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While the terms “computer science” and “computer engineering” are often used interchangeably, they are actually separate fields that focus on different aspects of computer technology. Simply put, computer science is the study of all aspects of computers with an emphasis on software systems, while computer engineering focuses more on designing and building hardware systems.

Whether you choose to major in computer science or computer engineering, some — but not all — of the coursework will be the same. However, the types of jobs you will be best-suited for will differ. Which path is best for you will depend on your skill set and career interests. Here’s what you need to know about computer science vs. computer engineering.

What Is Computer Science?

Those working in computer science focus mainly on computing theory, programming algorithms and models to develop software or computer systems that people utilize around the globe. A computer science program will typically cover topics like design and analysis of algorithms, data analysis, an introduction to operating systems, and different programming languages. Computer scientists generally focus on software and are typically the ones to create algorithms that make programs like artificial intelligence, machine learning, cloud computing, and even video games work.


💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.

What Is Computer Engineering?

Computer engineers generally focus on creating, testing, and evaluating the technology for hardware and software interfaces. If you choose computer engineering as your major, the program will likely cover topics like computer architecture, computer networks, and physics. It is a computer engineer’s job to develop new processors, microchips, and other components that physically go into computers and smartphones to make them work each and every time someone clicks the “on” button. This field may often require a combination of electrical engineering skills and computer science knowledge.

Similarities and Differences Between Computer Science and Computer Engineering

While computer science and computer engineering are two distinct areas of study, there are similarities between the two. Both professions, for example, involve working with computers. Both also involve data and math and work to advance the field of computing. Because of these similarities, both areas of study could share prerequisites and coursework at your chosen college or university.

Computer Science vs Computer Engineering Job Outlook

Individuals with a computer science or computer engineering degree may be qualified for a variety of different types of tech positions in a wide range of industries. Here’s a closer look.

Computer Science Job Outlook

There’s some good news for those looking at becoming computer scientists in the near future. According to the most recent data from the U.S. Bureau of Labor Statistics (BLS) , the employment of computer and information research scientists is projected to grow 21% from 2021 to 2031, much faster than the average for all occupations.

What’s more, computer and information research scientists earned a median of $131,490 per year in 2021.

The types of jobs you may be able to get with a computer science degree include: software developer, database administrator, web developer, project manager, full-stack developer, engineering manager, user interface designer, information security analyst, information technology specialist, mobile application designer or developer, and more.

Computer Engineering Job Outlook

According to the BLS, the employment rate for computer hardware engineers is projected to grow much more slowly over the same timeframe. From 2021 to 2031, the job market for computer hardware engineers is expected to grow 5%, which is as fast as average as the average occupation.

The positive? The average salary for computer hardware engineers is still comparatively high, sitting at a comfortable $128,170 per year in 2021. And while many entry level jobs in computer science require a master’s degree, entry-level computer engineering positions generally only require a bachelor’s degree, which can save both time and money.

As computer scientists, those with a computer engineering degree could qualify for roles under a variety of job titles. These include: telecommunications engineer, computer architect, communication engineer, network systems engineer, systems architect, and simply, computer engineer.

Recommended: Return on Education for Bachelor’s Degrees

Computer Science vs Computer Engineering — Which One Is Better?

The question of “which is better, computer science or computer engineering?” really comes down to personal choice. To make this decision for yourself, it may be a good idea to consider what your dream computing job looks like.

Computer scientists can typically specialize in the following areas:

•   Artificial Intelligence

•   Human-Computer Interaction

•   Software Engineering

•   Mobile and Web Computing

•   Game Design

•   Computer Graphics

•   Data Science

•   Programming languages

Computer engineers can typically specialize in the following areas:

•   Hardware systems

•   Robotics and Cybernetics

•   Computer and Network Security

•   Distributed Computing

•   Embedded Systems

As you can see, both computer science and computer engineering are related. However, each comes with unique and exciting specialty areas. Which one is better will depend on your skills, interests, and goals.

The First Step to Becoming A Computer Scientist or Computer Engineer

While computer science is expected to experience more growth in the coming years than computer engineering, both fields can lead to a varied, lengthy, and well-paid career. Both also generally require at least a four-year college degree, which can be a significant financial investment. Once you pinpoint some schools and programs that interest you, you’ll likely need to figure out how you’ll manage the financial side of getting a computer science or computer engineering degree.

Fortunately, there are a number of ways to cover your college costs. A great place to start is by filling out the Free Application for Federal Student Aid (FAFSA). This form puts you in the running for grants, scholarships, work-study positions, and federal student loans.

If financial aid and savings aren’t enough to cover the full cost of attendance (COA) for college, you might next look into getting a private student loan. Unlike federal student loans, which are provided by the government, private student loans are available through banks, credit unions, and online lenders. Rates tend to be higher than federal student loans, but borrowing limits are typically higher. These loans are not need-based and generally require a credit check. Borrowers (or cosigners) with excellent credit tend to qualify for the lowest rates.

Keep in mind that private student loans may not offer the same borrower protections that federal student loans offer, such as Public Service Loan Forgiveness or income-driven repayment plans.


💡 Quick Tip: Need a private student loan to cover your school bills? Because approval for a private student loan is based on creditworthiness, a cosigner may help a student get loan approval and a lower rate.

The Takeaway

While there is some overlap between computer science and computer engineering, the terms refer to two different majors and tech specialties that lead to different types of jobs after you graduate. Computer science tends to focus on computer theory and software, whereas computer engineering is more focused on computer design and hardware.

A career in either field can be rewarding, both financially and intellectually, though job growth is expected to be higher in computer science than computer engineering over the next eight years.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Photo credit: iStock/SeventyFour

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.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIS0823047

College grants are a form of financial aid that can be used to pay for tuition, room and board, and related school expenses. Unlike college loans, grants do not need to be paid back, which is why they are often referred to as “free money” for college.

Grants are typically awarded based on financial need, though, in some cases, merit comes into play. Either way, getting grants can be competitive. Read on for a closer look at how grants work, including common eligibility requirements, and how to find and apply for grants.

College Grants vs Scholarships — What’s the Difference?

Scholarships and grants for college both represent “gift aid,” since the money generally does not have to be repaid. Dropping out of college or switching to part-time enrollment are a couple of exceptions that may require paying back a grant or scholarship.

The main difference between grants and scholarships is that grants tend to be based on financial need, whereas scholarships are more commonly awarded based on a student’s achievements or merit. Scholarships may also be offered to students of a specific ethnicity or group, such as Native Americans or the LGBT community.

The source of funding also tends to differ. Funds for college grants typically come from the federal and state government, whereas scholarships are usually offered through private companies, colleges and universities, non-profits, and other organizations.

Another distinction between grants vs. scholarships is the application process. To apply for grant opportunities, you generally just need to complete the Free Application for Federal Student Aid (FAFSA). To apply for scholarships, you often need to fill out a separate application (which may require writing an essay) for each scholarship.


💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.

Types of Federal College Grants

Federal grants for students attending community college, career schools, and four-year colleges are offered through the U.S. Department of Education. Here is a list of federal grants for college students.

Pell Grants

The Pell Grant is the Department of Education’s largest grant program. Pell Grant funding changes from year to year, and is geared towards students who demonstrate significant financial need. The maximum Pell Grant total for the 2023-2024 award year is $7,395.

The amount an eligible student receives is calculated according to enrollment status, cost of attendance, Student Aid Index (SAI) (formerly called the Expected Family Contribution, or EFC), and duration of study.

It’s worth noting that the award amount for Pell Grants is not impacted by other forms of financial aid. Often, a Pell Grant is awarded in combination with other federal financial aid, such as work-study and subsidized student loans.

Recommended: The Differences Between Grants, Scholarships, and Loans

Federal Supplemental Educational Opportunity Grant (FSEOG)

The FSEOG program is another grant for students with exceptional financial need to pay for college expenses. FSEOG awards range between $100 and $4,000 a year.

Individual grant totals are calculated by overall financial need, timing of the application, total financial aid, and funding availability within the college.

Though FSEOG is funded through the Department of Education, it is administered by participating schools — and not every college participates. Check with a college’s financial aid office to learn if FSEOG is an option for assistance.

Iraq and Afghanistan Service Grants

This program has more specific criteria than financial need alone. Students may qualify for a grant if their parent or guardian died while serving in the U.S. armed forces in Iraq or Afghanistan after 9/11. To qualify, you must have been under 24 years old or enrolled in college at least part-time at the time of your parent’s or guardian’s death.

Additional requirements for the Iraq and Afghanistan Service Grant include failing to qualify for a Pell Grant due to Expected Family Contribution/Student Aid Index but satisfying the remaining eligibility Pell Grant criteria.

Grant funding is equal to the maximum Pell Grant award for any given year. Thus, grants can be up to $7,395 for 2023-2024, depending on financial need and the cost of attendance at the applicant’s college.

TEACH Grants

The Teacher Education Assistance for College and Higher Education (TEACH) Grant program offers awards up to $4,000 per academic year for students pursuing a career in teaching.

Compared to other federal grants for college, TEACH grants carry more stringent requirements. For instance, recipients must fulfill a service obligation of teaching in a high-need subject area at a school or educational service agency for at least four academic years within eight years of completing TEACH grant-funded studies.

Otherwise, the TEACH grant is converted into a direct unsubsidized loan which must be repaid in full with interest accrued from the date of the initial award.

To qualify for a TEACH grant, students must attend a participating school and achieve high academic performance (GPA of at least 3.25 or college admissions test scores above the 75th percentile). Additionally, recipients must partake in counseling sessions and sign a TEACH Grant Agreement to Serve.

Applying for Federal College Grants

Students looking for federal grants for college can begin the process by filling out the FAFSA. The FAFSA considers factors like the student income and parental income and assets to calculate the SAI (formerly called the EFC), which is used by schools to determine how much money students are eligible to receive.

After completing the FAFSA, students will receive a financial aid package from each college they applied and have been accepted to. This includes a breakdown of any eligible financial assistance, including grants, scholarships, work-study, and federal student loans.

Take note that students need to fill out the FAFSA every year they’re enrolled in college to be eligible for grant awards and other financial assistance.

Since some grants are awarded on a first-come-first-served basis, be sure to pay attention to FAFSA deadlines, and submit the form as early as possible.

Other College Grants for Students

In addition to federal grant programs, there are opportunities to get free money for college from state governments, nonprofits, and private organizations.

State Grants

There are state-level grants for students to consider too. For example, there are numerous California scholarship and grant opportunities to help students pay for school. Every year, the Cal Grant provides 41,000 awards to undergraduate, vocational, and teacher certification students.

Filling out and submitting the FAFSA may automatically make you eligible for certain state grants. In some cases, though, you might also have to apply to your state’s education department.

To find funding in any given state, you can use the National Association of Student Financial Aid Administrators online database .

Keep in mind that some state government scholarship and grant programs have different deadlines than FAFSA.

College Grants for Women

There are a variety of college grants geared specifically to women. Here are a couple grant programs women can apply to for college and graduate school.

•   Program for Continuing Education Grant : The Philanthropic Education Organization offers one-time need-based grants for women in the U.S. and Canada to put towards college and education-related expenses.

•   Career Development Grant : The American Association of University Women provides grants between $2,000 to $12,000 to female students pursuing an advanced degree or certificate.

Finding Additional Grants

In addition to state and federal grants or grants, private companies and nonprofits may also offer grants. Students may have to do a little leg work to find these opportunities, but a chance at free money for college can be worth a little time invested up front. Online databases like Scholarships.com have a variety of grant opportunities for students to peruse.


💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too. You can submit it as early as Oct. 1.

The Takeaway

College grants are a helpful way for eligible students to pay for school and reduce student debt. In 2022-2023, scholarships and grants were used by 76% of families and covered 29% of costs.

Even so, many students require additional financing to pay for college. If grants, other aid, and federal student loans are enough to cover the cost of your college education, you may want to consider applying for a private student loan. These are available through private lenders, including banks, credit unions, and online lenders. Loan limits vary by lender, but you can often get up to the total cost of attendance, which is more than you can borrow from the federal government. Interest rates may be fixed or variable and are set by the lender. Generally, borrowers (or cosigners) who have strong credit qualify for the lowest rates.

Keep in mind, though, that private loans may not offer the borrower protections — like income-based repayment plans and deferment or forbearance — that automatically come with federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Photo credit: iStock/Deejpilot

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.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIS0823042

If you’re looking at your chipping laminate countertops, you’re probably wondering what it would take to replace them — and maybe your whole kitchen, for that matter. That leads to the big money question: How are you going to pay for home improvements?

One option is to cash out the equity you have in your home in order to fund improvements on it, by doing a cash-out refinance. A cash-out refinance replaces your current mortgage with a new one and refunds you the difference in cash. You can use the cash however you would like.

However, it’s not your only option, and not every situation is the same. You’ll need to consider what it means to refinance for home improvements and whether or not it’s right for you.

How Cash-Out Refinancing for Home Improvement Works

When you cash out equity for home improvements, you can get a new mortgage and have some equity refunded to you in the form of cash. It’s best to look at how cash-out refinancing works with an example.

Let’s say you own a home worth $800,000 and your current mortgage amount is $500,000. Lenders allow a refinance of around 80% of the home’s value, so 80% of $800,000 is $640,000. $640,000 is the maximum amount that the lender will loan.

Let’s suppose you qualify for that loan. Next, the lender will pay off your original mortgage of $500,000. After you subtract $500,000 from $640,000, you’ll have $140,000 left. You’ll receive $140,000 in cash after you close on the loan (minus the closing costs on the loan). Your new loan amount will be $640,000.

If you want to take a closer look at how much money you would want to have on hand for a renovation, you can use a home improvement cost calculator to form an estimate of potential expenses.

What Can You Use the Cash For?

According to Fannie Mae guidelines, which are the regulations mortgage lenders follow for conforming loan types, you can use the cash from a cash-out refinance for anything. That includes whatever home improvement dreams you have — a pool, new kitchen, she-shed, pickleball court — so dream big!

Pros and Cons of a Cash-Out Refinance for Home Improvements

Benefits

Cash-out refinancing for home improvement has some benefits to consider.

•   A better loan. When you apply for a cash-out refinance loan, your loan terms will change with the new mortgage. It’s not guaranteed, but you could end up with a lower interest rate than the one you had on your previous mortgage. Depending on the scenario, it is possible that a refinance could lower the payment for the borrower while accessing cash and shortening the term.

•   Increased property value. When you refinance for home improvements, the renovations could increase your property value. New flooring or an updated kitchen could increase the value of your home by more than the amount of money you pour into the project.

•   One payment. With a cash-out refinance, there’s one payment for both your mortgage and the cash you take out for home improvement projects. It’s convenient and usually offers a lower monthly payment than other financing methods.

•   Lower interest rates than other types of loans. A mortgage has a lower interest rate than other loan types, such as credit cards or personal loans, which can reach an APR of 30%. Just keep in mind that financing over another 15- or 30-year term could add a significant amount of interest to your loan, so be judicious in how much debt you add to your home.

Drawbacks

As with any financing option, there are some drawbacks you’ll want to consider before refinancing for home improvement with a cash-out refi.

•   Loan terms may change. If you have very favorable loan terms on your original mortgage, you won’t necessarily get those same ones when you refinance. If interest rates have risen since your original closing, the mortgage refinancing cost could make your new mortgage more expensive than an old one.

•   What you can borrow depends on equity. You need a substantial amount of equity to be able to do a cash-out refinance. Your lender may only want to lend on 80% of the home’s current market value. That means you’ll need to have an original mortgage amount even further beneath that amount to be able to cash out equity for home improvements.

•   Closing costs. With a new mortgage come new closing costs, which are never fun to pay. There are usually fewer closing costs to pay with a refinance, but it’s still a cost you need to consider.

•   Long-term costs. Increasing the amount of your mortgage over a long period brings large interest costs. Take a look at an amortization table or mortgage calculator so you know exactly what the total cost of your mortgage will now be.

Requirements for a Cash-Out Refinance

To qualify for a cash-out refinance, you’ll need to qualify for a mortgage again. A lender will look at your credit score, debt-to-income ratio, as well as the amount of equity you have in your home.

Credit Score Minimum

When you’re looking to qualify for a mortgage, you want your credit score as high as possible so you can qualify for the best available mortgage rates. For the best rates, aim for a credit score of 740 or above. A credit score of 620 is needed for most home loan types, though you may be able to get a home with a credit score around 500, depending on the type of mortgage or program available in your area.

Home Equity Requirements

The amount of your new mortgage will retain around 20% equity before refunding cash (sometimes less, depending on the lender or the program). If your home is worth $500,000, that means they’ll likely be willing to lend up to $400,000 on the home. If your current mortgage sits at $300,000, the most cash you would be able to access with a cash-out refinance is $100,000.

Debt-to-Income Ratio (DTI)

A debt-to-income (DTI) ratio is the total sum of your debts divided by your income. Generally, lenders look for a DTI ratio at 43% or lower. There are exceptions, so be sure to consult with your lender.

Cash-Out Refinance vs Home Equity Line of Credit (HELOC)

Another way to pay for home improvements is with a home equity line of credit (more commonly referred to as a HELOC). A HELOC is a second mortgage loan that uses the equity in your home as collateral. It acts like a line of credit and you only borrow what you need. It’s flexible and easy to use.

It makes sense to use a HELOC instead of a cash-out refinance in a few scenarios:

•   When the interest rate on your current mortgage is very low. Changing your current mortgage to a higher-interest mortgage with a cash-out refinance would be very expensive. Paradoxically, a HELOC or personal loan will have an even higher interest rate than what you can get on a primary mortgage, but because you’re paying the HELOC or personal loan off sooner, you will spend far less in interest.

•   You can make a larger HELOC payment. A HELOC usually won’t take 30 years to pay off. On a HELOC that is paid off sooner, the monthly payment amount will be higher, but if the numbers make sense (meaning, you’re able to access enough money for your home improvements from a HELOC at a competitive interest rate and you can cover the payments), then you probably want to go with a HELOC instead of a cash-out refinance.

•   You’re not sure how much you need. With a HELOC, you apply for a credit line and are approved up to a limit, kind of like a credit card. You only take out what you need, which is convenient when you’re planning a project and are not sure exactly how much it will cost.

The Takeaway

Cashing out the equity for home improvements can be an affordable way to update, repair, or improve your home — but only if the circumstances are right. While a lump sum of cash can be a great way to pay for home improvements, be sure to factor in all the costs before you choose this method. There are other financing tools available to you if this one is too costly.

Turn your home equity into cash with a cash-out refi. Pay down high-interest debt, or increase your home’s value with a remodel. Get your rate in a matter of minutes, without affecting your credit score.*

FAQ

Can I use a cash-out refinance for ongoing or future home improvement projects?

The cash you get from refinancing your home can be used for any purpose.

How long does the process typically take for a cash-out refinance for home improvements?

The cash-out refinance process averages 30 to 45 days regardless of what purpose the excess funds will be used for.

Can I use a cash-out refinance to fund home improvements on an investment property?

Yes, however the requirements for a cash-out refinance on an investment property may be different from those on your personal residence, so it’s best to consult with a mortgage lender.

Are there any restrictions on how I can use the funds from a cash-out refinance for home improvements?

No, there are no restrictions on how to use funds from a cash-out refinance. You can pay for whatever home improvements you would like. There are restrictions, however, on whether or not you can deduct the interest you pay on the loan on your taxes. Ask your tax preparer for guidance.

Can I apply for a cash-out refinance for home improvements if I have a second mortgage or existing liens on my property?

Yes, but the second mortgage and other liens will likely need to be paid for a lender to issue a new mortgage for a cash-out refinance. There are some exceptions, so it’s best to consult with your mortgage professional on this one.

Photo credit: iStock/Kerkez

*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.

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

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

When a borrower stops making payments on student loans for a period of time, they could end up in default. And in some cases, lenders may send defaulted loans onto collections.

If your student loans end up in collections, it can have some bad financial consequences. Your credit score may be damaged, and sometimes your wages may be garnished. While it can be very stressful, there are steps you can take to fix the problem.

Before we dive in, it’s important for you to know this is an incredibly complex topic. We’re going to try to break it down the best we can, but full disclosure: The information we’re sharing here is general in nature and does not take into account your specific objectives, financial situation, and needs; it should not be considered advice. SoFi recommends you speak to a professional about your unique situation so you can make sure you make the right decision for your circumstances.

How Student Loans End up in Collections

Student loans don’t go away until you’ve paid them off. If you haven’t been paying off your student loans, your debt can go into default, because you are failing to fulfill your contractual obligation to repay your loan.

Americans owe more than $1.7 trillion in student loan debt as of the second quarter of 2023. When you consider that the average federal student loan debt for the class of 2023 was over $37,574, it’s no surprise that some have trouble keeping up with it. In fact, an average of 7% of student loans are in default at any given time.

💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

Delinquent Federal Student Loans

The first day after missing a payment on a federal student loan, the loan becomes delinquent. The loan will remain delinquent until the overdue balance is paid, or the borrower makes alternate arrangements such as applying for deferment or forbearance or switching their payment plan.

After 90 days of missing payments for federal student loans, the loan servicer will report the late payments to credit bureaus, which could negatively impact the borrower’s credit score.

Recommended: Defaulting on Student Loans: What You Should Know

Federal Student Loans in Default

For federal loans, you typically go into default after you haven’t paid your loan bill for nine months or 270 days.
When in default, the entire balance of the loan comes due. But just because a loan is in default, doesn’t mean it automatically goes to a collections agency.

At this point, you may have the opportunity to make arrangements with your loan servicer. For example, your lender may help you tailor solutions that lower your monthly bill to make payments more manageable for you.

However, if you don’t come to an agreement, your lender can send your debt to a collections agency that will collect it for them.

No federal loans went into default during the Covid-19 student loan pause. That’s changing as of September 2023, but thanks to the one-time Fresh Start program, borrowers who have defaulted loans can take steps to have their default status removed from their credit reports and restart payments with no penalties.

Private Student Loans in Default

The timeframe may vary for private loans depending on the terms and conditions of the loan. Generally speaking, private student loans may go into default after 90 days ​of missed payments. You should read your loan agreement for more information on when your loan provider will send your defaulted loans to collections.

What Does It Mean to Have a Loan Sent to Collection?

Once your debt is sent to a collections agency, that agency will do everything they can to get you to pay. Unfortunately, on top of collecting the debt, collections agencies typically charge fees, for which you’ll also be responsible.

Once your debt is in collections, the collections agency might try to work out a repayment plan with you as a first step. If you continue to not pay, the agency can then take actions to recoup the money, such as trying to garnish your wages.

Garnishment means the agency can take a certain amount from each paycheck and apply it toward your debt — in the case of federal student loans, it’s not more than 15%. For federal student loans, lenders are not required to take the borrower to court before garnishing wages.

Private student loans function differently. They are not subject to the same special regulation as federal student loans. Private lenders interested in garnishing wages must follow garnishment rules laid out for private debt. In this case, the lender is required to take the borrower to court and obtain a judgment in their favor before any wages can be garnished.

Recommended: What Happens If You Just Stop Paying Your Student Loans

What Happens When Your Loans Go into Default and Collections?

Some other not-so-great things can happen when your loans go into default and collections.

First, if you have defaulted on federal student loans, you may lose access to various federal loan repayment plans and forbearance or deferment on federal loans. These programs are important tools designed to make it easier for you to pay off your loans. Loan forgiveness is offered to those who have jobs in certain government, healthcare, and nonprofit sectors. Forbearance allows you to temporarily stop making student loan payments or reduce the amount you pay each month.

Your credit score may take a hit as well. With both private and federal student loans, the lender or the collections agency will report the late payments to the three major credit bureaus, and that might then lower your credit score.

A low credit score might cost you down the line, making it difficult to secure future loans at reasonable interest rates, should you want to buy a house or a car, for example. It may even mean you won’t qualify for a loan at all. Avoiding default might help you maintain these important financial tools.

Recommended: Student Loan Deferment vs Forbearance: What’s The Difference?

How to Get Your Loans Out of Default

The best thing you can do to avoid your student loans going into default and being sent collections is to pay your bills on time. And if you think you’re going to miss a payment, reach out to your loan provider to see if they’ll offer support.

But if you’ve defaulted, there may still be options for you to recover.

Options for Federal Student Loans

If you have federal student loans, you can try to rehabilitate your student loan in collections. Here’s how the program works: After you’ve made three consecutive on-time, voluntary, full payments on a defaulted federal loan, you can consolidate your federal loans.

The new direct loan pays off the old loans in full and consolidates them. Once you have made nine out of 10 consecutive, voluntary, on-time payments to this new loan, the loan may be rehabilitated and the default may be removed from your record. With a Direct Consolidation Loan, your eligible federal loans will be combined into one loan with a fixed interest rate — and the new rate will be the weighted average of the rates on the loans being consolidated (rounded up to the nearest one-eighth of 1%).

Options for Private Student Loans

When it comes to private student loans, private lenders may or may not offer borrowers the opportunity to rehabilitate their loans. You should contact your lender and ask what you can do to get your loan out of default. Sometimes borrowers who have rehabilitated a private student loan may ask to have the default removed from their credit report, but there is no guarantee that it will be removed.

In some circumstances, the statute of limitations on debt may be a consideration for private student loan debt. This is a legal time frame in which a creditor is allowed to collect on the debt, and it is determined by state law. In the case that the statute of limitations on private student loan debt has been met, entering into a rehabilitation plan may restart the limitations period.

Additionally, it’s important to note that some lenders may charge off private student loans that are delinquent for 120 days, or a set period of time, which may vary from lender to lender. When a lender charges off a loan, it means they have written off the loan as a loss and close the account. They typically sell your loan to a debt buyer or collections agency. But you are still legally obligated to pay off the loan. If the debt is charged off, the lender may not be willing to work with the borrower.

Recommended: Refinance Student Loan Rates

What to Do If Your Student Loan Goes to Collections

If you do find yourself in the unfortunate situation of having debt in collections, there might be steps you can take.

First, you could talk to your collections agency. It might seem scary, and it may be tempting to ignore their calls and letters, but doing so isn’t going to make them stop. Remember: Collections agencies want you to pay. It’s in their best interest for you to ultimately pay back your loan. In many ways, this is a situation in which the ball is in your court.

When you talk to them, the collections agency might offer payment options tailored to your individual circumstances, depending on if you’re employed and how much money you earn.

They might offer solutions such as allowing you to pay a discounted lump sum, or they might set up a manageable monthly payment plan if you don’t have a lot of income.

Having your loans in default or collections might have serious effects on your credit and your financial stability. If you’re afraid of defaulting on your loans, or if you already have, consider taking action as fast as you can. Taking control of the situation could help keep it from getting worse.


💡 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

In an ideal world, the best way to avoid going into student loan default is to make payments on time and in full. But if you have competing financial priorities, it may be difficult for you to pay your loans on time.

If your student loans end up in collections, it may damage your credit score, and with federal loans, your wages may be garnished. But there are steps you can take to rehabilitate your defaulted loans, depending on whether you have private or federal loans.

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.

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


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.

This article is not intended to be legal advice. Please consult an attorney for advice.

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