SoFi

A college education almost always costs more than families initially think it will, when everything is accounted for, so most students take out loans. The loan money is sent to the attending college, placed in the student’s account, and applied to various costs.

Fortunately, there are plenty of options available. But students are often left with questions like: How are federal student loans disbursed? How are private student loans disbursed?

Generally speaking, both federal and private student loans are disbursed directly to the school to pay for things like tuition, fees, and room and board. Continue reading for additional clarification and guidance on federal and private student loans.

The Lowdown on Student Loans

Student loans are designed to help college students absorb the many costs of postsecondary education.

The average price of tuition and fees for the 2022-23 school year is $10,940 for an in-state undergraduate student at a public college and $39,400 for a private college student, according to data collected by the College Board.

So borrowing becomes the normal route. Student loans be used to cover expenses such as:

•   Tuition and fees

•   Housing

•   Meals

•   Transportation

•   Books and supplies

•   Computers

Loan amounts can be excessive and give students the idea that they have a surplus of cash to spend. A rule of thumb suggests that only required materials and needs can be paid for with a loan.

For example, student loans may cover a campus meal plan but not food purchased from local fast-food joints. Bus fare or ride-share fees may be covered but not the purchase of a new car.

When in doubt about whether an item can be purchased with student loan funding or not, it’s best to speak directly to the loan provider or college financial aid department.

Got leftover money? Before going on a shopping spree, remember that that’s borrowed money and will have to be repaid, with interest.

Types of Student Loans: Federal and Private

There are two main types of student loans: federal loans vs. private loans. Federal loans are provided by the U.S. government, while private loans are issued by financial institutions. Each type of loan has advantages and potential caveats students should be aware of.

Financial advisors almost always recommend exploring federal options first. Applications are quickly processed, and these types of loans tend to have lower interest rates than private options. Interest rates are almost always fixed, meaning students won’t have to worry about fluctuating payments.

Another advantage is that students don’t typically have to begin making payments on federal loans until after graduation or dropping below half-time enrollment, according to the Federal Student Aid office. (Holders of parent PLUS loans for undergraduates are expected to begin making payments after the loan is fully disbursed, unless the parent requests deferment.)

Federal financial aid programs also offer more flexible repayment plans based on income, may be subsidized, and offer loan forgiveness to qualified students, the Federal Student Aid office notes.

But the benefits of federal loans don’t mean private student loan options shouldn’t be considered. For some students, like those who are denied federal funding, those for whom federal loans come up short, and those who are approved but never receive their full loan amount, private loans can be a financial lifesaver.

With a bit of grit and potentially a cosigner with a healthy credit score, students can obtain private loans with low and fixed interest rates comparable to federal loans.

One common downside of private loans is that repayment tends to start immediately. But in some cases, private loans can offer larger sums of money upfront, allowing students to pay for nearly every expense with one loan and make only one payment a month.

So now that you know that there are two main types of student loans, federal and private, it’s important to know the variations of each type. Continue reading for each type of student loan explained.

Direct Subsidized Federal Loan

Also known as a Stafford Loan, this option is often touted as the best type of federal loan available to applicants. That’s because a loan applicant will receive a subsidy upon graduation matching the amount of interest the loan has accrued.

In other words, a Direct Subsidized Loan will always be paid back at its original amount, despite years of accruing interest. Because it’s hard to match the benefit of an interest-free loan, it’s recommended to always accept these types of loans if approved.

Direct Unsubsidized Federal Loan

Unlike the subsidized version, a Direct Unsubsidized Loan will accrue interest, which will be included in the final repayment amount.

Before accepting this type of loan, use a student loan payoff calculator to calculate interest rates and the potential accrued interest to have a better understanding of potential future payments.

Direct PLUS Loan

This type of federal loan is only available to graduate students or parents of undergraduates. The interest rate is higher than subsidized and unsubsidized federal loans, and a credit check is required.

Direct Consolidated Loan

For students with several federal loans, it’s possible to consolidate them into one account with one monthly payment with a Direct Consolidation Loan. There is no fee to apply for this kind of loan, but all accrued interest will be rolled into the total principal balance. This leads to faster-accruing interest for students who can pay only the monthly minimum.

While it’s certainly more convenient to consolidate multiple loans, consider the additional length of the loan and additional interest paid over time before committing.

Private Student Loan

It’s no secret that interest rates vary widely with private loans. That’s because private lenders will evaluate factors like an individual’s credit score and request student loan proof of income. There are also loan fees to consider, but not all lenders apply these.

Federal loans often have more protections for students, but they rarely cover all of the costs that come with a college education, which is why many students find themselves with a combination of federal and private loans. Though it’s worth mentioning that because private student loans lack the borrower protections afforded to federal student loans, they are generally considered an option only after all other sources of financing have been exhausted.

How Long Does It Take to Get Student Loans Disbursed?

Disbursement is a term that describes when a loan is actually paid out. Disbursement timelines may vary depending on whether the loan is a federal or private student loan.

Federal Student Loan Disbursement

To get a federal student loan, interested students must fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA®. Information provided on this form will be used to determine how much federal financial aid and what types a student will qualify for — including federal student loans.

Generally, FAFSA applications are completed quickly. Online applications can be reviewed in as little as three to five days. Federal student loans are generally disbursed directly to the school sometime between 10 and 30 days after classes start.

Private Student Loan Disbursement

The application for a private student loan will be conducted with the individual lender. Each lender will have its own policies for applications and approvals. Generally speaking, it may take between two and 10 weeks to process a private student loan.

Private student loans are also generally disbursed directly to your school. The disbursement date may be timed to the start of the school year, though, this may vary depending on when you apply for and are approved for a private student loan.

How Are Student Loans Disbursed?

Whether a student chooses to accept multiple federal loans, a private loan, or a combination of the two, the money is often distributed the same way. As briefly mentioned, the loan amount is sent directly to the attending school, where it is kept in the student’s account and then applied to covered costs, including tuition, fees, room, and board.

When there is leftover money in a student’s account, the excess is paid directly to the student to be used for additional expenses. These payouts tend to take place once per term and vary by school. If students receive leftover funding, they can use it as they see fit or even begin to pay back the loan early.

Keep in mind that all universities have their own policies on loans and disbursement. Questions about how a specific school handles student loans should be directed to the financial aid office.

Overage funds tend to be awarded to the holder of the loan. If a student’s parents hold a loan with overage, they’re more likely to receive the leftover money.

Also, disbursements may be held for 30 days after the first day of enrollment, especially if the student is a freshman and first-time borrower, according to the Federal Student Aid office.

Common Student Loan Disbursement Issues

It’s possible for issues to crop up that could impact your disbursement.

•   Missing application deadlines. Applying for a private student loan or filing the FAFSA too late could impact when your student loan is disbursed. To avoid any late disbursements, be sure to submit your FAFSA before state or school-specific deadlines.

•   Making mistakes on the application. If there are errors on the FAFSA or a private student loan application, this could impact your approval or potentially delay the disbursement date as you fix errors and re-submit the application.

•   Forgetting to complete entrance counseling for federal student loans. You must complete the entrance counseling required for federal student loans before they are disbursed. Be sure to read the terms of all loans closely and fill out all paperwork properly to ensure timely disbursement.

Final Tips

Student loans are often a necessary step in the college journey. The world of loans can be intimidating at first, but it’s not impossible to learn how to navigate the financial waters of postsecondary education. These final tips may help.

•   Compare all options. It’s better to have too many loan options and turn some down than face uncertainty about how to pay for everything.

•   Apply early to ensure that there’s time to make corrections if necessary. There are rules and requirements unique to all types of loans.

•   Avoid overborrowing. Try to calculate overall expenses and keep loan amounts as close as possible to the estimate. Being approved for a large loan doesn’t mean the total amount has to be accepted.

•   Get a part-time job, if necessary, to alleviate the stress that loan payments can add.

Curious about private student loans? Consider applying for a private loan from SoFi. With an all-online application, no fees, flexible repayment plans, and possible rate discounts for SoFi members, SoFi can smooth the path to a college degree.

Oh, and SoFi makes it easy to add a cosigner to an application.

Learn more about private student loans with SoFi today.

FAQ

Do student loans get deposited into your bank account?

Typically, student loans do not get deposited in your bank account. Instead, the loans are disbursed directly to the school where it is applied to tuition payments and room and board. If there is any money leftover after paying for tuition, the money will then be distributed to the student. These payouts tend to take place once per term and vary by school.

How long do student loans take to deposit?

After applying through the FAFSA, it may take up to 10 days to find out what types of aid — including student loans — you are eligible for. If approved for a federal student loan, this money will be disbursed directly to the school. Typically, this will happen within the first 30 days of the start of term.

What does disbursement mean?

Disbursement is when the loan amount is paid out to the borrower. In the case of student loans, the loan is typically disbursed directly to the student borrower’s school.

Can you use a student loan to pay a tuition bill that is past due?

Yes, you can use a private student loan to pay off an outstanding tuition balance. Each lender determines how far in the past a loan can be used to pay an overdue balance, but many will allow loans to cover past-due balances that are 6-12 months outstanding.

---

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOPS0222013

Read more

Several members of the U.S. Supreme Court, hearing arguments for the first time on legal challenges to President Joe Biden’s student debt cancellation program, expressed skepticism about whether it was legal for the government to forgive up to $20,000 in federal debt for individual loan holders.

After three hours of debate, as expected, there was no decision made on whether the debt relief plan would go forward or the challenges would be upheld.

Court followers say that, based on past cases, the Supreme Court justices will cast votes at a private conference held at some point in the next week. Then one of the justices will be selected to draft a majority opinion. It takes an average of three months after an argument for the decision to be made public.

It is possible the court will rule much sooner that the parties challenging Biden’s policy have no legal standing. If that happens, there will be no larger ruling, the debt relief program will continue, and the deadline for resuming federal student loan payments will likely be set.

However, the most probable time to hear the court’s decision on whether the student debt cancellation is legal is June, when different Supreme Court rulings are typically made public. Until then, the future of the one-time student debt relief and the date when federal student debt payments will resume could be up in the air.

At stake are such vital issues as the burden that debt-strapped working and middle class Americans struggle under, the power of the executive branch to deliver a cancellation of $400 billion of debt without Congressional approval, and the fairness that such a cancellation would impose on people who never attended college or who’ve managed to repay their college loans

The Two Sides of the Student Loan Divide

In August 2022, President Joe Biden announced his plan . He said the Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples).

An online portal was created for applicants. Over the next month, more than 26 million people applied for cancellation, according to the Education Department.

However, the portal was frozen after legal challenges to Biden’s plan gained steam. Six Republican-led states and two individuals, students with loans, brought court actions. The states say Biden overstepped his authority with the debt cancellation program; they also argue that the plan would cause their tax revenues to fall. The two individuals say Biden’s cancellation is unfair to them because one of them has loans held by private lenders, so he can’t benefit, and the other is ineligible for the full $20,000.

In the arguments heard, Supreme Court Chief Justice John Roberts seemed to question whether the president can do this unilaterally.

“Most casual observers would say if you’re going to give up that much amount of money, if you’re going to affect the obligations of that many Americans on a subject that’s of great controversy, they would think that’s something for Congress to act on, and if they haven’t acted on it, then maybe that’s a good lesson to say for the president or the administrative bureaucracy that maybe that’s not something they should undertake on their own,” said Roberts.

Justice Sonia Sotomayor talked about the harm to students from debt, saying, “There’s 50 million students who are — who will benefit from this. Who today will struggle. Many of them don’t have assets sufficient to bail them out after the pandemic. They don’t have friends or families or others who can help them make these payments.”

The Supreme Court presently holds a 6-3 conservative majority. However, Justice Amy Coney Barrett joined liberal Supreme Court justices in appearing to question the legal standing of the Republican challenges. So the fate of the loan ruling is still unclear.

Why the Government Put Federal Student Loan Debt on Hold

The outstanding federal loan balance is currently $1.635 trillion and accounts for 92.4% of all student loan debt, according to educationdata.org.

In March 2020, because of the economic harm caused by Covid-19, the federal government paused loan payments and set interest rates to 0% for eligible federal student loans. The debt payment relief was authorized by the The Coronavirus Aid, Relief, and Economic Security (CARES) Act. Since then, the deadline for resuming payments has been extended multiple times.

Over 43 million Americans have federal student loan debt. The average federal student loan debt balance is $37,574 while the total average balance (including private loan debt) may be as high as $39,590.

In August 2022, President Biden announced that the pause would be extended again to December 31, 2022, along with explaining his cancellation plan. Biden also made changes in the Public Service Loan Forgiveness Program to make it accessible to more people.

After the court challenges threatened Biden’s plan and forced the Education Department to freeze applications, Biden pushed back the date for payments yet again, saying they would resume either 60 days after the Supreme Court makes its ruling — or 60 days after June 30 if litigation is ongoing. He said the delay would give enough time for the Supreme Court to rule and for loan holders to prepare their payments.

The White House said, “Borrowers can use the additional time to ensure their contact information is up to date with their loan servicers and consider enrolling in electronic debit and income-driven repayment plans to support a smooth transition to repayment.”

If the Supreme Court rules before June 30, borrowers with remaining balances will need to start repaying loans 60 days after the date of that court decision, at which point interest will also start accruing again. If the Supreme Court does not rule before June 30, forbearance will end and borrowers will need to start repaying loans 60 days after June 30, at which point interest will also start accruing again.

Recommended: Student Loan Forgiveness and Relief Guide

The Takeaway

The U.S. Supreme Court heard arguments challenging President Biden’s proposed debt cancellation of up to $20,000 in federal loan debts, with some justices expressing skepticism that Biden can relieve nearly half a trillion in debt without Congressional involvement. The decision may not come until June.

Student loan refinancing is one way holders of debt can seek to make student loan payments more manageable. If your federal debt is more than the amount of forgiveness you are potentially eligible for and you are worried about rising interest rates, you can refinance just the amount that will not be canceled. Remember that the refinanced amount will lose access to federal protections and programs, including the payment pause that has been extended.

Refi with SoFi today to get flexible terms and a competitive low rate before interest rates rise even higher!

---

Photo credit: iStock/Kameleon007

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

CLICK HERE for more information.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SOSL0223006

Read more

If your application for a federal Parent PLUS Loan was denied, you and your child still have options to help pay for their college. Below, we’ll explain some reasons why a Parent PLUS loan application might be denied, what you can do if yours is rejected, and alternatives to consider.

What Is the Parent PLUS Loan Program?

Parent PLUS Loans are federally funded Direct PLUS Loans taken out by parents to help their child pay for college. To apply, students or their parents must first fill out the Free Application for Federal Student Aid. Then a parent applies for a Parent PLUS Loan on the Federal Student Aid site. Most schools require this to be done online, though some have a different application process. Unlike other types of federal student loans, these loans require a credit check.

Why a Parent PLUS Loan Might Be Denied

If your Parent PLUS Loan was rejected, it may be because you don’t meet the credit requirements. PLUS borrowers can’t have an adverse credit history, such as being at least 90 days overdue in making a debt payment or completing bankruptcy in the last five years.

Your application may also be denied if you or your child don’t meet other PLUS loan requirements. For instance, your child must be enrolled at least half-time at an eligible school, and you must meet the general eligibility criteria for federal student aid.

What Parents Can Do

In the event that your application for a Parent PLUS Loan is rejected, you may want to consider these options.

Appeal the Decision

If you had extenuating circumstances that led to an adverse credit event, you can ask the U.S. Department of Education to reconsider your application. You’ll need to provide documentation that proves that extenuating circumstances led to the adverse credit. The DOE will decide whether to approve the appeal. Check its website for a list of potentially acceptable appeals and the supporting documentation needed.

If your appeal is approved, you’ll be required to complete PLUS Credit Counseling before your loan is disbursed. Counseling takes between 20 and 30 minutes and can be done online.

Find an Endorser

You may want to consider having someone else endorse the Parent PLUS loan. An endorser is essentially a cosigner without an adverse credit history. In the event that you are unable to repay the loan, the endorser would be responsible.

An endorser must complete an addendum online. They should be prepared to provide personal information such as their mailing address and phone number and their employer’s information, plus two references. Once the endorser is approved, they’ll need to complete PLUS Credit Counseling before the funds are disbursed.

Your Child May Qualify for More Aid

If your Parent PLUS loan is rejected, there’s a chance your child may qualify for more federal student aid. They can contact their school’s financial aid office to see what can be done given that their parental contribution is now reduced.

It’s important to talk to your child about student loans so they understand how the loans work and how much they will cost upon graduation. It may be helpful to speak in terms of the expected monthly payment, so your student can compare that to their expected annual salary.

Scholarships

It’s likely not too late for your student to apply for scholarships. In fact, students should be searching for scholarships each and every year they’re in school.

While some types of scholarships may be limited to incoming freshmen, this is not always the case. In addition to looking at scholarships offered by your child’s school and the state, other local organizations may offer scholarships.

If your student is still in high school, their guidance counselor may be able to provide advice on ways to search for scholarships, including finding opportunities in your area.

Consider Other School Options

Depending on where you live, you may want to reconsider where your child goes to school. Switching to a state school or local community college could save thousands in tuition, room and board, and travel costs. Some community colleges even have transfer programs for getting students into four-year schools. Consider meeting with a counselor at the community college to see what the transfer process is like.

Private Student Loans After Parent PLUS Loan

Private student loans are another way to close the funding gap. Commercial banks, credit unions, online lenders, and other lending institutions offer these loans with varying terms and rates. Private student loans and private parent student loans are not backed by the federal government and therefore not subject to its qualification rules. They may also lack the borrower protections available to federal loans, such as deferment. Private student loans are often considered once all federal aid options have been explored.

Rates on private student loans are generally determined by your credit score and personal financial situation. Borrowers who did not qualify for a Parent PLUS loan may also have trouble qualifying for a private loan at a competitive rate. Still, it’s worth shopping around. In addition to comparing rates between lenders, you’ll want to factor in the costs associated with taking out a loan, such as origination fees, prepayment penalties, and more.

The Takeaway

Parent PLUS Loans are federal loans available to parents of students. There are credit-related requirements in order to qualify for a PLUS loan, so in some cases, it is possible to be denied for a Parent PLUS Loan. If your application is rejected, you still have options, including appealing the decision, adding an endorser to the loan, exploring scholarships, or looking into alternate schools.

If you’ve exhausted all your options, no-fee private parent college loans from SoFi can help you pay for your student’s education. The application process can be completed easily online, and you can see rates and terms in just a few minutes. Repayment plans are flexible, helping parents find an option that works for their financial plan and budget.

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

FAQ

How often can I take out a Parent PLUS Loan?

You can apply each year you want to receive a Parent PLUS loan. To do so, you must fill out a Direct PLUS Application.

When do Parent PLUS Loans need to be paid back?

Repayment begins 60 days after final disbursement for that academic year. If you’re approved for deferments each year, you may not need to begin repaying the loan until 6 months after your child graduates.

If I’m approved for a Parent PLUS Loan, where will the funds go?

Funds from Parent PLUS Loans are sent directly to your child’s school.

---

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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. 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.
SOIS0123004

Read more

Want to squeeze in a couple of classes this summer but not sure how to pay for them? You have several options, including federal and private student loans. The summer loan application process is generally the same as it is for the regular academic year. But the federal government limits how much you can borrow, so it’s important to consider your options carefully.

Here’s what you need to know about paying for summer classes.

Costs of Going to School in the Summer

Tuition is one of the biggest costs associated with going to school in the summer. That said, some colleges offer summer courses at a reduced cost, or you may be able to take classes at a community college for a lower price and transfer the credits to your school. If you don’t plan on living at home, you’ll also need to budget for housing, food, transportation, and other personal expenses.

The short-term cost of going to school during the summer may be worth it in the long run, though. Taking extra classes can help you finish your degree — and start drawing income from a full-time job — faster.

Can You Get Financial Aid for Summer Classes?

Just like during the fall or spring terms, financial aid is available during the summer. Let’s take a look at some common types of assistance.

Grants

Grants can help offset the cost of summer courses and typically don’t need to be repaid. One popular type of grant is the Pell Grant, which is awarded by the federal government and based on financial need. Qualifying students can receive Pell Grants for 12 semesters, and in certain circumstances, they may be eligible to receive additional funds for the summer semester.

Some schools offer grants to students who are enrolling in summer classes. Contact the financial aid office to see if your school offers this option. Your state may also provide grants to help students cover the cost of summer classes. Visit the website of your state’s department of education to find out if this option is available to you.

Scholarships

Like grants, scholarships usually do not need to be repaid, and in general, you’re free to use the funds for a summer term. There are thousands of available scholarships based on financial need or merit offered by a variety of sources. Searching scholarship databases can help you narrow your options.

Work-Study

Federal Work-Study gives students with financial need part-time employment to help them earn extra money to pay for education expenses. Check with your college’s financial aid office to find out if the school participates in the program.

Student Loans

The loans you apply for, to pay for the regular school year, can also be used to cover summer courses. There are different types of federal student loans to explore: Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.

Once you’ve exhausted federal aid options, you may consider private loans to pay for summer classes. Generally, lenders allow you to borrow up to the school-certified cost of attendance.

Other Ways to Cover the Cost of Summer Classes

Whether you’ve exhausted financial assistance or want to earn extra money for school and living expenses, here are two other options to consider.

Paid Internship

A paid summer internship doesn’t just potentially provide students with valuable professional experience and important connections. It’s also a chance to draw an income while you’re taking summer classes. To find out about opportunities you may be qualified for, check with your school’s career center.

Part-Time Job

During the summer, students often have more free time to work more hours and earn more cash to help cover the cost of summer classes. A part-time job usually offers flexible hours to accommodate school. Plus, some students may find a job that’s related to their major or career of choice.

Federal vs Private Student Loans: How They Compare

Federal student loans are funded by the federal government and offer borrowers protections such as deferment, forbearance, and the option to pursue Public Service Loan Forgiveness. Most federal student loans do not require a credit check, and interest rates are fixed for the life of the loan. Students must fill out the FAFSA annually and be enrolled at least part-time to qualify for aid.

The federal government limits the amount of money students can borrow per academic year and in total, and this includes any aid you receive for summer classes. The limit is based on your dependency status and how long you’ve been in school. For example, in the 2022-2023 academic year, a first-year dependent undergraduate may qualify for up to $5,500 in student loans, with a limit of $3,500 on what can be subsidized. An independent first-year undergraduate student may qualify for up to $9,500 in student loans, with a limit of $3,500 on what can be subsidized.

Private loans are offered by private lenders, such as banks, credit unions, and other financial institutions. Interest rates may be fixed or variable and are determined by the lender based on criteria including an applicant’s financial history and credit score. Many lenders require students to be enrolled in school at least part time. Depending on the loan terms, borrowers may be required to make payments while they are enrolled in school, and they may or may not provide a grace period. Private student loans also lack the borrower protections afforded to federal student loans.

Students who take out the maximum amount of federal aid may consider private loans as an option to pay for summer classes. Generally, private lenders allow you to borrow up to the school-certified cost of attendance.

When Applications Are Due

FAFSA applications for the following academic year are typically due around the end of June. The application requires borrowers to check the school year in which the funds will be used. If you’re submitting a FAFSA for the summer term, ask your school which year to check on the form and if any other forms are required. The sooner you submit the application, the more likely you are to receive funding, since many sources of aid are offered on a first-come, first-served basis.

What You’ll Need to Apply

To help the FAFSA application process go smoothly, it helps to have some information and a few documents on hand. This includes your Social Security number (or Alien Registration number for if you’re an eligible noncitizen); your federal income tax returns, W-2s, and other records of income; bank statements and any record of investments; records of untaxed income, if applicable; and your FSA ID. Dependent students will need most of that information for their parents.

If you’re applying for a private student loan, you’ll apply directly with the lender. Applicants typically need to have a solid credit history, proof of income, be at least 18, and be a U.S. resident. Adding a cosigner to the loan may be an option that can help potential borrowers strengthen their application.

The Takeaway

If you’re considering enrolling in some summer classes, financial aid can help you cover the bill. Grants, scholarships, work-study, internships, and part-time jobs are all options to explore, as are federal and private student loans. There are key differences between the loans that are important to keep in mind. Borrowers applying for federal aid must fill out the FAFSA every year and should check with their school’s financial aid office to find out which year to select on the FAFSA summer application. The federal government limits how much a student can borrow each year and in total. Those amounts are based on a student’s dependency status and academic year.

Students who reached their maximum borrowing limit may explore private student loans, like ones from SoFi. The application process can be completed easily online, and you can see rates and terms in just a few minutes. There are no fees, and borrowers can choose one of four repayment plans, depending on which works best for their needs.

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

---

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOSL18121

Read more

When applying for financial aid to fund their college educations, students and their parents are often introduced to words they’d never heard of before. To help you learn the lingo, here are definitions of 14 important financial aid terms, plus information about different ways to pay for college.

Financial Aid Terminology for Parents

1. College Grants

Grants are used to help fund a qualifying student’s college education, and unlike loans, they typically don’t need to be paid back. They are often based on financial need and are available from private and public organizations. Some grants have criteria that a student must meet, such as maintaining a certain grade point average. Here is information about college grants from the U.S. Department of Education .

2. Cost of Attendance (COA)

A student’s cost of attendance (COA) is the total of all costs to attend college in a given year. This includes tuition, room and board, book and supplies, loan fees, costs associated with studying abroad or managing a disability, and more.

A COA is different from an invoice a college may send a student, which is more comprehensive. The COA figure is used to determine how much financial aid a student may be eligible to receive. Anyone who receives a form of financial assistance is not responsible for paying the full COA.

3. Expected Family Contribution (EFC)

The expected family contribution (EFC) is a number colleges use to determine a student’s eligibility for financial aid. It’s calculated using a formula that considers a family’s income, savings, investments, benefits, family size, and more.

Starting with the 2024-2025 school year, the EFC will be replaced by the Student Aid Index, or SAI. Both serve a similar function, but there are key differences in how they work and how students receive financial assistance. Here’s where you can find more information about the SAI.

Recommended: How the Middle Class Affords College

4. Free Application for Federal Student Aid (FAFSA)

FAFSA is the official government form that students must fill out to be eligible for federal student loans and grants. Filling the FAFSA out does not guarantee that a student will receive aid, but it must be completed annually in order to be considered for the upcoming academic year. The information provided will be used to calculate a student’s expected family contribution (see that definition above). Here’s more information about completing a FAFSA application.

5. Financial Aid Award Letter

A financial aid award letter goes by a few different names: merit letter, award letter, a financial aid offer or a financial aid package. But no matter what you call it, once a student fills out a FAFSA, they’ll receive one of these letters from each college that accepts them. A typical letter will list a student’s cost of attendance, expected family contribution, awarded grants and scholarships, work-study details, and federal student loans. Many schools now provide this information electronically.

6. Merit-Based Assistance

Merit-based assistance is based upon a student’s abilities and accomplishments. This can include their grade point average, athletic achievements, or another skill. Financial need is not typically taken into account. Students generally receive merit-based aid directly from the college.

7. Need-Based Assistance

Need-based assistance is provided to students based on their financial needs, and is commonly offered by federal and state governments, colleges, and other organizations. There are three types of federally granted need-based financial aid: Pell Grants, work-study programs, and Subsidized Direct Student Loans. Each of these is defined in this post.

To qualify for federal need-based aid, a student must fill out the FAFSA. Colleges may require additional information for non-federal aid. Simply applying for need-based aid does not mean a student will receive it, though applying early may potentially improve their chances.

8. Parent Loans/Direct PLUS Loans

Parents can borrow funds to help their children pay their college expenses, including through federal loans called Direct PLUS Loans. When this type of loan is provided to a parent borrower, it’s often called a Parent PLUS Loan. Not all schools participate in the Direct Loan Program, so students should check with their colleges of choice to see if this type of funding is an option. Private parent loans are also available through lenders, including SoFi.

Note that graduate or professional students are also eligible to borrow Direct PLUS Loans.

9. Pell Grants

A Pell Grant is a federal form of aid based solely on need. It’s the biggest source of federal grants. To receive these funds, a student must fill out the FAFSA and meet eligibility requirements. Because this is a grant and not a loan, it typically does not need to be repaid.

10. Scholarships

A scholarship is a type of funding awarded to students to help them pay for a college education. They are available through federal and state government sources, colleges, private and public organizations, and more.

Unlike loans, scholarships typically don’t need to be repaid. They can be based on need or merit, or a combination of the two. There is a wide range of scholarship possibilities, so it can be worthwhile for the student to research their options and apply for ones that seem to be a good match.

Recommended: Scholarship Search Tool

11. Student Aid Report (SAR)

After a student completes their FAFSA, they’ll receive a student aid report (SAR). This report provides basic information about the student’s federal student loan eligibility and includes the answers they provided on the FAFSA application. The SAR also contains the Expected Family Contribution (EFC) and a four-digit Data Release Number (DRN), which students may need to provide when changing information on their FAFSA. It’s important to review the entire report and address any errors, as colleges use that information to determine aid eligibility.

12. Subsidized vs Unsubsidized Assistance

Federal student aid can include both Direct Subsidized Loans and Direct Unsubsidized Loans, which are also referred to as Stafford Loans or Stafford Direct Loans. There are notable differences between the two.

Subsidized loans are reserved for undergraduate students with demonstrated financial need. The school determines the amount available for each qualifying student. The government will pay the interest on a subsidized loan as long as the student is enrolled in school at least half time (generally 6 credit hours per semester), for six months after the student leaves school (called the “grace period”), and during deferment periods.

With unsubsidized loans, students do not need to demonstrate financial need to qualify, and both undergraduate and graduate students are eligible. Loan limits are higher than with subsidized loans, but interest rates are generally higher, too. The borrower is responsible for interest that accrues from the day their funds are made available. If a student chooses not to pay the interest while they’re in school, it will continue to accumulate.

13. Work-Study

The federal government’s work-study program provides college students who have demonstrable financial need with part-time jobs to help them earn money for their college education. The program attempts to match a student with work in their area of study or in jobs that benefit the community. Students who are interested in this program should check with their colleges of choice to see if they participate.

Here is additional college financial aid glossary , plus financial aid secrets that may help students more effectively fund their education.

Overall College Financial Aid Plan

When it comes to planning how to pay for college, it helps to understand all the available options and how they may be combined. Students and their parents may have money to contribute to help cover the expenses. Scholarships and grants can reduce the bill and typically don’t need to be paid back, while work-study opportunities allow students to earn money to cover some expenses while in college.

Subsidized loans give qualifying students some time to establish themselves financially before the debt starts accruing interest they’ll have to pay. Meanwhile, unsubsidized or private student loans can help borrowers cover remaining costs.

Recommended: Guide to Private Student Loans

Private Student Loans at SoFi

Private student loans, including those from SoFi, can come in handy once you’ve exhausted your other loan options. Borrowers can use the funds to cover all school-certified costs, including tuition, books, room and board, transportation, and more.

SoFi offers fee-free private student loans for undergraduates, graduate students and their parents. These loans don’t have any fees, and borrowers can choose between four different repayment plans. When applying for a SoFi loan, students can quickly and easily find out if they prequalify and at what rates. Adding a cosigner is also simple — just a few clicks away.

SoFi private student loans offer competitive interest rates for qualifying borrowers, flexible repayment plans, and no fees.

FAQ

What is a cosigner?

A cosigner helps assure lenders that someone will pay back the loan. Their income and financial history are factored into the loan decision, and their positive credit standing can benefit the student’s loan application.

What’s the difference between a student loan lender and a student loan servicer?

Lenders lend borrowers money to help cover school-related costs. Servicers send borrowers their monthly bill, process payments, field customer service requests, and handle other administrative tasks.

How do I calculate my college costs?

There are several online tools to help students estimate the potential cost of attending college. Net price calculators, for instance, are available on a school’s website and give cost estimates based on basic personal and financial information provided by the student.

---

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
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.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
SOIS1222002

Read more