Breaking news! The president has made an announcement regarding federal student loan forgiveness.
Refi now and save money before rates rise again. Learn more

What Are State Student Loan Programs?

By Krystal Ndoni · March 09, 2022 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

What Are State Student Loan Programs?

Congrats! Your school is offering you a scholarship and grant. And, your parents are pitching in. You’ve even been awarded some federal grant aid. But it doesn’t cover the entire bill.

If this is you, loans are an option. Taking on debt is not your first choice — but a college education can be an investment in your future. You can earn potentially up to $1 million more with a bachelor’s degree than with only a high school diploma.

State student loan programs are an option to consider. They are loans provided and guaranteed by state government agencies. The loan programs are unique to each state and require specific eligibility requirements, such as state residency, to qualify. Though the institutions are non-profits or state-run, the loans are considered private.

State Student Loan Programs, Explained

State student loans are offered by state government agencies. They generally have similar requirements and benefits to federal loans: low, fixed interest rates and flexible repayment plans. Some even offer subsidized (interest-free) loans and a deferred repayment plan. Though some states may waive a credit check, other lenders do require it. Students without a solid credit history may need to consider applying with a cosigner.

State student loans agencies are also unique because they are run not-for-profit and benefit the local community. As a local entity, they tend to be more mission-minded and offer more personable customer service.

These programs may offer a strong alternative for students who have exhausted financial aid and federal student loans.

Recommended: Types of Federal Student Loans

What Are State Student Loan Programs?

State student loan programs vary in scope by state and not all states offer this option. Typically, a state’s department of postsecondary education is responsible for managing the loan program.

Also, terms and eligibility requirements differ from state to state. For instance, Georgia state offers the “Student Access Loan” through the Georgia Student Finance Authority. It’s a 1% fixed rate loan offered exclusively to Georgia residents.

Eligibility is strict, however. Prospective or current students must be enrolled in an institution from one of three university systems in Georgia (University System of Georgia, Technical College System of Georgia or Private postsecondary institutions). A maximum of $8,000 can be awarded per year: up to $36,000 in a college career.

Applying for State Student Loan Programs

Many state student loans’ first step is filling out a Free Application for Federal Student Aid (FAFSA®). According to the U.S. Department of Education, some programs are first-come, first-serve — so it may help to apply early.

To get started, find your state’s department of postsecondary education. The U.S. Department of Education maintains a list of each state’s agency . These departments will be your direct sources of information on loan programs, eligibility, and how to apply. They can direct you to state student loan programs, if any are available.

It’s best to contact your department first for the latest programs. But the Education Finance Council has a comprehensive list of all participating state agencies. It may also be helpful to connect with your financial aid office, as they may have insight into state and college-specific aid opportunities.

If your state does not offer student loans — consider out-of-state agencies that accept out-of-state students like the Massachusetts Educational Financing Authority (MEFA). Massachusetts’ state legislature created MEFA in 1982 to provide low-cost finance alternatives for families and students. They offer undergraduate and graduate loans with fixed rates as low as 3.75% to 5.75% APR, as of February 2022.

Recommended: FAFSA 101: How to Complete the FAFSA

What Can State Student Loan Programs Be Used For?

Borrowers use state student loans for college programs, whether professional, undergraduate, or graduate.

Your “cost of attendance” (COA) is a federal term that defines expenses from your higher ed programs. They can include tuition, room, food, books, and supplies.

State student loans should not be used for sorority and fraternity dues, vacation travel, or non-discretionary dining. Generally, it’s wise to use the minimum required to pay for educational needs in order to pay lower interest fees after graduation.

Tuition

Tuition is the price of the actual education. It covers the cost of your classes and varies by the amount of credits required in your major. Charges will also vary depending on whether the school is public or private, or if students are in-state.

Room & Board

Room and board refers to housing and meals provided on a college campus. Types of housing include dorms or university-owned apartments.

Some students cut substantial costs by living at home and commuting to school. If living at home is not an option, off-campus rentals can also be covered by state student loans. This option may be cheaper, especially if roommates split the rent.

Recommended: Using Student Loans for Living Expenses and Housing

School Supplies & Equipment

Books, laptops, and other educational equipment are also part of COA. It can cover general school items such as pens and notebooks. And, equipment includes degree-specific equipment and gear, such as Adobe software for graphic design majors or cameras for photography students.

Consider buying second-hand books or renting e-books. E-books in general are cheaper than physical textbooks.

Transportation

If your classes are not walking distance — COA covers all local transportation costs such as car, taxi, and public transit. Examples are monthly train passes or gas for your car. Loans cannot be used to purchase a vehicle.

Personal Expenses

These expenses cover daily needs such as toiletries, groceries, laundry, haircuts, and other personal matters while a college student. They can also cover your phone and internet bill.

Dependent Care Expenses

Childcare is included in COA. This includes daycare or babysitters. Determine your aid amount by the number and age of dependents, as well as hours of care needed.

Other Costs Associated with Schooling

Miscellaneous expenses are covered too. Examples might include study abroad programs and special needs equipment. COA also covers general campus fees such as orientation fees, student social activity fees, health insurance fees, and more.

Recommended: I Didn’t Get Enough Financial Aid: Now What?

State Loan Programs vs Private Student Loans

State student loan programs have minor differences from private student loans.

Benefits to state student loans may include a more competitive interest rate or a deferred payment plan. Some programs offer one interest rate for everyone — regardless of credit score. This means everyone accepted into the program is charged the same interest rate regardless of credit history. Minnesota’s Office of Higher Education, for example, offers one 4.85% fixed rate or 2.2% variable rate for all borrowers. Furthermore, the Alaska Commission on Postsecondary Education allows borrowers to defer paying off student loans six months after graduation. Private lenders typically have higher interest rates that are generally determined based on the applicant’s credit history and income, among other factors. Also, private loans may not have deferred repayment plans.

State loan programs usually have a maximum borrowing amount for students. For instance, Georgia’s program awards a maximum of $8,000 per year — while Minnesota’s program awards up to $20,000 per year. Private lenders generally have no cap.

State college loan programs have more strict eligibility requirements for borrowers. The above-mentioned state agencies in Georgia and Minnesota lend only to in-state residents. Georgia has even stricter policies: the schools must be in-state. Alaska’s program however, allows Alaskan residents to use funds for out of state tuition.

Lastly, state student loan programs are not available in every state — whereas there are several private lenders to choose from nationally.

Explore Private Student Loans with SoFi

If you’re short on college cash with financial aid and family contributions, a private student loan can cover the difference. Because they lack the borrower protections offer to federal loan borrowers, such as deferment options, they may be an alternative to consider when all other options have been exhausted.

SoFi’s private student loans are available for undergraduate and graduate students, or their parents. Plus the loans have no fees. Borrowers are also able to choose from four flexible repayment plans.

Students can choose to defer payments up to six months after graduating school, make interest-only repayments, or pay immediately. And, we offer a unique feature that releases co-signers from loan obligations after 24 on-time payments.

Interested in financing your education with a SoFi private student loan? Find out if you qualify within minutes.

FAQ

What are state student loans?

State student loans are non-federal funds offered via U.S. state higher education offices. They generally offer lower interest rates and various benefits to residents. Some state agencies lend nationally.

Are state student loans offered through the government?

State student loans are offered through state-level government agencies — not national (federal) agencies.


Photo credit: iStock/Nelson_A_Ishikawa

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. 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. SoFi Lending Corp. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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.
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.
SOPS1221046

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender