Can a Roth IRA Be Used for College Expenses?

A Roth IRA can be used to pay for college expenses, and it is possible to do so without incurring taxes or penalties. However, there are disadvantages of using a Roth IRA for college, and it’s important to weigh the pros and cons.

A Roth IRA is designed to help individuals save for retirement. While you can also use a Roth IRA for college expenses, you’ll want to understand the potential ramifications.

Here’s what you need to know about using a Roth IRA for college, plus other college savings options, to help make the best decision for your situation.

Key Points

•   Early withdrawals from a Roth IRA for qualified higher education expenses can be made without penalties.

•   Pros of using a Roth IRA for college include reducing the need for student loans and avoiding the 10% penalty.

•   Cons include impacting retirement savings and potential loss of compounding returns.

•   Comparatively, a 529 plan offers higher contribution limits and potential tax benefits.

•   Choosing between a Roth IRA and a 529 plan depends on individual financial needs and goals.

Can You Use a Roth IRA for College?

You can use a Roth IRA to help pay for college. However, as mentioned, a Roth IRA is primarily a vehicle for saving for retirement. You contribute after-tax dollars to the account (meaning you pay taxes on the contributions in the year you make them), and the money in the Roth IRA grows tax-free. You can generally withdraw the funds tax-free starting at age 59 ½. However, if you withdraw the money early, you may be subject to a 10% penalty.

But there are some ways to make early withdrawals from your Roth IRA to help pay for college without being penalized. Because you contribute to a Roth IRA with after-tax dollars, you can withdraw the contributions (but not the earnings) you’ve made to a Roth at any time without paying a penalty. You could then use those contributions to help pay for college.

Just be aware that there are annual contribution limits to a Roth IRA. In tax year 2023, you can contribute up to $6,500 (or $7,500 if you’re 50 or older), and in 2024 you can contribute up to $7,000 ($8,000 for those 50 or older). How much you’ve contributed will affect how much you have in contributions to withdraw, of course.

Another way to use a Roth IRA to pay for college without being penalized is by taking advantage of one of the Roth IRA exceptions that allow you to withdraw money from your account early. One of the exceptions is for qualified higher education expenses.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

Do You Have To Pay Penalties if You Use a Roth IRA for College?

Typically, if you take out money from your Roth IRA before age 59 ½ , you will be subject to taxes and penalties. However, IRA withdrawal rules grant a few exceptions to this rule, and one of the exceptions is for qualified higher education expenses.

If you pay qualifying higher education expenses to a qualified higher education institution for your child, yourself, your spouse, or your grandchildren, you won’t have to pay the 10% penalty for withdrawing funds from a Roth IRA. Qualified higher education expenses include things like tuition, fees, books and supplies. However, you will still have to pay taxes on any earnings you withdraw from your Roth IRA.

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Pros and Cons of Using a Roth IRA for College

Whether using a Roth IRA for college is right for you depends on your particular situation. Here are the pros and cons you’ll want to consider.

Pros of Tapping Into a Roth IRA for College

Advantages of using a Roth IRA for college expenses include:

•   You might not have to borrow as much money to pay for college. Using a Roth IRA for college expenses may reduce the need for student loans. And for some students, using money from a Roth IRA might make the difference between being able to afford to attend college or not.

•   You won’t be penalized for withdrawing the money. Because of the exception for qualified higher education expenses, you can take out the money to pay for those expenses without having to pay the 10% penalty.

•   If you withdraw just your contributions, you won’t owe taxes on that money.

Cons of Tapping Into a Roth IRA for College

These are the drawbacks of using a Roth IRA to pay for college:

•   Your retirement savings will take a hit. This is the biggest disadvantage of using the money in a Roth IRA for college. While there are other ways to help cover the cost of college, there are generally fewer options to help you save for retirement if you spend your Roth IRA funds on college expenses.

•   Because of possible compounding returns, even a few thousand dollars withdrawn from your Roth IRA today might mean missing out on tens of thousands of dollars of potential growth by the time you’re ready to retire years from now.

•   Eligibility for financial aid could be affected. Another possible downside of using a Roth IRA for college is that the money you withdraw generally counts as income on the FAFSA (Federal Application for Federal Student Aid). That may limit financial aid you could receive, including grants and loans.

Roth IRA vs 529 for College

Before you decide to use a Roth IRA for college savings, you might want to consider a 529 plan. With a 529, you can save money for your child to go to college and withdraw the funds tax-free as long as they’re used for qualified higher education expenses.

A 529 plan has more generous contribution limits than a Roth IRA does, and other extended family members may also contribute to the plan. In addition, while 529 contributions aren’t deductible at the federal level, many states provide tax benefits for 529s.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

Which College Expenses Can a Roth IRA Be Used For?

According to the IRS, a Roth IRA can be used to pay for qualified higher education expenses. These qualified expenses include tuition, fees, books and supplies, and equipment required for enrollment or attendance.

The Takeaway

It’s possible to use a Roth IRA to help pay for qualified higher education expenses, and you typically won’t be subject to a penalty for doing so. However, taking funds out of your Roth IRA means you won’t have that money available for retirement. You’ll also lose out on any gains that may have compounded throughout the years. That could impact your retirement savings or even delay your retirement date.

Instead of using a Roth IRA for college, you may want to consider other ways to save for college that might better fit your financial needs, such as a 529 plan. That way you can save for both college and retirement.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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FAQ

Can you use a Roth IRA for college?

Yes, it is possible to use a Roth IRA for college expenses. If you withdraw money from a Roth IRA for qualified higher education expenses, you generally will not be subject to the 10% early withdrawal penalty. Tuition, fees, books, supplies, and equipment needed for enrollment or attendance are usually considered qualified expenses.

Is a Roth IRA better than a 529 for college?

Deciding whether to use a 529 plan or a Roth IRA for college will depend on your specific financial situation. In many cases, a 529 plan may make more sense than a Roth IRA for college savings. You can generally contribute more to a 529 plan each year than you can to a Roth IRA, there are tax advantages to the plan, and other relatives can also contribute to it. Plus, by using a 529, you won’t be taking money from your retirement savings.

Can I withdraw from my IRA for college tuition without penalty?

Yes, you can use a Roth IRA to pay for college tuition without penalty in most cases because tuition is generally considered a qualified higher education expense. However, to avoid taking money from your retirement savings, you may want to consider other college saving options instead, such as a 529 plan.


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Federal Loan Programs to Consider Before You Refinance

Whether you’re in the market for a new student loan or looking to lower your current student loan payments, there may be a federal loan program available to help.

Student loan programs sponsored by the federal government are available to any eligible borrower (not just federal employees) and don’t always require a credit check. They also come with some advantages over private student lending options, such as income-based repayment plans, forgiveness programs, and (in some cases) lower interest rates.

Whatever stage you’re at in your education or borrowing journey, here’s what you need to know about federal student loan programs.

Why Consider Federal Loan Programs?

The federal government offers student loan programs for undergraduate students, graduate students, as well as those who are in the repayment phase of their student loan journey. These programs include:

•   Direct Subsidized Loans With Direct Subsidized Loans, which are available to students who demonstrate financial need, the government pays all the interest that accrues on the loan during school and for six months after graduation.

•   Direct Unsubsidized Loans Direct Unsubsidized Loans are available to eligible undergraduate, graduate, and professional students and are not based on financial need. With these loans, students are responsible for repaying all interest that accrues on the loan.

•   Direct PLUS Loans Graduate or professional students (and parents of undergraduate students) can tap into Direct PLUS Loans. Eligibility isn’t based on financial need, but you must undergo a credit check. These loans have higher interest rates and fees than Direct Unsubsidized Loans, but you can borrow more money — up to your total cost of attendance, minus other aid received.

•   Direct Consolidation Loans Direct Consolidation Loans allow you to combine your eligible federal student loans into a single loan with one loan servicer. This can simplify repayment. However, it won’t lower your interest rate.


💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

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Benefits of Federal Loan Programs for Students

Federal loan programs offer a number of benefits for college students. Here are some to keep in mind.

•   Payments not due until six months after graduation: Students don’t need to make any payments on their student loans while they are in school at least half-time or during the post-graduation grace period, which is six months.

•   Fixed interest rates: Federal student loans have fixed interest rates that are often lower than student loans from private lenders. For federal loans first disbursed on or after July 1, 2023, and before July 1, 2024, the rate is 5.50% for undergraduate Direct Subsidized and Unsubsidized Loans; 7.05% for Direct Unsubsidized Loans for graduate students; and 8.05% for Direct PLUS Loans.

•   Subsidized options: If you have financial need, the government may offer you a subsidized loan, which means the government pays the interest while you’re in school at least half-time and for six months after you graduate.

•   No credit checks for certain loans: You don’t need a credit check to qualify for Direct Subsidized or Unsubsidized Loans.

Federal Loan Programs to Consider After You Graduate

Once you graduate and need to begin paying back your federal student loans, the government offers a number of programs that can make repayment more manageable. Here’s a look at some of your options.

Federal Student Loan Repayment Plans

The Education Department offers a number of different repayment plans, including long-term plans that can last up to 30 years. You may be able to lower your monthly payment if you opt for a longer repayment term. Extending your repayment term generally means paying more in interest overall, though.

Fixed repayment plans include the Standard, Graduated, and Extended plans. Here’s a look at how they compare.

Fixed Repayment Plan

Eligible Loans

Monthly Payment Amount

Standard Plan Direct Subsidized and Unsubsidized Loans; Subsidized and Unsubsidized Federal Stafford Loans; PLUS loans, Consolidation loans Payments are a fixed amount that ensures your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans)
Graduated Plan Direct Subsidized and Unsubsidized Loans;
PLUS loans; Consolidation Loans
Payments start out lower and then increase, usually every two years. Payment amounts ensure you’ll pay off loans within 10 years (within 10 to 30 years for Consolidation Loans)
Extended Plan To qualify, you must have more than $30,000 in outstanding Direct Loans (or FFEL Program loans) Payments can be fixed or graduated and will ensure that your loans are paid off within 25 years

Income-Driven Repayment Plans

Income-driven repayment (IDR) plans aim to make student loan payments more manageable by tying them to the borrower’s income. They allow you to pay a percentage of your discretionary income toward federal loans for 20 to 25 years, at which point the remaining loan balances are forgiven.

The Saving on a Valuable Education (SAVE) Plan is the newest and one of the most affordable repayment plans for federal student loans. For some borrowers, payments can be as low as $0 per month.

Here’s a look at how the four IDR federal loan payment programs stack up.

Income-Driven Repayment Plan

Eligible Loan Types

Monthly Payment Amount

SAVE Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans (that do not include parent PLUS loans) 10% of discretionary income
PAYE Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans (that do not include parent PLUS loans) 10% of discretionary income but never more than what you would pay under the 10-year Standard Repayment Plan
IBR Direct Subsidized and Unsubsidized Loans; Subsidized and Unsubsidized Federal Stafford Loans; Direct and FFEL PLUS Loans (made to students); Direct or FFEL Consolidation Loans (that do not include parent PLUS loans) Either 10% or 15% of discretionary income but never more than what you would pay under the 10-year Standard Repayment Plan
ICR Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans Either 20% of your discretionary income or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income (whichever is lower)

Student Loan Forgiveness Programs

In addition to the loan forgiveness associated with IDR plans, the federal government offers other federal loan forgiveness programs, including Public Service Loan Forgiveness (PSLF), which is for public-sector workers. The PSLF program allows you not to repay the remaining balance on your Direct Loans as long as you’ve made the 120 qualifying monthly payments under an accepted repayment plan and worked for an eligible employer full-time.

There is also a separate forgiveness program just for teachers, as well as one borrowers with permanent disabilities.

Federal Student Loan Consolidation Program

If you have multiple federal student loans, you can consolidate them into a single new loan (called a Direct Consolidation Loan) with new repayment terms. This can simplify the repayment process, since you’ll only have one payment and one loan servicer to keep track of.

Federal loan consolidation also allows some borrowers (such as those with Federal Family Education or Perkins Loans) to access repayment and forgiveness programs that they otherwise are ineligible for.

The federal student loan consolidation program does not lower your interest rate, however. Your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next one-eighth of 1%.

Your new loan term could range from 10 to 30 years, depending on your total student loan balance. If you extend your loan term, it can lower your monthly payments but the total amount of interest you’ll pay will increase.

It’s also important to note that when loans are consolidated, any unpaid interest is added to your principal balance. The combined amount will be your new loan’s principal balance. You’ll then pay interest on the new, higher balance. Depending on how much unpaid interest you have, consolidation can cost you more over the life of your loan.

Recommended: Student Loan Consolidation vs Refinancing

Factors to Evaluate Before Refinancing

Refinancing is the process of taking out a new student loan from a private lender (ideally with better rates and terms) and using it to pay off your existing federal and/or private student loans. Generally, refinancing only makes sense if you can qualify for a lower rate. Here are some things to consider before you explore refinancing your student loans.

Current Interest Rates and Loan Terms

Refinancing can potentially allow you to lower your monthly payment by getting a lower interest rate than what you currently have, extending your loan term, or both. Keep in mind, though, that lengthening your loan term may mean paying more in interest over the life of the loan.

Credit Score Requirements

Not every borrower is eligible for refinancing. To get approved, you typically need a credit score of at least 650. A score in the 700s, however, gives you a much better chance of qualifying.

Your credit score also helps determine your new interest rate. Generally, the better your credit score is, the more competitive your interest rate will be. If you can’t qualify for an attractive refinance on your own, you might want to recruit a cosigner who has excellent credit.

Potential Savings Through Refinancing

One of the main reasons people refinance their existing student loans is because they can find a lower interest rate through a new lender. This can help you save money, potentially thousands over the life of your loan. A lower rate can also help you pay off your loan faster, or lower the amount you pay each month.

While student loan interest rates have been on the rise in the last couple of years, you may still be able to do better if your financial situation has considerably improved since you originally took out your student loans or you have higher-interest federal student loans.

Impact on Loan Forgiveness Options

Refinancing federal loans makes them ineligible for federal forgiveness and protections. If you think you may benefit (or are currently working towards) public service, teacher, IDR, or other federal forgiveness program, it may not be a good idea to refinance your federal student loans. Doing so will bar you from getting your federal loans forgiven.

Refinancing also makes your loans ineligible for government deferment and forbearance programs, which allow you to temporarily postpone or reduce your federal student loan payments. However, many private lenders offer their own deferment and forbearance programs.



💡 Quick Tip: 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.

The Takeaway

Federal loan programs, including loan consolidation, graduated repayment plans, income-driven repayment plans, and forgiveness programs can make repaying your federal student loans more manageable after you graduate.

If you have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans, however, it can also be worth looking into private student loan refinancing.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Does it make sense to refinance student loans?

Refinancing student loans can make sense if you are able to qualify for a lower interest rate through a new lender. This can help you save money, potentially thousands over the life of your loan. A lower rate can also help you pay off your loan faster, or lower the amount you pay each month.

Keep in mind that refinancing federal student loans with a private lender means giving up federal protections and relief programs.

Under what circumstances would you want to consider refinancing a debt?

You might consider refinancing a debt if your financial situation has improved since you originally got the loan and can now qualify for a lower rate. Refinancing also allows you to extend your loan term, which can lower your payments. Keep in mind, however, that a longer term generally means paying more in overall interest.

Which is a downside of refinancing out of federal student loans?

The biggest downside of refinancing your federal student loans is forfeiting federal protections, such as income-driven repayment plans and loan forgiveness options.


Photo credit: iStock/Drazen Zigic

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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


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

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

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My IDR Student Loan Is at $0: Now What?

Income-driven repayment (IDR) plans adjust your monthly student loan payments to a percentage of your discretionary income. Depending on your income and family size, you could have a payment as low as $0.

In this case, you can pay nothing on your student loans without falling into delinquency or default. Plus, you’ll still be making progress toward loan forgiveness, which you can receive after 20 or 25 years on an IDR plan.

Your $0 monthly payments can also count toward Public Service Loan Forgiveness (PSLF), which offers loan forgiveness after 10 years of working at a qualifying not-for-profit or government agency.

That’s the topline on this situation. Read on to learn more about how qualifying for $0 student loan bills on an IDR plan can impact your payment obligations and progress toward loan forgiveness.

What Are Income-Driven Repayment Plans?

When paying back student loans, you have the option of applying for an income-driven repayment plan. An IDR plan can be a good fit if you’re looking to reduce your monthly payments, since it adjusts your bills to a percentage of your discretionary income.

There are four options for income-driven repayment:

•   SAVE: The SAVE plan, which replaces the REPAYE option, adjusts your payments to 10% of your discretionary income. It calculates that as the difference between your annual income and 225% of the poverty guideline for your family size and state. It has the most generous interest subsidy of all the IDR plans, as the government will cover any unpaid interest from month to month. Starting in the summer of 2024, the SAVE plan may also offer loan forgiveness after 10 years, depending on your loan amount and type. Plus, it will slash payments on undergraduate student loans to 5% of your discretionary income.

•   Pay As You Earn (PAYE): The PAYE plan also adjusts your payments to 10% of your discretionary income, but the discretionary income calculation is less generous at 150% of the poverty guideline. It offers loan forgiveness after 20 years.

•   Income-Based Repayment: On this plan, you’ll pay 10% or 15% of your discretionary income for 20 or 25 years, depending on when you borrowed your loans.

•   Income-Contingent Repayment: This plan is the least generous of the IDR plans. It sets your payments at 20% of your discretionary income, which uses 100% of the poverty guideline. However, ICR is the only income-driven plan available for parent loans.


💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

Take control of your student loans.
Ditch student loan debt for good.


Student Loan Forgiveness Overview

Most income-driven repayment plans offer loan forgiveness at the end of your repayment term. Currently, all the plans require 20 or 25 years of repayment before you can get your remaining balance forgiven.

Starting in July 2024, though, the SAVE plan will offer a faster path to loan forgiveness for some borrowers.

•   Specifically, you can get forgiveness after 10 years on SAVE if your original balance was $12,000 or less.

•   Another year will be added to your repayment term for each additional $1,000 you borrowed, up to a total of 20 years for undergraduate student loans and 25 years for graduate student loans or a mix of both.

Keep in mind that you might have to pay taxes on any loan forgiveness you receive from an IDR plan after 2025. Prepare to pay this final student loan bill before you can say goodbye to your federal student debt.

Recommended: Guide to Student Loan Transfers

If My IDR Plan Is $0, Does It Count Towards Payments for Forgiveness?

The answer to “What is the minimum student loan repayment?” can, in fact, be zero. And if your IDR plan doesn’t require you to pay anything on your student loans, you may be relieved to hear that your IDR student loan $0 monthly payments will still count toward student loan forgiveness. Even though you’re not paying anything, you’ll still be making progress toward the 20 or 25 years of required payments to get your loans forgiven.

If you’re pursuing loan forgiveness through the PSLF program, you’ll get credit for your $0 payments for that as well. You need to make 120 payments on an IDR plan, along with working in eligible public service full-time, to qualify for PSLF. Unlike the loan forgiveness you get from an IDR plan, the forgiveness you get from PSLF is not taxable.

Keep in mind, though, that your payments may not stay at $0 forever. You must recertify your income and family size on an annual basis so your loan servicer can recalculate your income-based repayment plan. If your circumstances change, your monthly payment on an IDR plan could increase.

Should I Refinance My Student Loans Instead?

If you’re looking for strategies to manage your student loans, refinancing is another option. When you refinance student loans, you exchange one or more of your existing loans from a private lender.

On the plus side:

•   If you have good credit and steady income, you could qualify for a better interest rate than you have now. Reducing your interest rate could save you money over the life of your loans and help you pay off your debt faster.

•   You’ll also get to choose new terms for paying off your student loan. You could choose a short term to pay off your debt sooner or a longer term of 15 or 20 years to reduce your monthly payments. Keep in mind that a longer term can mean you pay more interest over the life of the loan.

Refinancing does have some risks, though, that are important to understand before you apply.

•   Specifically, refinancing federal student loans means losing access to federal benefits and protections, such as income-driven repayment plans and forgiveness options.

If you want to use income-driven repayment, pursue loan forgiveness, or take advantage of another federal perk, it wouldn’t be wise to refinance your federal student loans with a private lender. However, refinancing high-rate private student loans could be advantageous if you can get a better interest rate.

Recommended: Why Your Student Loan Balance Never Seems to Decrease

The Takeaway

Income-driven repayment can be a lifesaver if you’re struggling to afford your monthly student loan payments. An IDR plan will limit your payments to a percentage of your income while extending your loan terms to 20 or 25 years. If you still owe a balance at the end of your term, the rest will be forgiven.

Depending on your finances, you could get a payment as low as $0 on an IDR plan, but you’ll still get credit toward loan forgiveness. Keep in mind, though, that you may be in repayment for a long time on an IDR plan before you can say goodbye to your student loans.

You may also want to consider refinancing them for better rates and new repayment terms.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How do I qualify for a $0 student loan payment?

You may be able to qualify for a $0 student loan payment on your federal student loans through an income-driven repayment plan. These plans calculate your monthly payments based on your discretionary income and family size. If your annual income falls below a certain percentage of the poverty guideline for your state, you could qualify for a $0 monthly payment.

Can I lower my IDR payment?

Your loan servicer will calculate your IDR payment based on your discretionary income and family size. If you have a decrease in your income or increase in your family size, you could see your IDR payment go down. You’ll recertify your IDR plan annually with your most up-to-date information, but you can request an adjustment sooner.

Will income-based repayment go away?

There’s no sign that income-based repayment plans will go away. In fact, the Biden administration recently introduced the SAVE income-driven repayment plan, which offers a more generous payment calculation and interest subsidy than the income-driven repayment options.


Photo credit: iStock/JLco – Julia Amaral

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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


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

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

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

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Student Loan Refinancing: What Happens If There’s Overpayment?

If there’s an overpayment on your student loan refinance, the money might be returned to you or go towards your next payment on your new loan. Another possibility is that you may have to request a student loan overpayment refund.

These kinds of situations do occur, and they are typically resolved without too much effort. Here’s a closer look at student loan overpayment when you are refinancing your debt and what you can do to get your money back.

Student Loan Overpayment Explained

Student loan overpayment occurs when you pay off more than the amount you owe to your loan servicer. If you owe $1,000 on your loan and make a $1,500 payment, you’ve overpaid by $500.

This might happen for a couple of reasons.

•   For one, you might send an extra payment before your loan servicer has processed your previous one. It might take some time for your payments to reflect in your account. If you send an extra payment before the servicer has applied your last one, you could end up overpaying your balance.

•   Overpaying loans can also happen when you refinance student loans. When you refinance, your new loan provider will pay back your old balances. Specifically, it will send the amount that’s agreed upon when you sign the Truth in Lending (TIL) Disclosure, which is one of the documents you must sign to finalize your loan refinance.

If you make a payment on your old loans after you’ve signed the TIL Disclosure but before your new refinancing provider has disbursed the payment, the amount sent to your old servicer will exceed your balance. Your new lender will have paid off your old loan and then some, resulting in a student loan overpayment.

That’s not to say that you shouldn’t keep paying back your student loans while you’re waiting for refinancing to go through. In fact, it’s important to keep up with repayment so you don’t miss any due dates and end up with a negative mark on your credit report. Wait until your new refinanced student loan is up and running before you stop paying your old student loans.



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

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What Happens When a Student Loan Is Overpaid?

There are a few things that can happen when there’s an overpaid student loan. For one, a loan servicer might send the extra payment back to you via check or direct deposit.

If a refinancing provider overpaid your account, your old servicer might send the payment back to them. Then, that refinancing lender could send you back the payment or apply it toward your new, refinanced student loan.

Let’s say, for instance, that you decide to refinance your federal student loans with Alpha (a made-up company for the sake of this example). You understand that refinancing with a private student loan means you forfeit federal benefits and protections, and you know that if you refinance for an extended term, you may pay more interest over the life of the loan. If Alpha sends an overpayment to your existing loan servicers, those servicers will generally return the extra amount to Alpha. Then, Alpha will apply that overpayment retroactively to the principal balance on your new Alpha loan, a process that may take about six to eight weeks.

In some cases, your old servicer will send the payment back to you. For example, a lender might send a refund to the borrower directly if the overpaid amount is less than $500. In this case, the amount might be sent back to you via check using the address it has on file.

You can also receive a direct deposit, but you may need to request it specifically. Reach out to your loan servicer to find out how it deals with excess payments and any steps you need to take to receive your student loan refund.

💡 Quick Tip: If you have student loans with variable rates, you may want to consider refinancing to lock in a fixed rate before rates rise. But if you’re willing to take a risk to potentially save on interest — and will be able to pay off your student loans quickly — you might consider a variable rate.

What Should I Do With My Refund?

Finding out you overpaid your student loans can result in a windfall of cash. You may be wondering what to do with your student loan refund. Here are a few options worth considering.

Put Towards Next Payment

If you already used that payment toward your old loans, you might put it toward your new refinanced loan to pay down your balance faster (if your new servicer hasn’t already sent it there). After all, you’d already designated that cash for a student loan payment, so you may not miss having it in your bank account.

Making extra payments on your student loans can help you pay your student loan off early and save on interest charges. Let’s say, for example, that you owe $5,000 at a 7% interest rate with a five-year repayment term. If you make an extra payment of $500, you’ll get out of debt eight months sooner and save $292 in interest.

Use this tool for calculating student loan payments and finding out how much you can save by making extra payments. If you choose this route, instruct your loan servicer to apply the extra payment to your principal balance, rather than saving it for a future payment.

Use For Personal Expenses

Another option is putting that student loan refund toward personal expenses or your own savings. If you’re struggling to pay your rent or have other high-interest debt, for instance, covering those costs might be a priority over prepaying your student loans.

It’s also useful to have an emergency fund on hand that you can draw on if you lose your job or encounter unexpected expenses. Funneling that student loan refund into an emergency fund could save the day if you run into financial hardship.

However, using that refund on vacation or non-essential expenses might not be the best idea if you’re dealing with debt or don’t have an emergency fund in place. Consider your financial goals and priorities to determine the best use for that student loan refund.

The Takeaway

Overpaying student loans may be an inconvenience, but don’t worry about losing that money forever — you’ll get it back in the form of a refund or a payment toward your new, refinanced student loan. The exact process may vary by lender, so reach out to yours to find out what will happen next and whether there are any steps you must take to get your refund. Ensure that your loan servicers have your current address on hand, too, in case they need to mail you a check.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What happens if you overpay a student loan?

If you overpay a student loan, your servicer will issue a refund. That refund may go to you or, in the case of refinancing, to the third-party servicer that issued the payment. The exact process may vary by lender, so get in touch with yours to find out where it will send your refund.

What happens to excess student loan money?

When you borrow a student loan, the lender usually sends the amount directly to your financial aid office, which applies it to required expenses like tuition and fees. It then sends any excess funds to you so you can use the money on books, supplies, living expenses, and other education-related costs. If you find you borrowed more than you need, you could consider returning the amount to your lender. If you return part of a federal student loan within 120 days of disbursement, you won’t have to pay any fees or interest on the amount.

Does refinancing affect student loan forgiveness?

Refinancing student loans can affect your eligibility for loan forgiveness. Most loan forgiveness programs are federal, and when you refinance federal loans with a private lender, you lose access to federal programs, such as Public Service Loan Forgiveness and Teacher Loan Forgiveness.


Photo credit: iStock/stefanamer

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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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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How Much Does a Radiology Tech Make a Year?

The current median annual salary for a radiology tech is $67,180 or $32.30 per hour, according to the Bureau of Labor Statistics. This career can be a good option for those who want to work in the medical field but don’t want to attend medical school. This role typically only requires an associate’s degree, so it can be easy to pursue this career without taking on a ton of student loan debt.

For those who wonder how much a radiology tech makes, read on for details and what else you should know about this career and its earning potential.

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What Are Radiology Techs?

A radiology technologist, also known as a radiographer, is a healthcare professional responsible for conducting X-rays and other diagnostic imaging procedures on patients. It typically offers a medical career path without a college degree or graduate-level degrees. It therefore can sidestep many additional years of training and the expense of that education.

The key duties of radiology techs include:

•   Adjusting and maintaining imaging equipment

•   Adhering to precise instructions from physicians regarding the targeted areas of the body for imaging

•   Preparing patients for procedures by collecting medical histories and shielding unnecessary exposed areas

•   Positioning both the patient and equipment to obtain accurate images

•   Operating computerized equipment for image capture

•   Collaborating with physicians to assess the images

•   Deciding if further imaging is necessary

•   Helping to maintain patient records.

If you’re a “people person” who enjoys interacting with patients and colleagues daily, this position could be a good fit. However, as a job for introverts, it may not be enjoyable due to the social aspect.


💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

How Much Do Starting Radiology Techs Make a Year?

When someone is working as an entry-level radiology tech, they can expect to earn less than their more experienced coworkers. The median annual wage for the lowest 10% of earners in this role is less than $47,760.

In terms of how much an experienced radiology tech could make, the highest 10% earn more than $97,940. Being able to earn close to $100,000 is a good salary for a role that only requires an associate’s degree.

What is the Average Salary for a Radiology Tech?

While the median annual wage for a radiology tech is $67,180, where someone lives can greatly impact how much they stand to earn. For example:

•   Florida radiology techs can expect to earn an average salary of $66,051.

•   Those working in Oregon earn an annual salary of $108,714.

The following table sheds more light on how radiology tech salaries and hourly wages stack up.

It will give you a detailed look at how earnings vary by state.

What is the Average Radiology Tech Salary by State for 2023

State Annual Salary Monthly Pay Weekly Pay Hourly Wage
Oregon $108,714 $9,059 $2,090 $52.27
Alaska $108,369 $9,030 $2,084 $52.10
North Dakota $108,210 $9,017 $2,080 $52.02
Massachusetts $107,274 $8,939 $2,062 $51.57
Hawaii $105,948 $8,829 $2,037 $50.94
Washington $104,410 $8,700 $2,007 $50.20
Nevada $102,464 $8,538 $1,970 $49.26
South Dakota $102,270 $8,522 $1,966 $49.17
Colorado $101,476 $8,456 $1,951 $48.79
Rhode Island $100,695 $8,391 $1,936 $48.41
Mississippi $98,260 $8,188 $1,889 $47.24
New York $97,174 $8,097 $1,868 $46.72
Delaware $95,485 $7,957 $1,836 $45.91
Vermont $94,853 $7,904 $1,824 $45.60
Virginia $94,142 $7,845 $1,810 $45.26
Illinois $93,946 $7,828 $1,806 $45.17
Maryland $92,483 $7,706 $1,778 $44.46
Kansas $92,447 $7,703 $1,777 $44.45
Nebraska $90,537 $7,544 $1,741 $43.53
California $90,046 $7,503 $1,731 $43.29
Missouri $89,904 $7,492 $1,728 $43.22
South Carolina $89,113 $7,426 $1,713 $42.84
Pennsylvania $89,020 $7,418 $1,711 $42.80
New Jersey $88,951 $7,412 $1,710 $42.77
Wisconsin $88,122 $7,343 $1,694 $42.37
Maine $87,977 $7,331 $1,691 $42.30
Oklahoma $87,678 $7,306 $1,686 $42.15
North Carolina $87,273 $7,272 $1,678 $41.96
New Hampshire $86,552 $7,212 $1,664 $41.61
Idaho $86,116 $7,176 $1,656 $41.40
Texas $85,514 $7,126 $1,644 $41.11
Wyoming $85,210 $7,100 $1,638 $40.97
Minnesota $85,148 $7,095 $1,637 $40.94
Kentucky $84,779 $7,064 $1,630 $40.76
New Mexico $84,632 $7,052 $1,627 $40.69
Indiana $84,108 $7,009 $1,617 $40.44
Michigan $84,014 $7,001 $1,615 $40.39
Ohio $82,756 $6,896 $1,591 $39.79
Arizona $82,368 $6,864 $1,584 $39.60
Connecticut $82,133 $6,844 $1,579 $39.49
Iowa $81,424 $6,785 $1,565 $39.15
Montana $81,128 $6,760 $1,560 $39.00
Arkansas $80,164 $6,680 $1,541 $38.54
Alabama $80,115 $6,676 $1,540 $38.52
Utah $79,081 $6,590 $1,520 $38.02
Tennessee $79,008 $6,584 $1,519 $37.98
Georgia $74,633 $6,219 $1,435 $35.88
Louisiana $74,343 $6,195 $1,429 $35.74
West Virginia $68,751 $5,729 $1,322 $33.05
Florida $66,051 $5,504 $1,270 $31.76

Source: ZipRecruiter

Radiology Tech Job Considerations for Pay & Benefits

Most radiologic and MRI technologists work full time. Because imaging is sometimes needed in emergency situations, some technologists work evenings, weekends, or overnight.

Almost six out of 10 radiology techs work in hospitals; about 20% work in medical offices. One thing to note is that, as you would expect, the job involves working with potentially dangerous radiation, so appropriate protective clothing may be worn and safety practices followed.

Recommended: What Trade Job Makes the Most Money?

Pros and Cons of Radiology Tech Salary

Because radiology techs stand to earn a solid income without having to pursue higher education, there aren’t any real disadvantages to their salary. The main disadvantage of the job though is being exposed to infectious diseases through patient interaction and equipment that uses radiation. Safety procedures are in place to help offset these risks, but some people may not find the salary worth it in light of the risks.

Benefits will of course vary depending on where a radiology tech works. Packages may include health insurance, paid sick days and vacations, retirement account matching contributions, and more.

Recommended: Best Jobs for Antisocial People

The Takeaway

Working as a radiology tech can be a great way to earn a living in the medical field without having to commit to the major time and expense that comes with pursuing careers like nursing or becoming a doctor. It can offer a solid salary, benefits, and the satisfying work of helping people with their health care.

With SoFi, you can keep tabs on how your money comes and goes.

FAQ

Can you make 100k a year as a radiology tech?

It is possible to earn $100,000 a year as a radiology tech but being able to do so depends on what state someone works in, as well as other factors like experience. For example, the average annual salary of a radiologist tech in Oregon, Alaska, and North Dakota is well over $100,000.

Do people like being a radiology tech?

Being a radiology tech can be very enjoyable if someone finds the work interesting and if they enjoy interacting with patients. However, for those who don’t like being in a health care setting, repeating procedures, or working with potentially dangerous radiation, it may not be a good fit.

Is it hard to get hired as a radiology tech?

Those who want to work as a radiology tech and who have the required credentials should have no problem doing so. The job outlook for radiology techs is positive with a projected 6% growth from 2022 to 2032, which is faster than the average for all occupations. Each year, approximately 15,700 job openings for this role are expected to be available.


Photo credit: iStock/monkeybusinessimages

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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.

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

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