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Understanding Parent PLUS Loan Repayment Options

If you took out loans to help fund your child’s education, such as Parent PLUS Loans from the federal government, you’re eventually going to have to start paying them back. Parent PLUS loans can’t be transferred to your child — even once they graduate and get a steady job — so you’re the one who’s on the hook for paying them off in full. That prospect can be daunting, since this may be your largest chunk of debt outside of a mortgage.

But you have lots of options for temporarily putting off payments on Parent PLUS Loans or making them affordable. The choices can get overwhelming, so here’s a guide to help you figure out which plan is right for you.

Starting Repayments — and Pausing Them if You Need To

Unlike some other federal loans, Parent PLUS Loans do not have a grace period — a six-month break after the student graduates, or drops below half-time enrollment, before payments are due. Instead, their repayment period typically begins once the loan is fully disbursed.

The idea behind the delay with other loans is that it gives your child a chance to get settled financially. The federal government assumes you, as a parent, don’t need the same accommodation.

If you’re not ready to start paying, you have a couple of options for pausing repayment on your Parent PLUS Loan:

1.    Apply for deferment: One option is to apply for a deferment , which will allow you to temporarily stop monthly payments. You can ask for a deferment while your child is still in school at least half-time, or for six months after they graduate or drop to a lower level of enrollment.

   Keep in mind that interest will still be piling up, even if you’re not making payments. If you don’t pay the interest during this period, it will be capitalized, or added to the loan principal, when the deferment is over, which can increase how much you owe over the life of the loan.

2.    Request a forbearance: If the circumstances above don’t apply, you can still temporarily stop or reduce what you owe by requesting a forbearance . You may be eligible for forbearance if you’re unable to pay because of financial hardship, medical bills, or a change in your employment situation.

   You may also qualify for a forbearance if you’re in a medical or dental internship or residency, if you’re in certain teaching jobs, or if you pay 20% or more of your gross income toward the loan. Interest will still capitalize during this period, but if you’re going through a temporary financial difficulty, it may be worth approaching your loan servicer for a forbearance rather than risking missed payments.

Parent PLUS Loan Repayment Options

You can’t put off payments forever. Depending on the plan you choose, you will have between 10 and 25 years to pay off the loan in full. But Parent PLUS loan repayment doesn’t have to be daunting — here are a few of the Parent PLUS Loan repayment options you have:

•   Standard Repayment Plan: One of the most straightforward options is the Standard Repayment
Plan
. In this scenario, you will pay the same fixed amount each month and pay the loan in full within a decade. The benefit is that you always know how much you owe and you’ll accrue less interest than with most other plans, since you’ll be repaying the loan in a faster time frame.

   The difficulty is that this results in monthly payments that are too high for some people. It’s a good option if you can afford the payments and you don’t expect your situation to change in the next ten years.

•   Graduated Repayment Plan: Another option is the Graduated Repayment Plan . You will also pay off your loan within a decade, but the payments will start out smaller and then increase, usually every two years. You’ll pay more overall than under the previous plan because you’ll accrue more interest, but less than if you were to sign on for a longer repayment term. This plan is a good option if you expect to earn more in the relatively near future.

•   Extended Repayment Plan: A third choice is the Extended Repayment Plan , which spreads payments out over 25 years. You can either pay the same amount every month, or have payments start out lower and ramp up over time. You’ll end up paying more over the life of the loan because you’ll be racking up interest over a longer time period. But it’s a good way to make monthly payments more affordable while knowing you are on track to pay off the loan in full.

Loan Forgiveness for Parent PLUS Loans

Parent PLUS borrowers don’t have as many opportunities as students do for getting a portion of the loan forgiven. There are no income-driven repayment plans for Parent PLUS loans, even though the government offers four such plans for students.

That being said, you do have a couple of options:

•   Income-Contingent Repayment Plan: You do have one option for tying payments to your income, but you have to jump through one hoop first — you would need to consolidate your Direct PLUS loan (or loans) into a Direct Consolidation Loan through the federal government. This combines your existing loans into one and may change your monthly payment, interest rate, or the amount of time in which you have to repay the loan. Just note that Direct PLUS Loans received by parents to help pay for a dependent student’s education cannot be consolidated together with federal student loans that the student received.

   Once you consolidate, you may be eligible for the Income-Contingent Repayment Plan . Under that plan, your monthly payment would be no more than 20% of your discretionary income. If you make the monthly payment for 25 years, the remaining balance will be wiped away, though you may owe taxes on it. This can be a good option for making your payments affordable if you expect your income to remain relatively low for the foreseeable future.

•   Public Service Loan Forgiveness: Another way you might be able to get your loans forgiven is by signing up for Public Service Loan Forgiveness . You might qualify if you work in a public service job, including for a government organization, nonprofit, police department, library, or early childhood education center. Note that you are the one who has to work in this field, and not the student.

   Make sure you submit an Employment Certification Form every year or when you switch jobs. To qualify, you also need to take out a Direct Consolidation Loan and then start repayment under the Income-Contingent Repayment Plan. If you work in public service, this can be a very effective way to get the loan off your back within a decade.

Considering Student Loan Refinancing

If you’re looking for another way to tackle your Parent PLUS loan, consider refinancing your parent plus loans with a private lender. This involves taking out a new loan and using it to repay your old one.

The benefit of refinancing is that you may qualify for a lower interest rate or a lower monthly payment, especially if you have a solid credit and employment history. However, when you refinance federal loans with a private lender, you will lose eligibility for any federal repayment plans or loan forgiveness programs.

You can get a preliminary quote online in just a few minutes to see whether refinancing makes sense for you.

The Takeaway

By taking out a Parent PLUS loan, you are generously supporting your child to achieve their dreams of a higher education and a solid career — but that doesn’t mean that loan payments need to become a burden for you. If you learn about your options for reducing or managing payments, you’ll be on track to paying off your loan with peace of mind.

One such option you might consider is refinancing your Parent PLUS Loan, which could help you secure a lower interest rate or monthly payment.

Ready to tackle your Parent PLUS Loan? Look into whether refinancing with SoFi can help you get a better deal.


SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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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Do You Have to Pay FAFSA Back?

If you’re wondering “do you have to pay back FAFSA® loans?,” what you really want to know is whether you have to pay back your federal student loans that you may be eligible for after filling out your FAFSA. In short, you will have to pay back loans you get through completing the Free Application for Federal Student Aid (FAFSA®), but other types of student aid you get through FAFSA likely don’t need to be repaid.

Aside from federal student loans, you can also use FAFSA to apply for grants and scholarships as well as work-study jobs, for which you’d get funds you usually wouldn’t need to pay back. If you have loans through FAFSA and need to pay them back though, read on for information on the three general types of federal student loans and your repayment options.

Direct Subsidized Loans

With Direct Subsidized Loans, the government (more specifically, the U.S. Department of Education) pays the interest while you are still in school at least half-time. That’s what makes them “subsidized.”

The maximum amount you can borrow depends on whether you are a dependent or an independent student, as well as what year of school you are in. However, it is ultimately up to your school how much you are eligible to receive each academic year.

Not everybody qualifies for a subsidized loan. You have to be an undergraduate (not a graduate student) demonstrating financial need and attending a school that participates in the Direct Loan Program. Additionally, the academic program in which you are enrolled must lead to a degree or certificate.

You also should check how your school defines the term “half-time,” as the meaning can vary from school to school. Contact your student aid office to make sure your definition and your school’s match completely. The status is usually based on the number of hours and/or credits in which you are enrolled.

Direct Unsubsidized Loans

You will have to pay back all the interest that accrues with Direct Unsubsidized Loans, because these loans are “unsubsidized.” That means the government doesn’t cover your interest while you’re in school like they do with a subsidized loan.

You do not have to prove a financial need in order to qualify for a Direct Unsubsidized Loan. Additionally, these loans are available to graduate students as well as undergraduate students. Again, you need to be enrolled at least half-time in a school that will award a degree or certificate.

Direct PLUS Loans

There are two types of Direct PLUS Loans:

•   Grad PLUS Loans: These are for graduate or professional degree students

•   Parent PLUS Loans: Parent PLUS Loans can be taken out by parents for as long as their qualifying child is a dependent or undergraduate student

Unlike most other loans, PLUS loans require a credit check, and you cannot have an adverse credit history . If you or your parents have bad credit, a cosigner on the loan application may be an option.

With Direct PLUS Loans, you can borrow as much as you need (subtracting the other financial aid you’re getting). However, the interest rate for PLUS loans is generally higher than it is for the other types of federal student loans.

Do I Get a Grace Period on My Federal Student Loan Repayment?

Whether you get a grace period — time after you graduate (or drop below half-time enrollment) during which you do not have to make loan payments — depends on what type of federal student loan you have, as not all federal student loans offer one. Direct Subsidized and Unsubsidized Loans offer a grace period of six months, whereas Direct PLUS loans don’t offer a grace period at all.

Grace periods are meant to give you time to find a job and organize your finances before you have to start making loan payments. They are usually one-time deals; in most cases, you often can’t get a second grace period ​once the initial one ends.

Additionally, not all grace periods are exactly alike. Different loans may offer different grace periods. Policies vary. Check with your loan servicer so that you know for sure when your grace period begins and ends.

Keep in mind that grace periods are usually not interest-free. Some loans accrue interest during grace periods, which means that the interest will “capitalize,” or be added to the principal when the grace period ends. Many students subscribe to the strategy of making interest payments even during the grace period. Doing this can ultimately lower the amount you owe, and interest payments are generally more affordable to handle than principal payments.

Also remember that loan servicers are paid by the Department of Education to handle billing and other services for federal loans. The government gives you a loan servicer; you don’t get to choose one yourself. The loan servicer you get is the one you should contact if you have questions regarding your loan.

Federal Student Loan Standard Repayment Plan

Once you graduate, your repayment plan will depend on various factors, but most of the time the government will place you on its Standard Repayment Plan . The general rule here is that you’re expected to pay off your loan over the course of a decade, and your payments will remain the same for the duration.

Before you are placed on that Standard Repayment Plan, the government gives you a chance to choose a few other repayment options (which we’ll discuss below). If you don’t choose one of those, you’ll automatically be placed on the Standard Repayment Plan.

Additional Repayment Options

Here are a couple of your other repayment options beyond the Standard Repayment Plan:

•   The Extended Repayment Plan: The Extended Repayment Plan can extend your term from the standard 10 years to up to 25 years. To qualify, you must have at least $30,000 in outstanding Direct Loans. As a result, your monthly payments are reduced, but you could be paying way more interest.

•   The Graduated Repayment Plan: Another option, the Graduated Repayment Plan lets you pay off your loan within 10 years, but instead of a fixed payment, your payments start low and increase over time. This may be a good option if your income is currently low but you expect it to increase over time.

Keep in mind that although you can choose these repayment options, you cannot refinance a federal student loan with the government on your own (you can, however, consolidate them). That’s because those interest rates are set by federal law , and they can’t be changed or renegotiated.

Difference Between Refinancing & Consolidating Student Loans

While you can’t refinance your federal loans with the government, you can do so with a private loan company. Before you consider refinancing, be sure to know the difference between refinancing and consolidating student loans:

•   Refinancing means taking out a brand new loan so that you can pay off your existing loans. To refinance, you’ll choose the loan company you feel is best, with (hopefully) better interest rates and repayment terms. Refinancing can be done via a private lender and can be used for both federal and private loans. Keep in mind that when you refinance federal loans with a private lender, you lose access to federal benefits and protections like loan forgiveness programs and repayment plans.

•   Consolidation means placing all of your current loans into one big loan. Doing this typically extends your loan term so that your monthly payment is lowered. The problem with consolidating student loans is that it could mean you wind up paying additional interest. This is because when you consolidate multiple federal student loans, you’re given a new, fixed interest rate that’s the weighted average of the rates from the loans being consolidated.

Refinancing (as opposed to consolidating) your school loans may be a good option if you have high-interest, unsubsidized Direct Loans, Graduate PLUS loans, and/or private loans. Refinancing your existing loans with a longer term can reduce your monthly payments. Alternatively, you may be able to lower your interest rate or shorten your term.

Before you apply for that refinancing plan, it’s a good idea to check your credit score, as it is an important factor that lenders consider. Many lenders require a score of 650 or higher. If yours falls below that, you may consider a cosigner on the loan.

Lenders typically offer fixed and variable interest rates, as well as a variety of repayment terms (which is often based on your credit score and many other personal financial factors). The loan you choose should ultimately help you save money over the life of the loan or make your monthly payments more manageable.

The Takeaway

If you only got grants, scholarships, or work-study funding through FAFSA, you don’t have to worry about paying FAFSA back, so to speak. But if you got federal student loans through filling out FAFSA, you will have to pay those loans back.

Luckily, you have a number of options to do so. If you have high-interest loans, consider looking into refinancing to see if you can reduce your monthly payments.

Whether you are looking to borrow for school or refinance your student loans, SoFi can help. See your interest rate in just a few minutes—with no pressure to sign up.


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SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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.
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. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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Applying for a Student Loan Without a Cosigner

Most federal student loans do not require a credit check and can be borrowed without a cosigner. While the vast majority of students who take out private loans have a cosigner to guarantee the loan, that’s not an option for everyone. A cosigner — generally a family member or close friend — is someone who guarantees they will pay back your student loan if, for some reason, you can’t.

If you don’t have enough established credit to qualify for a private student loan on your own, turning to a cosigner, if possible, may also help you get approved at a better interest rate. However, not everyone has someone to cosign their student loans, and that’s okay too. There are plenty of ways to potentially qualify for both private and federal student loans without a cosigner.

Purpose of a Cosigner

Typically, a cosigner is someone with a solid credit history, who could step in if something goes wrong with your payments, but who trusts you to pay back the loan.

Cosigners provide reassurance to lenders when a borrower alone may not have a strong enough credit history to qualify for a loan. Because a cosigner agrees to pay for the loan if the primary borrower is unable to, lenders may be more willing to offer a loan.

Some borrowers may need a cosigner to qualify for a private student loan, because a cosigner with more financial security or a better credit history can make you a stronger applicant in the eyes of the lender. If you don’t have enough established credit to qualify for a loan on your own, turning to a cosigner, if possible, can also help you get approved at a better interest rate.

Applying for a Student Loan Without a Cosigner

With the average cost of undergrad at $38,185 a year for a private education for the 2021-2022 school year, it’s no surprise that many students will take out student loans to pay for their education. These student loans come in all shapes and sizes: federal or private, subsidized or unsubsidized, cosigned or not. Read on for information on getting a student loan without a cosigner.

Can You Get a Federal Student Loan Without a Cosigner?

Yes, it’s possible to get a federal student loan without a cosigner. For the most part, federal student loans do not require a credit check and can be borrowed directly by students, even if they do not have an established credit history. Direct PLUS Loans, which are primarily offered to parents, or graduate or professional students, require a credit check.

The first step in qualifying for a federal financial aid package is to fill out the FAFSA® (Free Application for Federal Student Aid). If you are a dependent student, the form will also require you to submit your parent’s financial information. Depending on your financial need, you’ll then be offered a combination of
federal student loans — including subsidized and unsubsidized Direct Loans or PLUS Loans — work-study programs, scholarships, and grants.

Keep in mind that there are borrowing limits for federal student loans. For example, dependent students cannot take out more than $5,500 as a first-year undergrad. And, no more than $3,500 of that money can be in subsidized loans. For more information on loan limits, check here .

Can You Get a Private Student Loan Without a Cosigner?

Even with federal loans, grants, and scholarships, some students rely on private student loans to help them pay for college. In general, private student loans are considered only after all other financing options have been reviewed. This is because they don’t always offer the same borrower protections afforded to federal student loans — things like income-driven repayment plans or forgiveness programs.

To qualify for a private student loan, you generally have to be 18, a U.S. resident, and enrolled in school at least part time. Additionally, certain lenders may only approve loans if you are enrolled at schools that meet their criteria, which can vary from lender to lender.

Recommended: A Guide to Private Student Loans

You may also have to meet certain credit requirements (typically, a certain minimum credit score and length of credit history). If you don’t meet their credit requirements, most private loans require a cosigner. Those loans that are offered without a cosigner — and they do exist — often have higher interest rates. And unfortunately, the private loans offered to students with no cosigner typically come with specific qualifications.

For example, they could only be available for U.S. citizens or residents, or for older college students or graduate students. It truly depends on the lender. Private lenders and banks look at many factors, including credit history, to determine eligibility for a loan.

Establishing Credit

One option, if you know you’re going to need a student loan without a cosigner, is to start building credit as early as you can. If you’re over 21, you could consider applying for a low-limit credit card. (The Credit Card Act of 2009 limits your ability to get a credit card without an income.)

The advantage of a low-limit credit card is it can help keep you from going overboard on spending, while still allowing you to establish credit. If you pay your statement balance in full at the end of each billing cycle, you can potentially build credit up over time.

Does Having a Cosigner Impact Interest Rates?

Federal interest rates are set by Congress, the current rates for loans disbursed for the 2021-2022 school year are: 3.73% for undergraduate Direct subsidized and unsubsidized student loans, 5.28% for unsubsidized Direct Loans for graduate or professional students, and 6.28% for PLUS Loans. These interest rates are fixed, meaning they won’t change for the life of the loan.

Private student loans without a cosigner can give you the flexibility to pay for school and additional school-related expenses like books. While a cosigner can help bring down the interest rate you qualify for, it also means the cosigner’s credit is impacted by this new loan, which could be a concern for your potential cosigner. If the loan is only in your name, you’ll also be able to build your own credit history once you start making payments.

Why It Can Help to Have a Cosigner on a Private Student Loan

Federal loans are one way to apply for student loans without a cosigner, since most simply do not require a cosigner at all. However, there are limits on how much you can borrow, as we mentioned above.

The downside of not having a cosigner for your private student loan is you might pay more in fees and/or interest. That is definitely something to consider when deciding if you are going to apply for a private student loan with or without a cosigner.

Other Ways to Help Finance Your Education

Besides taking out federal student loans or private student loans without a cosigner, there are a few other options to help finance your education. There are many grants and scholarships available that you can apply for that you do not need to repay.

However, there may be certain eligibility requirements you need to meet in order to receive this “free money.” For example, there are scholarships for residents of certain states, or scholarships for certain majors.

Additionally, there are merit-based grants (grants available for students who reach a certain level of academic excellence) or need-based grants. The options are almost limitless for the grants and scholarships available. You can always search online or ask your school counselor for information on scholarships you can apply to and additional grants you may be eligible for.

The Takeaway

Applying for a private student loan with a cosigner can help a potential borrower secure a more competitive interest rate or preferable loan terms. This is because the cosigner provides additional security for the lender — if the primary borrower runs into any issues repaying the loan, the cosigner is responsible.

Federal student loans, aside from Direct PLUS loans, do not require a credit check or cosigner. If you find that your federal loans aren’t going to cover your education, a private student loan may help. Keep in mind that private student loans lack the borrower protections offered by federal student loans and are generally borrowed as a last resort option because of this.

If you’re interested in a private student loan, consider SoFi, where there are origination fees or late fees. The application process can be completed entirely online — with or without a cosigner. And when it’s time to repay your loans, SoFi offers flexible payment options that fit your post-grad lifestyle.

Learn more about SoFi’s private student loan offering.


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

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

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Keeping in Touch With Your College Student

As a parent, learning how to communicate with college students can be a challenge. Adjusting to college is an emotional transition for the whole family, but keep in mind that this is an important phase in a young adult’s life that helps to prepare them for the real world.

To help keep the lines of communication open try to support your child without nagging, setting times for catching up, and let them know that they can come to you with any issues. If you maintain a strong connection without overdoing it, they might even divulge more of the good times and you’ll be able to share in the full experience of their new adventure.

Here are some tips for parents on how to communicate with college students and some discussion topics.

Tips for Communicating with College Kids

Be Their Ally

It’s tempting to want to make sure your kid is taking care of themselves: Are they eating enough vegetables? Are they making friends? Are they partying too much?

Your parental instincts are inevitable, but avoid nagging. Try to be their ally instead. Of course, it’s important to check in on them and make sure everything’s okay, but you’d be surprised to find that the more freedom you give them to make their own decisions, the more they may share with you.

Let Them Know They Can Talk to You

Along with being their ally, it’s also important for them to feel comfortable talking to you about more serious things. College is a major transition and many incoming students struggle with the adjustment.

If they are unhappy at their new school, they may be considering the possibility of transferring schools. It can be a good idea to make sure your son or daughter knows that they can talk to you about anything. That’s what parents are for, after all.

Utilize Technology

Video chat is an incredible tool that wasn’t around back when parents were in college. These days there are seemingly endless options to connect via video from FaceTime to Zoom to Google Hangouts and more. Video calls can be especially helpful for students who are far away from home.

If your son or daughter is not one to call you every day, you could set up a time once a week to catch up.

What to Talk About

Academics

While it may be forgotten among all the exciting aspects of college, taking advantage of the incredible educational resources on campus, working hard, and getting a solid education are some of the main reasons for attending university.

Without overwhelming your student, remind them that grades could have an impact on their plans after graduation.

Play to Your Strengths

While we’re on the topic of academics, you can also get involved in your child’s studies, if they ask for help. Aside from reminding them to focus: help them choose classes for their first semester; reread some Nietzsche or Aristotle along with them; or offer to be a second set of eyes for their papers. When they are choosing their major, you could help them realize what it is they’re passionate about.

Grown-Up Stuff

There are some things you should periodically bring up with your student that they likely won’t enjoy talking about, which involves money management, including student loans and budgeting. While these might not be on their list of the best ways to communicate with college students, it’s your duty as the parent to remind them.

It’s considered important to have an ongoing dialogue about student loans and educate them on how not to make their debt even higher.

This is a conversation that can begin in high school when making the decision on which college to attend and what the financial impact will be for them and for you in the years to come.

As for budgeting, know that many young adults make financial mistakes in their early twenties. This is what mistakes are for — to learn from them and adjust your habits moving forward.

But if you can teach your student good spending habits, especially if this is their first time with a credit card, they’ll be thankful to you in the long run.

Future Plans

You may have a son or daughter who has dreamed of going to med school since they were little, but most students are unsure of what they want to do with their futures or what life after graduation will look like. This might be a common thread throughout their four years in college.

Find ways to make this conversation exciting and optimistic without asking the question they’ve heard a million times: “What do you want to do with your life?” The truth is, they might not know, even upon graduation, and that’s okay.

If they are considering graduate school, it would be useful to discuss what’s involved financially. Will they need additional student loans for grad school? Will you be able to help with any costs?

While these are just some guidelines on how to communicate with college students, ultimately, the best approach for you and your child depends on your relationship and your personality.

It’s recommended for a parent to find a healthy balance between staying involved and being overbearing. You can watch with pride from a healthy distance and still experience this exciting time in your child’s journey through young adulthood.

The Takeaway

The transition to college can be an overwhelming one, for both students and their parents. While your student is building their new life at school, parents may find it challenging to keep in touch with them. Try FaceTiming, or setting a time for a weekly catch-up session with your child. Be open and honest with them and make sure they know that they can come to you with any questions, concerns, or issues they may be facing at school.

Part of parenting is providing advice and guidance, and after graduation that may include assisting as your child figures out how to repay their student loans. One avenue you can look into is student loan refinancing. It’s not for everyone — especially if you have federal student loans and you plan to use their benefits and protections, like Public Service Loan Forgiveness or deferment or forbearance. Benefits and protections like these that come with federal student loans are forfeited once federal student loans are refinanced with a private student loan.

Refinancing could help you (or your student) lower monthly payments or shorten the loan term. Note that lowering the loan’s monthly payment generally results from extending the loan term, which may make the loan more expensive in the long run. At SoFi, there are no application fees or pre-payment penalties and SoFi members get access to benefits like career coaching and financial advice at no additional cost.

Learn more about SoFi student loan refinancing today.


SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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

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

Grants, scholarships, and student loans can all help you pay for your education, but there are key differences between the three — namely, how they award funds and whether you need to repay those funds. Grants and student loans often depend on financial eligibility and need, while scholarships tend to be merit-based. Additionally, whereas both grants and scholarships do not need to be repaid, student loans do.

Here’s a breakdown of how student loans, grants, and scholarships work, as well as some of their key differences.

Student Loans

Very simply put, a loan is money borrowed that has to be paid back (usually with interest). You can take out a loan from a friend, a family member, a bank, an online lender, a college or university, or the state or federal government. So, how do student loans work?

Loan terms for college can vary based on a few different factors: whether they’re federal (offered by the government) or private (offered by a financial institution), whether you choose fixed or variable interest rates, how long it takes to pay the loan back, and how much can be borrowed. Loans offered to you could be based on your credit score or the personal financial information you supply on the Free Application for Federal Student Aid (FAFSA®).

To determine your eligibility for a student loan from the federal government, you must fill out the FAFSA. States and colleges may use information from your FAFSA to determine state and school-specific aid, as will some private financial aid providers.

To fill out the FAFSA form, you’ll need a few pieces of information, including:

•   Your Social Security number or alien registration number (if you are not a U.S. citizen)

•   Your driver’s license number (if you have one)

•   Federal income tax returns, W-2s, and other records of money earned

•   Bank statements and records

•   Records of untaxed income (if applicable)

•   Information on account balances, investments, and assets

•   FSA ID for electronic signature (this is your username and password needed to access and submit your FAFSA online)

If you are applying as a dependent student, you will need all of the above information from your parent(s) as well.

What Is the Difference Between Unsubsidized and Subsidized Loans?

There are two primary types of federal student loans: unsubsidized loans and subsidized loans . The main difference between unsubsidized and subsidized loans is how the interest accumulates through the life of the loan.

What Is an Unsubsidized Loan?

Unsubsidized loans are available to undergraduate and graduate students, regardless of any financial need. An unsubsidized loan starts accruing interest as soon as the loan is dispersed.

That means if you accept an unsubsidized loan during your freshman year of college, the loan will accumulate interest throughout the rest of your time in school. Ultimately, that means the interest will capitalize — in other words, it will be added onto the principal of your student loan.

When Do I Need to Pay Back an Unsubsidized Loan?

You are responsible for starting to pay back an unsubsidized loan six months from when you graduate or if you drop below half-time enrollment. Because of the interest capitalizing on your unsubsidized loan from the day it’s disbursed, your loan balance will likely be more than what you originally borrowed if you don’t make interest payments while you’re in school.

What Is a Subsidized Loan?

A subsidized loan is a need-based loan available to undergraduate students on which interest accumulates only after you begin repayment. The government will pay the interest while you’re in school at least half-time or until you graduate and for the first six months after, as well as during a period of deferment.

When Do I Need to Pay Back a Subsidized Loan?

Like unsubsidized loans, repayment for a subsidized loan typically occurs after a six-month grace period from when you graduate or drop below half-time enrollment. You are responsible for paying back the total outstanding balance, plus interest. There are plenty of ways to pay off federal loans , from the standard 10-year repayment plan to income-based repayment plans.

Grants

A grant can be beneficial to students because it is financial aid that does not have to be repaid. Grants may be obtained directly from your university, the federal government, state government, or a private or nonprofit organization. It is important to note that you may be required to meet certain financial eligibility criteria, depending on the grant.

What Is a College Grant?

A college grant is financial aid money awarded to a student that does not have to be paid back. Grants are typically awarded based on need, not on academic achievement or merit.

One popular type of college grant is the Pell Grant . Pell Grants are given to undergraduate students with significant financial need, which means they are typically awarded to low-income students.

Do You Have to Pay Back Grants?

In most cases, you do not need to pay back grants as long as you maintain eligibility . If, for example, you decide to drop out of school, you might be required to pay back certain grants.

You might also need to pay back grants if you withdraw early from a program in which the grant was awarded, or if you did not meet a service obligation, as is required for the Teacher Education Assistance for College and Higher Education (TEACH) Grant , for example.

Scholarships

Scholarships are a great way to finance higher education, simply because there are thousands of available scholarships based on financial need or merit. Scholarships can come from a variety of sources and typically do not need to be repaid.

It can be easy to feel overwhelmed with the amount of time it takes to hunt for scholarships — here are a few tips to help you find scholarships to apply for:

•   Start by combing scholarship databases for any scholarship that may align with your interests or background. Don’t be afraid to tell people you know that you are looking for scholarships either — your best friend, neighbor, or even your crazy uncle may have heard of a scholarship that you could be eligible for.

•   Take a look at your academic achievements. Have you maintained a certain GPA or did you make the Dean’s List? There could be a scholarship for that. List out your community involvements and start researching whether your softball league, for example, offers scholarships.

•   Make a list of all the things that make you who you are. List out your heritage and things that your family have been involved with over time. Perhaps your grandmother belongs to the National Corvette Club or your grandfather was a veteran, both of which could present scholarship opportunities.

Once you have your list, it helps to stay organized by adhering to deadlines and application requirements. Stick to what feels doable so you can knock out several applications in a row. Scholarship application formats vary from essay writing to creating a video to simply filling out a form.

Important documents you might need when applying for scholarships include birth certificates, SAT/ACT scores, academic transcripts, certifications, or ID cards. Be sure you have those handy prior to hitting search engines and applying for the next available scholarship you find.

Grants vs. Scholarships vs. Loans

Now that you have a grasp on all three forms of financial aid, let’s examine the main differences between grants, scholarships, and loans.

What Is the Difference Between a Loan and a Grant?

A student loan—whether it is unsubsidized or subsidized, federal or private — must be repaid with interest. A grant typically does not need to be repaid as long as you maintain eligibility requirements.

What Is the Difference Between a Grant and a Scholarship?

The primary difference between a grant and a scholarship is that a grant is typically need-based while a scholarship is usually merit-based. You might receive a scholarship for a number of things, such as high academic achievement, organization or club involvement, or ancestry. A grant is typically awarded based on financial need and can be specific to certain degrees, students, and programs.

How Is a Student Loan Different from a Scholarship?

A student loan is different from a scholarship primarily in that a student loan must be repaid and a scholarship does not need to be repaid. Scholarships can come from a variety of sources, including nonprofit organizations, private companies, universities and colleges, and professional and social organizations. Student loans may come from private lenders, federal or state governments, or colleges and universities.

The Takeaway

With a good understanding of scholarships, grants, and student loans under your belt, you can better determine which form of financial aid is right for your situation. Remember that you don’t necessarily have to choose just one.

Once you’ve maximized the money you can get from grants or scholarships that you likely won’t have to pay back, you may consider bridging the remaining gap by taking out a student loan.

Focus on your degree, not your debt, by searching for low-rate loans you can pay back on your own terms.


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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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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