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Paying for college can be a major financial challenge, but tuition payment plans offer a way to make the cost more manageable. These plans, often referred to as tuition installment plans, allow students and families to break up large tuition bills into smaller, more affordable monthly payments.

Unlike student loans, they typically don’t charge interest, though they may include small enrollment or administrative fees. In this article, we’ll explore what college tuition payment plans are, how they work, their benefits and drawbacks, and how to decide if one is the right choice for your financial situation.

What Is a College Tuition Payment Plan?

Instead of paying for college tuition at the beginning of each year, semester, or quarter, college tuition payment plans — also known as tuition installment plans or deferred payment plans — allow students and their families to spread out the cost of tuition over a period of time.

Depending on the school, the plan may allow payments to be made over the course of the semester or over the full year.

While you’ll generally have to start making payments right away, schools frequently offer the option to spread payments into monthly installments. Some also offer plans that break the payment into a few equal payments throughout the semester.

How Do Payment Plans Work?

Some colleges and schools run their own tuition payment plans. Others use an outside service to administer the plan.

Typically, these payment plans only cover the direct costs charged by and paid to the college, such as tuition and fees. Sometimes the cost of housing and meal plans will also be included. The cost of things like textbooks and school supplies are not usually included in these plans.

Many tuition payment plans require an enrollment fee, which may run around $50 to $100, although it could be lower. These plans don’t usually charge interest, which can make them less expensive than taking out a student loan, as long as you are able to make the monthly payments. There generally isn’t a credit check with tuition payment plans.

What Types of Schools Offer Payment Plans?

Many schools offer some sort of tuition payment plan, including college and universities, graduate schools, community colleges, and trade schools.

Colleges and Universities

Tuition payment plans are offered at most, though not all, colleges and universities. Check your school’s website for details on available installment plans and see if there’s one that fits your needs and budget.

Graduate Schools

Many graduate programs offer payment plans. Enrollment dates can vary, so contact your program to find you when you’ll need to sign up.

Community Colleges

Community colleges typically offer payment plans for students and their families who are unable to pay costs upfront. Similar to plans at other types of schools, installment plans at community colleges may only cover certain costs, such as tuition and fees.

Trade Schools

Trade school tuition can cost $15,000, on average. Some schools may offer a payment plan so students can pay the tuition and fees in installments.

What if My School Doesn’t Offer a Payment Plan?

If your preferred school doesn’t offer a payment plan, you can explore independent plans offered through private organizations. Your school’s financial aid office may be able to provide referrals.

Of course, even with a payment plan, the burden of tuition can still be too high for some students and their parents. Consider some of the following options when planning to pay for college tuition. While these ideas alone might not be enough to help you cover the full cost of tuition, a combination of a few could do the trick.

Federal Aid

Federal aid for college encompasses grants, scholarships, federal student loans, and work-study. To apply, students must complete the Free Application for Federal Student Aid (FAFSA®) each year.

The schools you apply to will use this information to determine how much aid you receive. You’ll typically receive an award letter detailing what types of federal aid you’ve qualified for and the amounts.

Federal Student Loans

Federal student loans can be either subsidized or unsubsidized. Subsidized loans are awarded based on need. The Department of Education covers the interest that accrues on these loans while you are in school at least part-time, during the grace period after leaving school, and during periods of deferment or forbearance.

Unsubsidized federal loans are awarded independent of need. Borrowers are responsible for paying the interest that accrues on these loans while they are in school and during periods of deferment.

Payments are not required on either unsubsidized or subsidized loans while you are actively enrolled more than part-time in school.

There are also PLUS loans available to parents who are interested in borrowing a loan to help their child pay for college.

Work-Study

The Federal Work-Study Program provides jobs for undergraduate and graduate students who demonstrate financial need. The amount of work-study you receive will depend on factors like when you applied, your level of determined financial need, and the amount of funding available at your school.

The money earned for work-study won’t count against you when you fill out the FAFSA, so it shouldn’t jeopardize future financial aid awards. Each time you fill out the FAFSA, it’s worth indicating that you’re still interested in receiving work-study as part of your financial aid award (that is, if you are still interested).

And it’s important to remember that your financial aid award may change from year to year, depending on your and your family’s circumstances.

Scholarships and Grants

Scholarships and grants don’t typically have to be repaid, which makes them one of the best options for students trying to pay for school. Some scholarships and grants are awarded by schools based on the information you provided in the FAFSA, but there are scholarships and grants available that aren’t based on financial need.

Taking some time to comb through online scholarship search tools could prove helpful. Each scholarship will have different application requirements. Some might require an essay or additional supplementary materials, but the effort could be worth it if you’re able to fund a portion of your tuition costs.

Private Student Loans

Sometimes federal aid, scholarships, and your savings aren’t enough to cover the full cost of tuition. In those cases, private student loans could be an option. Unlike federal student loans, which are offered by the government, private student loans are offered by banks, credit unions, or other private lenders.

The private student loan application process will vary slightly based on lender policies, but will almost always require a credit check. Lenders will review your credit score and financial history as they determine how much money they are willing to lend to you.

In some cases, students might need the help of a cosigner to take out a private student loan. This could be the case if they have little to no credit history.

Some parents may also be interested in taking out a private loan to help their child pay for their education.

Recommended: A Complete Guide to Private Student Loans

The Takeaway

Tuition payment plans, which extend the payment for college tuition over a fixed period of time, can be helpful for parents and students as they navigate how they’ll pay for the cost of education. Spreading tuition payments over the semester or year can help make them more manageable. Check if your preferred school offers a tuition payment plan. Many do.

Sometimes, the burden of tuition is still too high, even with a payment plan. Scholarships and grants, work-study, and federal aid can help you cover the cost of tuition. If you’ve exhausted all federal aid options, private student loans can fill gaps in need, up to the school’s cost of attendance, which includes tuition, books, housing, meals, transportation, and personal expenses.

FAQ

Are college tuition payment plans the same thing as tuition installment plans?

Yes, college tuition payment plans and tuition installment plans refer to the same concept — spreading tuition payments over several months instead of paying a lump sum upfront.

Do college tuition payment plans cover all school-related costs?

Typically, payment plans only cover tuition and fees. This means you may be responsible for the cost of books, supplies, housing, food, and transportation. Check with your preferred school to find out what its plan covers.

Do college tuition payment plans charge interest?

College tuition payment plans typically do not charge interest. However, they may include enrollment fees or administrative charges, which vary by institution. These plans allow families to spread tuition payments over several months, making costs more manageable without accruing interest like traditional loans—though late payments may incur penalties.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

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).

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.

SOISL-Q225-046

With the rising price of tuition, fees, and room and board at four-year public colleges and private nonprofit institutions, more students in all income brackets have been taking out student loans.

If you’re wondering where to get a student loan for college, you have two options. The first is getting a federal student loan through the government. Federal student loans account for more than 93% of all student loan debt. The second option is a private student loan, which is given by a bank, credit union, or online lender. Private student loans are not based on need, but rather your college’s cost of attendance, your credit profile, and your income (or your cosigner’s income).

Keep reading for more on where to get a student loan, including both federal student loans and private student loans.

Prioritizing a Plan

When creating a plan to fund college education, it’s wise to first explore any avenues for free money in the form of grants and scholarships.

By taking a look at the remaining balance after any free money has been found, exploring federal loans can be a smart next step. They come with income-based repayment options and the ability to request loan forgiveness under some circumstances. There are also work-study programs that can help students earn money while attending college.

If all needs are not covered, then there are private student loans to consider, along with Direct PLUS Loans that parents can apply for to get funds for their children.

After that, some people may seek out personal loans to cover living expenses while in school and/or emergency loans from the college.

Here are more specifics about these options.

Where to Get a Federal Student Loan

To obtain any kind of federal student loan, a student must first fill out the Free Application for Federal Student Aid, commonly called the FAFSA®.

After filling out this form, a student will have insights into what federal funding is available for them, along with work-study options. More specifically, each school that a student applies to can send a financial aid offer letter, which includes information about how to apply for student loans that they qualify for.

Two broad types of federal loans are:

•   Direct subsidized loans: Direct Subsidized Loans are for undergraduates that demonstrate financial need. With this loan, the U.S. Department of Education pays the interest while the student is enrolled at least half-time, during the grace period after leaving school, and during any deferment periods.

•   Direct unsubsidized loans: Direct Unsubsidized Loans are available for undergraduate students, as well as graduate and professional ones, that do not demonstrate financial need. Interest begins accruing right away.

Where to Get a Private Student Loan

A variety of financial institutions offer private student loans and have their own criteria for qualification. Some allow students to apply online and can give quick responses, while others go a more traditional route with in-person applications.

Private lenders will typically review a student’s income, plus that of any cosigner, along with credit histories and more to make lending decisions. A lender might grant a private student loan to someone whose credit isn’t stellar, but charge a higher interest rate.

When applying for a private student loan, it’s important to understand the loan terms before signing the note. This includes the interest rate and whether the rate is fixed (staying the same over the life of the loan, with the principal and interest payments also staying the same) or variable.

Pros of Private Student Loans

Benefits of private student loans can include the following:

•   They can bridge the gap between what is owed after federal student loans are applied to the balance and what is needed to attend college.

•   Students can apply for them any time of the year, without the strict deadlines associated with federal loans.

•   Borrowers may have more choices in interest rates and terms.

•   The loans may not include origination fees or prepayment fees, although that isn’t universally true.

Cons of Private Student Loans

Potential cons can include these:

•   It isn’t unusual for a private lender to require a cosigner because college students often don’t have enough income to qualify or have established a good enough credit profile to get the loan on their own.

•   Students who are considered a higher credit risk may pay more in interest.

•   Private student loans don’t come with many of the benefits associated with federal loans, such as forgiveness programs and income-based repayment plans.

•   Students may borrow more than they can ultimately afford, and these loans are typically not dischargeable in bankruptcy proceedings.

Recommended: A Complete Guide to Private Student Loans

Other Types of Loans

In addition to federal and private student loans, students and their families may consider other borrowing options to cover educational expenses.

Parent PLUS Loans

Students and parents can consider the Parent PLUS Loan, in which parents can apply for federal funding to help their children attend college.

Eligibility for a Parent PLUS Loan isn’t based on financial need, but credit is checked. If applicants have a credit history that’s considered “adverse,” they “must meet additional requirements to qualify.”

According to the Federal Student Aid office, adverse credit can include:

•   Having accounts that, in total, have an outstanding balance of more than $2,085 and are at least 90 days delinquent.

•   A default or a bankruptcy discharge during the previous five years.

•   Involvement in a foreclosure, repossession, or tax lien situation in the previous five years.

•   Write-off of federal student loan debt or wage garnishment during the past five years.

Qualifying parents of a dependent undergraduate student can receive funding through this loan program to cover education-related costs that are not covered by other financial aid.

Personal Loans

It’s also possible to apply for personal loans from financial institutions to cover living expenses during college or to address an emergency. There are downsides to this, though, including:

•   Interest rates will likely be higher than student loans, along with shorter payoff periods (which means principal and interest payments can be higher).

•   There isn’t typically a grace period, which means repayment starts right away.

•   These loans don’t come with deferments or forbearance, as can be available through federal student loans.

Emergency Loans

In an emergency, a student might want to reach out to the college financial aid center to see if the school offers emergency loans for those in need. These loans would not typically be large, perhaps $1,000 to $1,500, but might be enough to address a dire situation.

Each college has its own guidelines, so check them out carefully. Some charge interest; others may not. Some may charge a service fee; others may not. As with personal loans, repayment may start immediately, so factor that into budget planning.

The Takeaway

When exploring options to finance a college education, it’s essential to understand the various student loan avenues available and where to get them. Federal student loans, accessible through the Free Application for Federal Student Aid (FAFSA), often offer lower interest rates and flexible repayment plans. Private student loans, provided by banks, credit unions, or online lenders, can help bridge funding gaps but may come with higher interest rates and less lenient repayment terms.

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.

FAQ

What are the main sources for obtaining a student loan?

The two primary sources for student loans are federal student loans provided by the government and private student loans offered by banks, credit unions, and online lenders. Federal loans account for over 93% of student loan debt and are typically based on financial need, while private loans depend on creditworthiness and income.

How do I apply for a federal student loan?

To apply for a federal student loan, you must complete the Free Application for Federal Student Aid (FAFSA). After submission, you’ll receive information on the types and amounts of federal aid you qualify for, including work-study options. Each school you apply to will send a financial aid offer letter detailing your eligible loans.

When should I consider private student loans?

Private student loans can be considered after exhausting federal aid options. They can bridge the gap between the remaining cost of attendance and the amount covered by federal loans. Private loans are based on creditworthiness and may require a cosigner. They often lack the benefits of federal loans, such as income-driven repayment plans and loan forgiveness programs.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

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).

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.

SOISL-Q225-044

Using retirement funds to pay for college may seem like a convenient solution when faced with the high cost of higher education, especially for parents looking to support their children. However, tapping into these savings can have significant financial consequences.

While certain retirement accounts, like IRAs, allow penalty-free withdrawals for qualified education expenses, the funds are often still subject to income tax and may reduce long-term retirement security.

Understanding the pros and cons can help families make informed decisions about whether to use retirement savings for college costs.

Pros of Using Retirement Funds to Pay for College

If you already have the money saved up, there can be some upsides to taking money out of your retirement funds so that your child won’t need to take out student loans.

May Avoid an Early Withdrawal Penalty

If you have an individual retirement account (IRA), taking an early withdrawal typically results in income taxes on the withdrawal amount plus a 10% penalty. However, if you withdraw funds for qualified higher education expenses, the 10% penalty is waived.

That said, the withdrawn funds will still be considered taxable as income. Also, this tax break does not apply to 401(k) accounts. But if you roll over your 401(k) into an IRA, then you would be able to withdraw the funds from the IRA and avoid the penalty.

May Avoid Taxes Altogether

If you have a Roth IRA, you can withdraw up to the amount you’ve contributed to the account over the years without any tax consequences at all.

Paying Interest to Yourself With a 401(k) Loan

In addition to allowing you to take early withdrawals, some 401(k) plans also let you borrow from the amount you’ve already saved and earned over the years.

If you borrow from a 401(k) account, that money won’t be subject to taxes the way an early withdrawal would. Also, when you’re paying that loan back, the money you pay in interest goes back into your 401(k) account rather than to a lender.

Drawbacks of Using Retirement Funds to Pay for College

Before you raid your retirement to pay for your child’s college tuition, here are some potentially negative aspects to consider.

May Be Negative Tax Consequences

Even if you manage to avoid being charged a 10% early withdrawal penalty on your retirement account, some or all of the money you withdraw from a retirement account may be considered taxable income. Depending on how much it is, you could face a larger-than-usual tax bill when you file your tax return for the year.

401(k) Loan Repayment Can Be Affected by Your Job Status

If you take out a large loan from your 401(k), then leave your job, you may be required to pay the loan in full right then, regardless of your original repayment term. If you can’t repay it, it’ll likely be considered an early withdrawal and be subject to income tax and the 10% penalty.

You May Have to Work Longer

Taking money out of a retirement account not only lowers your balance, but it also means that the money you’ve withdrawn is no longer working for you.

Due to compounding interest, the longer you have money invested, the more time it has to grow. But even if you replace the money you’ve taken out over time, the total growth may not be as much as if you’d left the money where it was all along.

Alternatives to Using Retirement Funds to Pay for College

While you can use retirement funds to pay for college, there are other options to consider, too.

Scholarships and Grants

One of the best ways to pay for a college education is with scholarships and grants, since you typically don’t have to pay them back.

Check first with the school that your child is planning to attend (or is already attending) to see what types of scholarships and grants are available.

Then, make sure your child fills out the Free Application for Federal Student Aid (FAFSA®). The information provided in the FAFSA will help determine his or her federal aid package, which typically includes grants, federal student loans, and/or work-study.

Finally, you and your child can search millions of scholarships from online scholarship databases. While your child may not qualify for all of them, there may be enough relevant options to help reduce that tuition bill.

Federal Student Loans

As mentioned above, filling out the FAFSA will give your child an opportunity to qualify for federal student loans from the U.S. Department of Education.

These loans have low fixed interest rates, plus access to federal benefits, including loan forgiveness programs and income-driven repayment plans.

With most federal student loans, there’s no credit check requirement, so you don’t have to worry about needing to cosign a loan with your child.

Parent PLUS Loans

If you’re concerned about the effect of student loan debt on your child, you can opt to apply for a federal Parent PLUS Loan to help cover the costs of college.

Keep in mind that the terms aren’t usually as favorable for Parent PLUS Loans as they are for federal loans for undergraduate students. The interest rates are currently higher, and you may be denied if you have certain negative items on your credit history.

Private Student Loans

If your child can’t get federal student loans, is maxed out on loans, or has pursued all other options to no avail, private student loans may be worth considering to make up the difference.

To qualify for private student loans, however, you and/or your child may need to undergo a credit check. If your child is new to credit, you may need to cosign to help them get approved by being a cosigner — or you can apply on your own.

Private student loans don’t typically offer income-driven repayment plans or loan forgiveness programs, but if your credit and finances are strong, it may be possible to get a competitive interest rate.

Recommended: A Complete Guide to Private Student Loans

The Takeaway

Using retirement funds to pay for college is one way to help your child, but you may not want to risk your future financial security. Take the time to help your child consider all of the options to get the money to pay for school.

Options to pay for college include cash savings, working a part-time job, scholarships, grants, federal student loans, and private 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.

FAQ

Can I use retirement funds to pay for my child’s college education?

Yes, it’s possible to use retirement funds, such as those from an IRA or 401(k), to pay for college expenses. However, this decision carries potential tax implications and penalties, depending on the type of account and how the funds are withdrawn.

What are the tax implications of withdrawing from an IRA for college expenses?

Withdrawals from an IRA for qualified higher education expenses can avoid the 10% early withdrawal penalty. However, the amount withdrawn is still considered taxable income, which could impact your tax bracket and financial aid eligibility.

What are the alternatives to using retirement funds for paying college tuition?

Alternatives include applying for scholarships, federal student loans, Parent PLUS Loans, and private student loans. These options can help cover college costs without compromising your retirement savings.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

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).

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.

SOISL-Q225-043

Whether you’ve been turned down for a private student loan or you’re applying for the first time, it’s important to understand how a cosigner can impact your loan application.

Having a cosigner on a student loan is a bit like a letter of recommendation to get into college. A cosigner can reassure the bank or lender that you are capable of repaying the loan. A cosigner is not always required for student loans, such as with most federal student loans. Depending on a student’s financial history, employment, and what type of loans they’re applying for, the likelihood of requiring a cosigner will vary.

Read on to learn more about what a cosigner is and when it may make sense to add one to your student loan application. This article will also discuss some of the risks involved with being a cosigner, and some tips on how to ask someone to be a cosigner on a student loan.

What Is a Student Loan Cosigner?

A cosigner is a person who agrees to repay the loan if a borrower defaults or is otherwise unable to pay their debt. Adding a cosigner to a student loan application could help the primary borrower secure a lower interest rate, depending on the cosigner’s financial and credit history.

When a cosigner takes on a student loan with the borrower, they’re assuming equal responsibility to repay the loan. Any negative actions on the loan, such as a late payment or defaulting, could harm the cosigner’s credit.

How to Decide If You Need a Cosigner on a Private Student Loan

Before deciding whether you need a cosigner on a private student loan, you’ll want to fill out the Free Application for Federal Student Aid (FAFSA®). This will determine how much aid you’ll receive, and help you and your family determine how much of a gap you’ll need to fill with other sources of funding.

Once all other options are exhausted, students could look into private student loans and consider a cosigner. When considering a cosigner, there are several factors to evaluate, including the type of loan you’ll be applying for, your credit history, credit score, income, and any history of missed payments. Continue reading for a more in-depth discussion of these factors.

1. What Type of Student Loans Are Being Considered?

The type of loans you’re applying for may affect your need for a cosigner.

Federal Student Loans

For the most part, federal loans do not require a credit check or a cosigner. The federal loan types that do not require a cosigner include:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct Consolidation Loans

The exception is a Direct PLUS Loan, which does require a credit check. Borrowers interested in a Direct PLUS Loan may need an “endorser” for the same reasons they may need a cosigner for a private student loan: if their credit history and other financial factors are lacking.

A Direct PLUS Loan can help graduate students and parents of undergraduate students pay for the entire cost of school attendance, minus any other financial aid. Direct PLUS Loans are the only federal student loans that look at an applicant’s credit history, thus the potential need for an endorser.

An endorser is the equivalent of a cosigner — they agree to repay the Direct PLUS Loan if the borrower defaults or is delinquent on payments.

Private Student Loans

IIf an applicant doesn’t meet the lending requirements on their own, they might need a cosigner to obtain any private student loan. To qualify for a private student loan, you typically have to check more boxes regarding financial history than you would for a federal student loan.

Having a cosigner on a private student loan is incredibly common. More than 90% of private student loans for undergraduates require a cosigner, and more than 75% of graduate and professional students need a cosigner for their student loans.

Recommended: A Complete Guide to Private Student Loans

Both Federal and Private Student Loans

Once a student has a full understanding of the financial aid they qualify for after submitting their FAFSA, they can determine if federal student loans and other federal aid like scholarships and grants will cover the cost of their education or if they need to supplement the amount with a private student loan. While the borrower might not need a cosigner for federal loans, they might require one for private student loans they might take out.

2. Are You an Undergraduate or Graduate Student?

The necessity of a cosigner may vary depending on whether a person is applying for graduate or undergraduate private student loans.

Undergraduate Student

Undergraduates are generally more likely to need a cosigner on their private student loans because they typically haven’t established a lengthy credit history. Without an established credit history, there is no track record for lenders to evaluate. In addition, undergrads might not have a steady income, which can also affect whether they are approved for a loan without a cosigner.

Graduate Student

The type of schooling a person is pursuing won’t have an impact on the need for a cosigner. However, a person’s credit history and income will still factor into the decision.

3. How Does Your Credit Score Factor into the Decision?

Most private lenders will look at an applicant’s credit score (among other factors) to determine eligibility. Having a lower credit score may make it more challenging to get a loan without a cosigner.

FICO® Scores (the most common credit scores used by lenders and financial institutions) range between 300 and 850. If a person wants to check their score, many websites offer free credit scores or credit score monitoring (just be sure to read terms and conditions carefully).

Ultimately, it’s up to each individual lender to consider the credit score and other financial factors before approving a loan, and every lender has different criteria.

4. How Long Is Your Credit History?

A person’s credit history gives lenders a sense of their ability to pay on time, or ability to pay off debt in full. The length of a person’s credit history makes up about 15% of their FICO Score.

Length of credit history is determined by average age of accounts (AAoA). Lenders take the lifespan of a person’s accounts and divide by the number of accounts that person holds. A potential borrower can determine this number by figuring out how long they’ve had each account in their credit history, then dividing by the number of accounts.

The real sweet spot for credit history comes at the seven-year mark. From that point, early negative marks on accounts might have faded away. It shows lenders that a borrower can pay loans and maintain accounts over time.

There are a number of factors at play in lending decisions, but a short credit history could mean that adding a cosigner is beneficial.

5. What Is Your Employment Status?

Lenders want to be sure that you can repay your debts, so they’ll generally also evaluate an applicant’s income.

Employed Full-Time

Generally, if a person is employed full time at a salaried job, it shows lenders they have the capability to repay the loan they’re borrowing. Lending requirements vary based on the lender, but having an established income history may help an applicant avoid needing a cosigner.

Employed Part-Time

While part-time employment can still be beneficial for a loan application, it’s possible that a cosigner might help boost the application. The applicant’s debt-to-income ratio will come into play — that is, how much debt a person owes (credit cards, rent, other bills) divided by the income they earn before taxes and other deductions.

Of course, all lender requirements vary, but significant, consistent income can factor into whether the applicant will still need a cosigner.

Only a Student (Not Employed)

If an applicant is not employed, lenders may be more inclined to approve a loan if there’s a cosigner who is able to show stable income.

6. Have You Ever Declared Bankruptcy?

Lenders can and do consider all aspects of a person’s financial history before granting a loan, bankruptcy included. Declaring bankruptcy negatively affects a person’s credit score, which private lenders pay close attention to with a loan application. A bankruptcy filing can stay on a person’s credit history for a decade.

Bankruptcy filings can affect a credit score in a number of ways, and depending on how long ago it took place, the effects on a person’s score will vary.

7. Have You Defaulted on a Loan?

The terms of each loan are different, but after a period of nonpayment, the loan enters default. Defaulting on a loan stays with a person’s credit history for at least seven years and typically negatively affects their credit score.

If a person has defaulted on a previous loan, they’ll likely need a cosigner on their student loan to potentially improve their chances of approval.

Recommended: Defaulting on Student Loans: What You Should Know

8. Have You Ever Missed a Payment?

On-time payments each month can help show lenders that a person is a responsible borrower. Missing payments or consistently making late payments can have a negative impact on a person’s credit score. Payment history accounts for approximately 35% of an individual’s FICO Score.

Consistently missing payments that have affected a person’s FICO Score might cause a potential lender to require a cosigner. It could also cause concern for a potential cosigner, so students might want to keep that in mind.

A solid history of on-time payments shows a lender that a person is a responsible candidate for a loan and might not need a cosigner.

Choosing a Cosigner

As stated above, the majority of private student loan borrowers have a cosigner. But not all cosigners are built the same, and choosing the right person to cosign a loan could be as important as the terms of the loan itself.

A cosigner should not only have a strong financial history, but also a strong relationship with the applicant. A cosigner might be a parent or blood relation, but they don’t have to be. A cosigner ideally has a stable financial history and a relationship to the applicant where they feel comfortable discussing money.

Asking Someone to Be a Cosigner

There’s a common misconception that cosigning on a loan is as easy as signing a contract, but it actually means more than that. When a person asks someone to be their cosigner, they shouldn’t shy away from discussing the challenging topic.

It may make sense to talk about worst-case scenarios with a cosigner, and make it clear it would be their responsibility to take on the payments if you default. Discuss how you could repay the cosigner in the event that you can’t make payments.

Risks of Cosigning

Beyond the worst-case-scenario discussion, cosigners should know the additional risks they take on when cosigning a student loan:

•   Credit score. Cosigning a loan will affect a person’s credit score, since they’re taking on the debt as well. Even if the borrower makes on-time payments and doesn’t default, the cosigner will see a change in their credit score by taking on the additional debt. On the upside, though, it could potentially benefit their score.

•   Liability. If the borrower defaults on the loan, it becomes the cosigner’s responsibility to pay for it. A lender can come to collect from the cosigner, seizing assets and garnishing paychecks to cover missed payments.

However, the cosigner doesn’t need to stay tied to the loan forever. Private student loans may have a cosigner release policy in place. After a duration of on-time payments and additional paperwork, a lender may release the cosigner from the loan, leaving the borrower on their own.

It might sound easy, but a cosigner release isn’t a guarantee and not all private loans will offer this option. Read the terms of your loan carefully to understand the requirements for cosigner release.

The Takeaway

Like every college application, each loan application is a little different. Certain aspects of a person’s credit history or employment might make them more compelling to a lender. Other elements, like late payments or a limited credit history, might make a person less compelling to lend to.

Adding a cosigner to a private student loan is common and can improve your chance of approval, sometimes even with a lower interest rate than if you applied on your own.

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.

FAQ

What is a student loan cosigner, and when might I need one?

A student loan cosigner is someone, typically a parent or close relative, who agrees to share legal responsibility for repaying your loan. You might need a cosigner if you’re applying for a private student loan and have limited credit history or income, as their strong financial background can improve your chances of approval and potentially secure a lower interest rate.

Do federal student loans require a cosigner?

Most federal student loans, such as Direct Subsidized and Unsubsidized Loans, do not require a cosigner or a credit check. However, Direct PLUS Loans, available to graduate students and parents, do require a credit check and may necessitate an endorser (similar to a cosigner) if the applicant has adverse credit history.

What are the benefits and risks of having a cosigner on a private student loan?

Having a cosigner can increase your chances of loan approval and help you secure a more competitive interest rate. However, it’s important to note that the cosigner is equally responsible for repaying the loan. If you miss payments or default, it can negatively impact both your and your cosigner’s credit scores, and the cosigner may be required to repay the loan.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

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).

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.

SOISL-Q225-042

Many students rely on student loans to help them pay for college. In addition to charging interest, student loans may also have other fees associated with them. Fees charged may include origination fees — a fee charged by the lender for processing the loan — or late payment fees.

When students sign up for loans or are in the midst of repayment, they may not even be aware of fees that accompany many private and federal student loans. But by learning about these fees, they can better prepare themselves financially and avoid headaches.

Keep reading to learn more on student loan fees and how you may be able to avoid them.

What Are Student Loan Fees?

Student loan fees are additional charges that may be applied when borrowing or repaying student loans. They may include:

Student loan fees may include:

•   Origination fees

•   Late payment fees

•   Returned-check fees (aka insufficient-funds or non-sufficient-funds fees)

•   Loan collection fees

•   Forbearance and deferment fees

Can a Student Loan Fee Be Waived?

For the most part, student loan fees cannot be waived. In some instances, lenders may be willing to waive late payment fees for borrowers who have not previously made a late payment. Fees and policies may vary by loan type and lender, so contact your lender with specific questions. Continue reading for an explanation of different types of fees that may be associated with a student loan.

Origination Fees

Origination fees cover the cost of processing the loan. They are typically a small percentage of the loan amount.

How Are Student Loan Origination Fees Assessed?

Student loan origination fees are charged as a percentage of the loan amount. Federal student loans have an origination fee, and the information will be included in the Master Promissory Note. The origination fee is deducted from the amount borrowed, so when you receive the loan, it will actually be for less than the amount you borrowed.

Private student loans may or may not charge an origination fee; the policy will depend on the lender.

How Much Are Student Loan Origination Fee?

For federal student loans, the origination fee (also known as disbursement fee) is dependent on the loan type. Direct Subsidized and Unsubsidized Loans disbursed between October 1, 2020 and October 1, 2025 have a 1.057% origination fee. During the same timeframe, Direct PLUS Loans have a ​​4.228% origination fee.

The origination fee on private student loans will vary based on the lender, and not all private lenders charge an origination fee. Review the terms and conditions closely and contact your lender with any questions.

Recommended: Avoiding Loan Origination Fees

Late Payment Fees

Making a loan payment past the due date for a federal student loan can result in a late fee. After 30 days, the late fee may be up to 6% of the loan amount due. Review your Master Promissory Note or contact your loan servicer with questions.

The late fee for a private student loan depends on the lender and loan program. Some private student loan lenders do not charge late fees.

Returned-Check Fees

If a borrower pays using a check that bounces, the student loan servicer could charge a returned-check fee.

Loan Collection Fees

If a borrower defaults on a loan by not making payments for a certain amount of time (270 days for most federal student loans), the loan may be placed with a collection agency and be subject to loan collection fees. Any fees incurred will be in addition to the outstanding principal balance, interest, and fees.

Private student loan companies may charge even higher loan collection fees. Generally, private student loans also enter default sooner than federal student loans. The default period is described in the loan contract.

Forbearance and Deferment Fees

Borrowers who cannot make payments temporarily can request student loan forbearance or deferment. Typically, loan holders can avoid a fee, but they will need to contact their loan provider.

Forbearance and deferment are available for most federal student loans. Private lenders are not obligated to offer either program, but may offer some forms of deferment. If you are struggling to make payments on a private student loan, contact your lender to evaluate the options available to you.

Federal Student Loan Fees

When students want to apply for a loan, they can do it through the federal government or a private company, depending on their circumstances. The loan providers charge different types of fees.

Students will pay an origination fee for a federal student loan. As mentioned previously, for Direct Subsidized and Unsubsidized Loans, the fee is 1.057% of the loan amount. For Direct PLUS Loans (including Grad PLUS and Parent PLUS Loans), the fee is about 4.228% of the loan amount.

A late payment fee will typically be charged within 30 days after the payment is due. The late fee could be up to 6%. At that rate, if your monthly minimum payment is $250, your fee would be $15.

Private Student Loan Fees

Private lenders may not charge origination fees, though there may be an origination fee for a specialty loan, like a loan for medical school.

Some lenders charge late fees — generally a percentage of the late payment amount or a flat fee. They also typically charge for returned checks.

Additionally, most private student loan companies charge a fee for forbearance, a flat fee determined by the lender.

Collection fees will vary from lender to lender. If there is a collection fee on a private student loan, it will typically be included in your loan agreement.

How to Avoid Student Loan Fees

If students need to take out private or federal student loans, they may be able to avoid some of the fees (with the exception of origination fees for federal student loans). Ways to avoid student loan fees include:

Paying on Time

Paying on time is always recommended, not only to avoid late fees but to keep a credit report healthy. To avoid late fees, returned-check fees, and collection fees, borrowers can set up automated payments from a bank account. Otherwise, they can set up reminders on their phones and calendars that go off when their payments are about to come due.

Communicating with Your Lender

In terms of deferment fees, borrowers having trouble making payments on time can call their student loan servicer and ask for extensions or other options so that they don’t go into default.

Students shouldn’t be afraid to reach out to their loan servicer as soon as they can’t make a payment.

Choosing No-Fee Lenders

Some private lenders offer student loans with no origination, application, or late payment fees. Comparing lenders and reading the fine print can help you steer clear of unnecessary charges.

Paying for College

Paying for college may require a combination of resources. One of the first places for students to start their financial aid journey is by filling out the Free Application for Federal Student Aid (FAFSA®) every year. This application allows students to find out if they are eligible for federal financial aid, including federal student loans, grants, scholarships, and work-study. Additional ways to pay for college include private student loans and personal savings.

Private Student Loans

Private student loans are offered by private lenders such as banks, credit unions, and other financial institutions. To apply, potential borrowers will need to file applications with individual lenders. The interest rate and loan terms are generally determined based on the applicant’s personal information, such as their income and credit score. It’s generally worth shopping around to find the best rate and loan terms for your personal situation.

Private student loans can be helpful tools to pay for college. However, when comparing private student loans vs. federal student loans, it’s important to note that private student loans lack the borrower protections afforded to federal student loans — things like income-driven repayment plans or deferment options. For this reason, they are generally considered an option after all other financial resources have been depleted.

Personal Savings

Some students may have the money saved to go to college, or someone in their family might be able to finance their education. For instance, perhaps their parents or grandparents opened a 529 savings plan for them when they were younger and funded it with money to put toward college.

Grants

Grants are a type of funding that typically don’t need to be repaid. Grants are generally awarded based on financial need and can be found from sources such as the federal or local government, college, or even nonprofit organizations.

Each grant application may have different application and eligibility requirements so be sure to read the instructions closely.

Scholarships

Scholarships are another type of aid that recipients are not required to repay. Often, they are awarded based on merit, though they can be awarded based on other criteria, as well.

Students can look for scholarships in schools, nonprofit and community organizations, companies, and more.

Take a look at your school’s financial aid website to see what scholarships are available. There are also online databases that aggregate information on available scholarships, as well.

The Takeaway

Student loan fees, like an origination fee or late payment fees, can increase the total cost of the loan. The types of fees on student loans will vary based on the loan type. Federal student loans, for example, charge an origination fee which varies based on the type of federal loan, and there are late payment fees associated with payments that are 30 days late or more.

Private loans may or may not have an origination fee or late payment penalties. The policies will vary by lender.

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.

FAQ

How much is the origination fee for student loans?

The origination fee on a student loan will likely vary depending on the loan type and lender. For federal student loans, the origination fee from October 1, 2020 through October 1, 2025 is 1.057% for Direct Subsidized and Unsubsidized Loans and ​​4.228% for Direct PLUS Loans.

The origination fee on a private student loan will vary by lender.

Do unsubsidized student loans have an origination fee?

Yes, unsubsidized loans through the federal government’s Direct Loan Program do have an origination fee of 1.057% for loans disbursed between October 1, 2020 and October 1, 2025.

Can a student loan origination fee be waived?

Federal student loans have an origination fee and it’s unlikely to have this fee waived. Some private student loans may not charge an origination fee and lenders that do may be willing to negotiate with borrowers.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

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).

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.

SOISL-Q225-041