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Millions of students across the U.S. take out student loans every year as a way to finance their college education. Student loan debt in America is at an all-time high, reaching nearly $1.5 trillion in 2018. About 70% of college students graduated in 2017 with student loan debt that was expected to average $38,000 .

After years of record low interest rates, 2018 marks the second year in a row that interest rates on federal student loans have increased. Interest rates on federal student loans for undergraduates have increased from 4.45% to 5.05% for the 2018 to 2019 academic year . This student loan rate increase of 0.595% applies for any new loans taken out on or after July 1, 2018.

Student loan interest rates also increased for graduate students—rising from 6% to 6.6%. Rates on PLUS loans, which are available to parents and graduate students, increased from 7% to 7.6%.

How Does Student Loan Interest Increase on Federal Loans?

Since 2013, the interest rate on federal student loans has been set annually by Congress based on the 10-year treasury note . Each year, the new rates take effect on July 1 and apply to loans taken out for the following academic year. Under this formula, rates can increase, decrease, or remain the same.

Federal student loans have fixed interest rates, so the new rate hikes only affect new loans taken out in the 2018 to 2019 school year. Because many students rely on federal loans to pay for college every year, the increases could still result in borrowers paying more money each month, even though the interest rates on federal loans are fixed.

Assuming a 10-year repayment plan, the latest interest rate hike in July 2018 will increase monthly loan payments by about 2.8% . And although the interest rate on federal education loans remains the same over the life the loan, when a student takes out an education loan for the next school year, that loan might have a higher interest rate. Higher interest rates on student loans lead to more debt, which can make it harder for graduates to pay off their student loans.

In an effort to keep the interest rates on 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 never go higher than 9.5%, and the limit on parental loans is capped at 10.5%.

How Does Student Loan Interest Increase on Private Loans?

If you have private student loans, the federal rate hikes won’t directly affect your loans. Most private lenders look at your credit history and income, among a few other factors to determine if they will lend to you and what rate you will qualify for. Many private lenders offer fixed and variable rates for student loans.

Often variable rate loans are tied to the one-month LIBOR, a common global index that reflects short-term interest rates and can change monthly. The one-month LIBOR rate generally rises and falls in small increments each month. As the LIBOR fluctuates, the variable rate on your loan will fluctuate as well. For example, in 2017, variable and fixed interest rates on private student loans rose nearly a point.

Private lenders generally add a margin to the rate which is determined by your credit score or the credit score of your co-signer if you have one. Depending on your lender, variable rates can change monthly, quarterly, or annually.

Even if the variable interest rate on your loan rises, you could still be paying less money in interest over the life of the loan if you pay it off in a short period of time. (Because paying it off quickly means there is less time for interest to accrue!)

On the other hand, if rising interest rates are causing your student loan anxiety to increase as well, you could consider refinancing your variable rate student loans to a fixed interest rate.

Protecting Yourself From Student Loan Rate Increases

When you refinance your student loans, you essentially take out a new loan with a new (hopefully lower) interest rate. That new loan is used to pay off your existing loans.

Refinancing your student loans can allow you to adjust your repayment timeline by shortening or extending the term length. These options can change the total amount of interest you pay over the life of the loan and your monthly loan payment, too.

If you have a mix of federal and private loans and you want to get a new interest rate, you won’t be able to consolidate your loans with the government. At SoFi, you can consolidate your federal and private loans through refinancing.

Keep in mind that if you do refinance with a private lender, your loan will no longer have federal protections like income-driven repayment plans or Public Service Loan Forgiveness.

But if you don’t anticipate needing these programs, refinancing with a private lender might result in a lower interest rate.

With SoFi, there are no application fees or prepayment penalties. And you’ll have the opportunity to choose between a fixed rate loan or a variable rate loan. Both options offer strong opportunities for borrowers to reduce the money they spend on interest depending on a variety of factors such as the total amount of the loan and the overall length of the loan.

To get an idea of how refinancing and the different interest rate options could impact your loan, take advantage of SoFi’s easy-to-use student loan refinance calculator.

SoFi is a leader is the student loan space—offering both private student loans to help pay your way through school, or refinancing options to help you pay off your loans faster.

See your interest rate in just a few minutes. No strings attached.

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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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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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Graduating from college can feel like the end of an era. You’re leaving behind the safety of school, and in theory, you now have all of the tools you need to make it in the real world.

While you may be ready to job search, kill it at an interview, or even start a business, many new grads aren’t sure of the best ways to manage their financial health. Here are five financial tips for new graduates.

1. Making (and Sticking to) a Budget

Make a budget. Hear us out. The b-word might make you cringe, but setting a budget is one of the most important things you can do to help set yourself up for financial success.

That doesn’t mean, however, that you need to hire CPA and create a complicated spreadsheet you’ll never look at again. Think of a budget as a tool that helps you get what you want instead of something that limits you.

For example, whether you want to start saving for retirement ASAP, or just want to save enough money to buy a couch, the first step to getting there is usually setting a budget. A key to creating a budget you’ll actually follow?

Make sure that it not only accounts for necessities like housing and student loan payments, but also includes the things you actually like to spend money on, whether it’s weekly cocktails at your favorite neighborhood bar or online auctions for rare action figures.

If you try to go cold turkey on the things you normally spend your money on, you might not have the motivation needed to set aside some of that cash for your larger goals.

One other important thing to remember is that if you accidentally spend more than your budget at first, don’t give up. Financial health is typically a process, and no one is perfect. The most important thing is that you keep trying.

If you keep struggling to stick with a budget, it may be time to take a look to see where most of your money is going and adjust your budget to make it more realistic to your individual circumstances. For better insight into your spending, get started with SoFi Relay. You’ll be able to keep tabs on your cash flow and spending habits, plus find ways to save.

2. Planning For Emergencies

Many of the financial tips for college graduates focus on saving but can leave out what, exactly, you ought to be saving for. This brings us to our second money tip for college graduates: Creating an emergency fund.

By now, almost everyone knows that most Americans don’t have enough cash saved to navigate a $500 emergency . Scary, right? $500 could be one major car repair, hospitalization, or even just an unexpected security deposit on a new apartment.

When you don’t have cash on hand to pay for emergencies, it may be tempting to put it on a credit card, which, if not paid off right away, can spiral into increasing debt.

One easy way to start is to make an initial goal, say $500. As part of your budget (See? Budgets are important!), you could set aside a certain amount monthly towards your emergency fund. Once you reach $500, take a minute to celebrate, but don’t stop saving.

Your emergency fund should ideally be able to cover about six months of expenses so that you can protect yourself if you ever face extended unemployment or serious illness.

Those numbers can certainly sound daunting, so some savers might find it is easier to set incremental goals, like aiming to first save $500, then $1,000, then $1,500, and so on.

3. Putting Down that Credit Card

We know that not everyone has a job lined up right after graduation. Post-college life can be pretty rough. We see you, recent grads crashing with friends and surviving on instant noodles while you job search. It can be tempting to rely on a credit card during times of financial uncertainty, but overusing your credit card can have serious consequences.

Unless you pay off your credit card debt right away (that is, in full every billing cycle), it continues to accrue interest, which in turn increases the amount you owe. That means that, for example, a $900 couch you charged could balloon in cost the longer you take to pay it off. On top of the extra costs of fees and interest, carrying a large balance on your credit card(s) can impact your credit score.

Instead of relying on your credit card, you may opt to save up for big purchases like new furniture, and keep spending in check by following your budget. If you must put expenses on your credit card, you can help keep added interest at bay by prioritizing paying off your balance in full every month.

4. Learning About Investing

Okay, so you’re on board with a budget and have even started to save for an emergency fund. What’s next? Financial tips for recent graduates often focus only on how to manage your money for right now, but a huge part of financial health is putting your money to work for your future.

Right after graduation can be a great time to consider dipping your toes into investing. Investing is not just for super rich old guys in suits. In fact, getting started on investing while you’re younger can allow you to grow your portfolio over time.

One other common misconception about investing is that you need a ton of spare money available to get started.

The truth is that you may be able to start investing with small amounts of money—SoFi lets you start with as little as $100 a month—and grow your portfolio over time. Intimidated by the process? Talk with an advisor who can help guide you toward the right mix of investments for your goals.

5. Making a Plan For Loan Repayment

Finally, perhaps the most timely tip for new graduates: Make a plan for repaying your student loans. You may have a grace period after you graduate. If you do, you can use that time to figure out exactly how you plan on making those monthly loan payments.

Planning for your loan payments in your budget is a great place to start, but if the monthly payment seems too high to manage, there are a couple things to do that may help keep things in check.

First, make sure that you’re on the right loan repayment plan for your personal circumstances. Federal loans offer several different options for repayment , whether you want to pay your loans off as soon as possible or keep your monthly rate as low as possible. Just remember: If you aren’t making payments to at least cover your monthly interest, your loan might actually end up getting bigger!

If the federal repayment plans aren’t doing it for you, refinancing your student loans may be another option. Refinancing your student loans is a process by which you apply for a brand new refinancing loan to pay off all your existing student loans at once. Why trade in one type of debt for another?

Student loan refinancing may help you secure a lower interest rate or better repayment terms—and that can add up to major savings over the life of your loan. Loan refinancing may be especially beneficial to new grads who have secured a well-paying job or have a better financial situation and credit score than they did when they originally took out their loans.

Recommended: 46 Tips for Recent College Grads

Whether you’re ready to take on the real world or are still trying to get your feet underneath you, taking steps to protect your financial health during this time is crucial.

Congrats, grad: You’ve got this!

Considering refinancing your student loans? With SoFi, applying is quick, easy, and all online. You could get pre-qualified within two minutes. Learn more today.

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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.
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 on credit.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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.
The information provided is not meant to provide investment, tax or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory and automated services offered through SoFi Wealth LLC. An SEC registered investment advisor. SoFi Securities LLC, member FINRA / SIPC .
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Dreaming of climbing the ladder at a prestigious finance institution? Or maybe you’re committed to starting a socially-responsible environmental consulting firm. The chances are that if you’re interested in the business world, you’ve considered getting an MBA.

An MBA, or Master’s in Business Administration, is a graduate level degree that confers grads with flexible and expansive knowledge about the business world, from business development to accounting. Internationally recognized, an MBA can set you up for a career in the United States or abroad, in the private sector or even in the NGO and non-profit sector.

Designed to help you hone critical business skills, MBA programs cover a wide variety of topics, from the basics of economic theory to practical seminars on topics like sustainable development. The flexibility of an MBA means that you will be able to tailor your graduate degree to your specific interests, whether that is learning how to rise to C-suite executive or learning how to manage an international non-profit staff.

If you’re wondering “what jobs can you get with an MBA?”—know that each MBA program has different specialties and electives that allow you to hone your business leadership skills in a context that will help push your career forward.

An MBA is one of the most lucrative master’s degrees . But as more and more students pursue graduate degrees, many students may wonder: is an MBA really worth it?

How Much Does an MBA Cost?

The biggest downside to getting an MBA? The cost. The cost of an MBA degree can vary widely by school and program, but many MBA programs will cost you a pretty penny out of pocket , even if you earn some scholarships.

MBA programs can be some of the most expensive master’s degrees out there, landing grads with more than $70,000 of debt, on average. Top schools, like the University of Pennsylvania and Columbia, can cost upwards of $100,000 in tuition alone. Add in the cost of living, and you’re looking at an even higher number.

Of course, there are more affordable MBA programs. For example, the highly ranked University of Wisconsin-Madison has an annual in-state tuition of $19,162. But regardless of which program you choose, you may be looking at taking out hefty student loans to cover the cost of attendance. If you’re going to invest that much money in your degree, you want to make sure that it will pay off.

Is Getting an MBA Worth the Cost?

Even though getting your MBA is expensive at the outset, it is essential to think about how much actual value having that MBA can add to your life and finances.

Your MBA degree sends an automatic signal that you are a professional and an expert. While many business leaders rise through the ranks without an MBA, having the degree is a bonus for employers showing them you are competent and ready for the business world.

Getting your MBA can come with a serious cost, but it can also have a beneficial impact on your earning potential. In fact, the average MBA salary for 2017 graduates was $105,146 .

It’s important to calculate the return on your investment because some MBA degrees might actually cost way more than you can expect to recover in the boost to your salary. Luckily, we’ve helped take some of the work out of it for you with our annual “No BS” MBA rankings, where we surveyed SoFi members to help break down the return on investment for top MBA programs. Picking an MBA program that could give you the most bang for your buck can help make an MBA worth it.

Of course, not all business professionals need or want an MBA. MBA programs typically take two years of full-time study, which can make them impractical for many people who don’t want to (or can’t) stop working for such a long time, especially if they are already moving up the ladder in the business world.

There are some alternatives to full-time MBA programs, some offer online-only classes, while others offer part-time programs that are designed to work with your schedule while you are still working full-time.

Can You Increase the Value of Your MBA?

The bottom line? Look for a program that fits your interests and offers a great debt-to-value ratio. In addition to choosing the right MBA program, you can help increase the value of your MBA degree by thinking smart when it comes to student loans.

One significant benefit of an MBA is that it can seriously boost your salary and your finances. If your financial picture has improved with things like a solid income and consistent credit history, you may be a good candidate for refinancing. Refinancing your student loans after obtaining an MBA can help you lower interest rates, which means that you could pay less interest on your student loans and voilà—that MBA becomes even more valuable.

When you refinance your student loans, you’re taking out a new loan with a private lender which will in effect pay off your existing loans. Refinancing gives you a new, hopefully lower, interest rate, a new term length, and new monthly payments.

Instead of paying multiple student loans, you end up with a straightforward loan payment, ideally with more favorable student loan repayment terms based on your current financial situation. That means that refinancing offers take into account your new degree, your new salary, and your new financial reality.

You can maximize the value of your MBA program by minimizing the amount of debt you take on through finding a high-value program and considering refinancing your loans after graduation. In the end, getting an MBA can help advance your career if you’re dedicated to pursuing a career in business.

Whether you need help paying for school or help paying off the loans you already have, SoFi offers competitive interest rates and great member benefits as well. See what you’re pre-qualified for in just a few minutes.

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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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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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Geography matters. Where you live can have an impact on your income, expenses, and overall household budget. By extension, this can affect how much you have to put toward your student loans every month—and how quickly you’re able to pay them off.

Many Americans move around a lot, with the average person changing homes more than 11 times over his or her lifetime. Perhaps you’re contemplating a move to find a new job, be closer to family, pursue graduate school, or find a more affordable locale. When doing your research, it’s worth exploring which states boast conditions that may help you pay off your loans.

A state that lets you keep more of what you make is also likely to leave you with more funds to put toward your student loans.

A state that lets you keep more of what you make (e.g., low income or sales taxes) is also likely to leave you with more funds to put toward your student loans.

If you use extra disposable income to accelerate your student loan payments, as opposed to extra shopping or travel, your loans have a better chance of disappearing more quickly.

Other factors can also speed up loan repayment— increasing your payments, or shortening your term by refinancing your student loans—but living in a state that offers opportunities to increase your income or reduce your bills can be a boon.

Here are some of the top states to live in that may make it easier to pay off student loans quickly, based on the perks they offer. Even if you’re not moving anytime soon, it’s worth knowing how your state stacks up.

No or Low-Income Taxes

Every working American has to pay federal income taxes. But not having to pay anything, or much, in state income taxes can go a long way toward leaving you with more cash to pay your loans off with.

Seven states don’t make you pay any income tax at all. As of 2019, these states are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee come close: You only pay state income taxes on income from dividends and investments—not wages. In contrast, the highest personal income tax state is California, which charges 12.3%.

No Sales Tax

Even if you save on income taxes in certain states, you could end up paying more at the register through sales taxes . Five states don’t charge any sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. (Alaska and Montana do allow local—rather than state-level—sales taxes).

You may have noticed that Alaska also doesn’t charge income tax, so that’s double the savings in one state. In Colorado, the sales tax is just 2.9% .

Some states charge sales taxes no higher than 5%, which in 2018 included Alabama, Georgia, Hawaii, Louisiana, Missouri, New York, North Carolina, North Dakota, Oklahoma, South Dakota, Wisconsin, and Wyoming. The cash you save on sales tax can add up and help you pay off your student loans.

Lowest Cost of Living

Paying less for daily expenses, such as housing, transportation, food, and utilities, would potentially leave you with more cash for your student loans. According to a CNBC study from 2018 , the 10 states with the lowest cost of living are (starting with the most affordable): Mississippi, Arkansas, Oklahoma, Michigan, Tennessee, Missouri, Kansas, Alabama, Georgia, and Indiana.

The study took into account prices of housing, food, energy, and other goods. In the cheapest state, Mississippi, the average home costs $214,217 and the average doctor’s visit will set you back $87.58. With prices like those, you could have more room in your budget for paying down your student loans.

Highest Incomes

Earning more money is the obvious way to have more funds for student loans. Although incomes obviously vary by profession, level of education, and other factors, some states have higher-than-average salaries.

These states had median household incomes that were far higher than the 2016 national median of $58,552: Washington ($67,106), California ($67,739), Virginia ($68,114), New Hampshire ($70,936), Connecticut ($73,433), Hawaii ($74,511), Massachusetts ($75,297), New Jersey ($76,126), Alaska ($76,440), and Maryland ($78,945). Of course, high incomes can come with a high cost of living, as well.

Best Job Prospects

High median incomes don’t matter much to you if you’re having trouble finding a job in the first place. According to U.S. News & World Report , these are the 10 best states for employment based on a combination of having a low unemployment rate, high labor-force participation, and high job growth: Hawaii, North Dakota, Colorado, Utah, New Hampshire, Nebraska, Minnesota, Iowa, Massachusetts, and Wisconsin. You may notice that a few of those states overlap with with the highest-income rankings, so you could be more likely to find a job there that also pays well.

Best Cost-of-Living-to-Income Ratio

A high income can disappear quickly in a place with high living costs; conversely, a cheap state becomes less affordable if you can only earn a low income there. One way to gauge true affordability is to compare the “real income” in each state by taking the median household income and accounting for cost of living.

When Money Magazine did this, it found that the states with the highest real incomes were: Alaska ($69,465), Maryland ($69,203), New Hampshire ($66,955), Massachusetts ($66,069), Connecticut, ($65,636), North Dakota ($65,609), Minnesota ($65,183), Utah ($64,858), Virginia ($64,646), and the District of Columbia ($64,639). Some of these overlap with the highest-income states, but in others the cost of living makes a big difference in making incomes stretch further.

Another study revealed the cities that offer the best combination of high wages and affordable expenses. The highest-ranking city was Oklahoma City, where the average annual income is $72,385, while the median monthly rent is $1,070, and annual necessities cost an average of $18,701.

The other cities on the list, starting from the highest ranked, are: Kansas City, Missouri; Lexington, Kentucky; Phoenix, Arizona; Durham, North Carolina; Omaha, Nebraska; Bakersfield, California; Tampa, Florida; Dallas, Texas; and Charlotte, North Carolina. Living in states with the best cost-of-living-to-income ratio can help make your dollars go further.

Other Perks

Besides high incomes, affordability, and low taxes, some states offer other perks that can help you pay off your loans more quickly. Alaska pays each eligible resident a fixed amount of cash every year through the Permanent Fund Dividend, created to share revenues from the state’s oil reserves.

The amount was $1,600 per man, woman, or child in 2018 and could be used for anything, including paying off loans. Colorado and Kansas pay up to 4% of your first mortgage if you meet income and credit requirements.

Other states may help you pay off student loans if you enter certain fields. For example, the Washington Student Achievement Council repays up to $75,000 in student loans for health professionals in rural or disadvantaged areas, and New York repays up to $20,400 in loans for eligible residents working as public interest lawyers. The American Bar Association maintains a full list of state-level loan repayment assistance programs (LRAPs) for attorneys.

How Student Loan Refinancing Can Help

If you’re looking to pay off student loans more quickly, you don’t have to move across the country. Refinancing your student loans can also be a great way to potentially reduce your interest rate. When you refinance, you take out a new loan from a private lender, like SoFi, and use it to repay your existing federal or private loans.

The new loan may offer a lower monthly payment or lower interest rate, especially if you have a solid credit and employment history (among other factors). A lower interest rate can help you pay less in interest over the life of the loan.

If you qualify to refinance, you may also have the option to shorten the length of your loan term. This would likely mean higher monthly payments, but if you’re in a financial position to take on a higher monthly payment, that’s another way you could pay off your student loan debt more quickly.

At SoFi, you can apply for pre-qualification online and find out whether you qualify in two minutes. And keep in mind that if you pay off your refinanced student loan early, SoFi has no prepayment penalties.

Want to pay off your student debt more quickly? Check out whether refinancing your student loans with SoFi can help.

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This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or 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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Almost 20 million students entered the American higher education system this year. And most of them are faced with yearly expenses averaging nearly $26,000 for in-state public colleges and up to double that for private schools.

Tuition, books, supplies, room and board, fees, and transportation can all contribute to the final bill, and seeing that total for the first time can lead to some serious sticker shock. But it doesn’t mean you have to hand over cash in order to enroll. There are a number of ways to help pay for college. But what’s the difference between grants, scholarships, and loans? Here’s what you need to know.
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Student Loans vs Scholarships

The biggest difference between student loans and scholarships is that loans do not reduce the cost of college, they just help you afford it upfront. Eventually, they need to be paid back. Scholarships , on the other hand, are need-based or merit-based awards that actually help make college more affordable because they go directly toward the cost of your education and you don’t need to pay them back. There are quite a few other differences between the two as well.

Getting the Money

If you take out a student loan, the total amount is divvied up by semester or year and that amount is typically disbursed to your school to cover your tuition.

The remaining money is often disbursed to you directly so you can cover costs like housing off campus, food, and school supplies.

Scholarships, on the other hand, are often paid straight from the college, or straight to the college in the case of third-party awards. Your scholarship money may go directly to your tuition or other school fees, or it may be sent to you directly (depending on the scholarship).

Restrictions and Qualifications

Both scholarships and student loans come with strings attached. Scholarships, whether merit-based or need-based, can come with GPA requirements or other academic qualifications. You can win scholarships from either the government, your school, or one of a large number of private organizations. (Here’s a giant scholarship database to aid your search.)

Even if you earn a scholarship that’s more lenient, it’s not the green light for a free for all. How you spend your scholarship money could affect everything from your taxes to your loan eligibility (definitely talk to a tax professional if you have any questions about that), so it’s important to ensure that scholarships are spent only on tuition or other school-related expenses.

Whether the student or the parents apply for federal loans, the process starts with a FAFSA® (Free Application for Federal Student Aid). Even if you don’t think you’ll qualify for a student loan or other financial aid, it’s still a good idea to fill out the FAFSA, because some states and schools use it to determine their awards as well.

The minimum qualifications for federal student aid include (but are not limited to) U.S. citizenship or eligible non-citizenship, a high school diploma or GED, and acceptance into an eligible degree or certificate program.

Beyond that, the FAFSA determines eligibility based on your financial situation, the school you’ll be attending, and other factors. Student loans are widely used to help pay for college. In fact, Americans currently share a student loan burden that’s over $1.5 trillion (with a T).

How Are Grants Different from Scholarships?

Like scholarships, grants help reduce the cost of higher education for the individual student because they don’t need to be repaid. They also have certain minimum requirements for maintaining your eligibility. The primary difference between the two is that grants are typically need-based, whereas scholarships are typically merit-based.

The largest provider of grants from the federal government is the Pell Grant program, which awards a fluctuating maximum (currently $6,095 for the 2018–19 award year) per year based on your financial circumstances. State governments may also fund grants for residents who attend in-state colleges or universities.

Can You Win a Scholarship and Still Take Out a Loan?

If you are awarded a grant or a scholarship, you can still apply for student loans. However, the money you receive from that grant or scholarship can affect your loan eligibility, sometimes in a big way.

For example, the schools or programs you applied to will use your completed FAFSA to determine your financial need , which is the difference between your total Cost of Attendance (COA) and your Expected Family Contribution (EFC) . Earning scholarships can reduce your costs, which in turn can leave you eligible for less financial aid—which includes both need-based and non need-based aid.

To complicate matters, some scholarships are awarded as “first-dollar ,” meaning they are made either according to set guidelines or without regard for any other aid you receive, and some are “last-dollar,” meaning they cover any remaining gaps after all your other aid has been applied. If you’re awarded several forms of student aid, be sure to do the overall math and determine if one is a better opportunity.

A Word About Work-Study

Another way some students choose to pay for college is the Federal Work-Study program , which provides part-time jobs for students while they are enrolled in classes. It’s available to students at all levels of higher education and aims to employ students in community service work or work related to their degree.

For students whose chosen career paths require lots of hands-on work, this can be an attractive option to not only help earn money for school, but gain real world experience at the same time. Check with your school’s financial aid office to see if they participate.

We want to help you focus on your degree, not your debt. Our mission is to help students get low-rate loans they can pay back on their own terms. Learn more.

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When the time comes, SoFi can help you refinance your student loans and potentially put more money back in your pocket.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice about bankruptcy.
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.

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