repayment plans. Some lenders only refinance private student loans. Clearly, knowing if and when to refinance student loans is not a simple decision.

Benefits of Refinancing Student Loans Without a Cosigner

Take a look at the benefits of a student loan refinance with a cosigner and the drawbacks of refinancing student loans without a cosigner.

Pros of Refinancing With a Cosigner

Cons of Refinancing Without a Cosigner

Students may gain access to lower rates and terms. Students may not get approved for a loan without a cosigner.
Students may have a better chance of getting approved for refinancing student loan debt with a cosigner. Students may have to pay a higher interest rate without a cosigner on the loan.
Students may be able to build their credit in order to qualify for future loans and get a lower interest rate on other loans in the future.

Keep in mind that if the student stops making loan payments, cosigners may end up paying back the student loan. Not making payments can damage both the student’s and the cosigner’s credit score. Your credit score is a three-digit number that shows a lender how well you pay down debt.

If this happens, it can result in a strained relationship. A student loan refinance without a cosigner may be the best option for all parties involved.

Recommended: Guide to Student Loan Refinancing

How To Refinance Student Loans in 4 Steps

Refinancing student loans without a cosigner typically follows these four steps:

1. Prequalify

By submitting some personal information, you can compare the rates among lenders. Lenders will run a soft credit check which won’t hurt your credit. Lenders will ask for your name, address, school you attended, degree achieved, total student loan debt, income, credit score estimate, and more. The information you need to provide varies from lender to lender.

Recommended: What’s the Difference Between a Hard and Soft Credit Check?

2. Get Multiple Rate Estimates

Each lender will likely give you several offers with various term lengths as well as fixed interest rates (those that don’t change) and variable interest rates (those that change depending on market fluctuations).

3. Complete the Application

Once you’ve chosen a lender and a loan, you can submit documentation that supports the soft credit check and any other information the lender needs, such as personal identification, pay stubs, or other income verification. You’ll undergo a hard credit check at this point.

4. Sign the Final Documents

Learn your final costs, or take a look at a student loan refinance calculator, to get a sense of your all-in costs so you know what you’ll have to pay every month.

What Refinancing Without a Cosigner Involves

Refinancing student loans without a cosigner involves special considerations:

Qualifying With Your Own Credit

Qualifying for a refinance with your own credit means that you aim to get a refinance using your own credit score. The credit score you need to qualify for a refinance will depend on a wide variety of factors, including your income and other information.

It’s important to put forth as high a credit score as you possibly can. The FICO® score range from 300 to 850 — 300 is the lowest and 850 is the highest credit score possible.

In addition to your credit check, you may also need to meet some basic eligibility requirements:

•   The legal age, or “age of majority,” in your state (typically 18)

•   A U.S. citizen, permanent resident, or non-permanent resident alien

•   Employed or have sufficient income from other sources

•   Graduated with an associate’s degree or higher from a qualified institution

Recommended: What is a bad credit score?

Debt-to-Income Ratio

When you get a refinance, a lender will also look at your debt-to-income (DTI) ratio. This is a percentage that tells lenders how much of your money per month goes toward monthly debts versus how much money you have coming into your household.

You can figure out your DTI by adding up your monthly debts and dividing that figure by your gross monthly income (your income before taxes). The result is a percentage, and the lower the percentage, the less risk you present to lenders. Learn more about why debt-to-income ratio matters in student loan refinancing with cosigner and without a cosigner.

Employment Status

In many cases, you must be currently employed, earn income from other sources, or have an offer of employment to start within the next 90 days in order to get a refinance. However, various lenders may have different employment stipulations. Check with your lender to learn more.

Credit History

In order to qualify for a refinance, a lender will look at your credit history, which includes your current and past credit accounts, the amount you owe, and your payment history. Your credit history reveals how responsibly you repay your debts. Credit scores come from information on your credit reports.

What If You Can’t Get Approved Without a Cosigner?

If you can’t get approved without a cosigner, you may want to look for a lender with an alternative credit check. Lenders may offer an alternative process, including simply taking a look at your grade point average, field of study, graduation prospects, and estimated future earnings to determine your eligibility for a refinance or loan. Keep in mind that these alternative requirements may require you to pay a higher interest rate for your refinance.

You may also consider going ahead with a cosigner and then later applying for a student loan cosigner release. A cosigner release means that cosigner is released from a loan as long as you meet certain requirements, such as a minimum payment requirement. Once released, the cosigner is no longer obligated to take care of your debt if you cannot repay your loan.

Alternatives to Refinancing Without a Cosigner

One of the best ways to circumvent the need for a cosigner is to work on improving your credit score. You can do that by paying off debt — paying down credit cards, paying off loans that have gone into arrears — and not taking out too many other types of loans. Your credit score will increase over time as you make positive moves.

SoFi Student Loan Refinancing

It’s possible to refinance student loans without a cosigner, but you may end up with less desirable rates than if you did opt for a cosigner. However, consider the pros and cons of applying with and without a cosigner, including the potential for a strained relationship if you fail to make timely loan repayments. Another important factor to weigh is how likely you are to benefit from the current federal student loan forgiveness plan, as well as the protections that come with federal student loans.

If you think refinancing might make sense for your situation, consider refinancing your student loans with SoFi. You can refinance online and pay zero fees, whether you choose to refinance student loans with a cosigner or not.

Check out student loan refinance rates offered by SoFi.


Photo credit: iStock/paulaphoto

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

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 Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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