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An income share agreement (ISA) is a type of college financing in which you repay the funds you receive using a fixed percentage of your future income. While ISAs can be useful for some students who lack other funding options, it’s important to fully understand how these agreements work, since you can potentially end up owing significantly more than you borrow.

Read on for a closer look at income share agreements, including their pros and cons, who might consider them, and how they compare to other types of college financing.

What Is an Income Share Agreement?

With an income share agreement (ISA), you receive money to pay for college and contractually agree to pay it back using a fixed percentage of your post-graduation income for a set period of time. ISAs are offered by some colleges and through several private lenders.

The income percentage and terms of an ISA will vary depending on the lender. Typically, the repayment percentage will range between 2% and 10% of the student’s future salary, and terms can be anywhere from two to 10 years.

Unlike other types of student loans, ISAs do not accrue interest. However, students commonly end up paying back more than the original amount that they borrowed.

How Income Share Agreements Work

Typically, you start repaying an ISA after you leave school and pass a specific income threshold, often $30,000 to $40,000 per year. If you earn less than the threshold in any month, you can waive your requirement payment that month. Some ISAs will count months in which you earn less than the minimum salary toward your repayment term, while others will extend the length of your loan.

You can typically exit your ISA at any time, provided you’re willing to pay the maximum repayment cap for your plan upfront.

With an ISA, your payment rises when your salary rises. However, the repayment term and total repayment amount are usually capped. The cap is the most you’ll have to repay under your ISA. With many plans, though, the cap can be as high as two (or more) times what you borrowed.

Income Share Agreement Example

To illustrate how an income share agreement might work, let’s say you sign an ISA agreement for $10,000 with the maximum number of monthly payments of 88, an income percentage of 4%, an income threshold of $30,000 (or $2,500 per month), and a payment cap of $23,000.

In this case, you would pay 4% of your income for any month you earn at least $2,500 and continue to do so until you make 88 payments or pay a total of $23,000 — whichever comes first. If you only earn the minimum, you will end up paying back $100 a month for 88 months for a total repayment of $8,800 (which is less than what you borrowed). However, if you make $55,000, you’ll pay $183 per month for 88 months, for a total repayment of $16,133, which is $6,000 more than you borrowed.

Keep in mind that the income percentages, terms, and repayment caps can vary considerably from one ISA provider to the next.

Recommended: How to Pay for College With No Money Saved

The Advantages of Income Share Agreements

Some of the pros of income share agreements include:

•   ISAs typically do not require a cosigner or good credit, so they can be easier to qualify for than other types of financing.

•   Payments won’t exceed a certain percentage of your monthly income.

•   Your ISA contract could expire years earlier than a traditional student loan.

•   Schools that offer ISA programs are incentivized to help you earn the highest paying jobs.

•   Depending on your future income, you may end up paying less than you would pay with a traditional student loan.

Potential Pitfalls of Income Share Agreements

There are also some significant cons to ISA loans that you’ll want to keep in mind:

•   In some cases, the ISA provider will cap payment more than twice the amount you receive.

•   Unlike other types of student loans, there’s uncertainty regarding how much your loan will cost.

•   In many cases, an ISA could cost more over the long run when compared to federal or private student loans.

•   Income-driven repayment plans are already an option with federal student loans, and federal loans also offer the potential for student loan forgiveness.

•   ISAs are not widely available and may be restricted to certain majors or programs.

Who Should Consider An ISA?

Income share agreements can end up being costly, especially if you enter a high-earning field and the ISA has a high payment cap. However, you might consider looking at ISA if:

•   You’ve maxed out federal loan options but are unable to qualify for private student loans.

•   You have a poor credit score and would receive high rates on private student loans.

•   Your school offers an ISA with reasonable terms and a low payment cap.

•   You’re planning to earn a degree in a field that doesn’t have steep salary growth potential.

If these scenarios don’t apply to you, you’re likely better off using federal student loans to pay for higher education, or even private student loans if you have good credit. Before signing up, you’ll want to compare your options side by side and run the numbers to see which is the better deal.

Recommended: Private Student Loans vs Federal Student Loans

Considering Private Loans

You generally want to exhaust all your federal financial aid options before considering other types of debt, but if you’re looking to fill gaps in your educational funding, it may be worth considering private student loans before signing an ISA.

Private student loans are only offered through private lenders, and come with either fixed or variable rates. For borrowers with excellent credit, rates may be relatively low. Unlike federal loans, however, undergraduate private student loans often require a cosigner. The cosigner is an adult who agrees to take full responsibility for your student loans if you default. Cosigners are almost always required by private lenders since undergraduates have not had much time to develop a credit history.

If you expect to have a high salary after graduation and/or can qualify for a low rate on a private student loan, you could end up paying less than you would for an ISA.

Recommended: A Complete Guide to Private Student Loans

The Takeaway

An income share agreement, or ISA, is an agreement between the borrower and the school or a lender that states the borrower will receive funds to pay for college and then repay those funds based on a certain percentage of their future salary for a set amount of time.

While ISAs may sound like a different type of college funding, they are, essentially, loans. And in many cases, you will end up paying back significantly more than what you borrow.

Generally, you would only want to consider ISAs after exhausting any undergraduate federal student loans and aid available to you. It’s also a good idea to compare ISA offers with traditional private student loans before deciding on the best funding option for your situation.

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 an income share agreement?

An income share agreement (ISA) is a financial contract where a student receives funding for education in exchange for a percentage of their future income for a set period. It’s an alternative to traditional student loans, offering flexible repayment based on earnings.

Are income share agreements worth it?

Income share agreements (ISAs) can be worth it for students who need funding and prefer flexible repayment terms based on future income. However, they may be more costly in the long run compared to traditional loans, so it’s important to compare options and understand the terms.

Are income share agreements tax deductible?

Income share agreements (ISAs) are generally not tax deductible. Unlike student loans, payments made under an ISA are considered a share of income rather than debt repayment, so they do not qualify for the same tax benefits. Always consult a tax professional for personalized advice.

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-Q325-004

Money problems are pretty common. In fact, 73% of Americans say finances are their top source of stress in life, according to a 2025 survey by Capital One.^[1] So if you are feeling the pinch and worrying, you are not alone.

But that doesn’t mean you should live with the anxiety that a mountain of debt or low credit score can bring. Here, you’ll learn about the most common financial issues you may face, how to avoid money problems, and how to resolve them if and when they strike.

Why Are Money Problems Common?

There are many factors that contribute to money problems. Depending on your situation, you might be dealing with, among other factors:

7 Common Money Issues

Financial challenges can happen to anyone — whether you are younger or older, rich or living paycheck to paycheck. Here are some of the most common money issues that people come up against.

1. High Credit Card Debt

Credit cards can be a useful tool for disciplined consumers who are trying to build good credit. And there are several perks to paying with a card instead of cash, including convenience, purchase protections, and rewards programs.

But many Americans aren’t able to pay off their account balance every month. According to Transunion, the average household carried $6,580 in credit card debt at the end of 2024.^[2]

Thanks to high interest rates, items you charge on a credit card and don’t pay off right away end up costing quite a bit more. As of March 2025, the average annual percentage rate (APR) for credit cards was 28.70%.^[3]

The interest you’re charged on a credit card also compounds, which means interest is calculated not only on the principal amount owed but also the accumulated interest from previous pay periods.

While this kind of compounding is a positive thing for a high-yield savings account, it can be a real issue with your plastic. It means a credit card balance can grow exponentially, even if you pay the minimum every month. Add in late charges and the possibility that the interest rate could be increased on an overdue account, and it’s easy to see how consumers get into trouble.

2. A Low Credit Score

Carrying too much debt or failing to make credit card or loan payments on time may result in a lower credit score. A low credit score can make it harder to get a loan, such as a mortgage or a credit card. And even if an application is approved, the interest rate the lender offers may be higher than what’s available to borrowers with better scores. That higher interest rate can make it harder to make payments and keep up with other bills, which can, in turn, further hurt your credit profile.

A low credit score can also negatively impact your ability to get a job or rent an apartment. And, it can take years before negative factors like late payments, defaults, and collections are removed from credit reports.

3. Not Having an Emergency Fund

Setting money aside in an emergency fund may seem like a luxury for those who are struggling to meet everyday expenses. But a solid savings buffer can actually be even more important if you’re living on a tight budget.

Without an emergency fund, any unexpected expense that comes along — whether it’s a high medical bill, a car or home repair, or a temporary job loss — can throw you way off balance. As a result, you might need to use high-interest credit cards, retirement savings (which can trigger penalty charges), or other options that can add even more stress to a challenging situation.

“For the most part, you’ll hear that a healthy emergency fund should cover between three and six months worth of living expenses — which would include rent, mortgage, bills, food, and other essentials,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “And since you never know when an emergency might happen, it’s best to keep your fund relatively liquid.”

4. Spending More Than You Earn

Picking up a morning latte and grabbing lunch out may not seem like it could make or break your bottom line. But just $40 per week spent eating out will cost you $2,080 per year, which is money that could go toward an extra loan payment or a few extra car payments.

If you tend to make spending decisions on the fly (without any type of budget or financial plan in mind), it can be easy to blow through more money than you actually earn, and much harder to achieve your financial goals.

While the causes of overspending are varied, the habit is one of the most common reasons why people get caught in the debt trap. If you don’t have the cash to cover your expenses, you may rely on credit cards to get you through.

Once you start paying interest on your credit card balance, your monthly expenses go up. This can make it even harder to live within your means and, as a result, lead to more debt.

5. Facing Foreclosure

State foreclosure rates vary, but regardless of where you live, it can be a major concern for struggling homeowners, especially in tough economic times.

People can end up in foreclosure for any number of reasons, including financial mismanagement (buying too much house or choosing a loan payment they can’t afford), or uncontrollable events (such as a job loss or expensive medical condition).

The process is typically slow, but it can be daunting to imagine having to move, especially if it means taking children out of a school or neighborhood they love. And there can be long-lasting financial consequences, as well.

A foreclosure can have a significant effect on your credit, and it can stay on your credit record for years.

6. Student Debt

While getting a college degree can improve your earning potential, the cost of getting that degree continues to skyrocket. And so has student loan debt.

Recent statistics reveal that the average federal student loan debt balance is $38,375.^[4] As students leave college and enter the workforce, paying back that money can be a major challenge. Student loan burdens can lead to postponing certain milestones, including homebuying or having children, and saving for retirement.

Recommended: Average Student Loan Debt: Who Owes the Most?

7. Not Saving Enough for Retirement

According to a 2024 AARP survey, 20% of adults ages 50-plus have no retirement savings at all.^[5] While having no money in the bank for later life can make some people feel like, “Why even bother trying to save,” know that financial advisors stress that saving something is better than nothing.

Thanks to the magic of compounding interest (when the interest earned on your money gets reinvested and earns interest of its own), even putting just a small percent of your paycheck into a 401K or IRA each month can add up over time.

Recommended: How to Manage Your Money Better

Money Problem Solving

If you recognize that you have money problems brewing or in full force, here are some steps to solve the problem:

Identify the Issue

Though it may be tempting to hide from what is going on, digging in and exploring where your money is going (or isn’t going) is an important move. Is your credit card debt feeling insurmountable? Are your housing and food costs rising too steeply? Did a job loss or medical bill force you into a difficult financial position?

Figure out and face the facts so you can move forward.

Develop and Implement a Plan

Once you know the source (or sources) of your money stress, you are in a position to take action. In a moment, you’ll learn some important ways to take control of financial issues. These include budgeting and paying down debt.

But other specific moves may suit your situation, such as debt consolidation or refinancing student loans.

Seek Help

If despite digging into your money issues, you are feeling unclear of how to proceed or as if there isn’t a feasible solution, reach out for help. There are an array of experts who might be appropriate, from a Certified Financial Planner® professional to a low- or no-cost debt counselor.

How to Cope with Money Issues

If you’re dealing with money problems (or hoping to avoid any future setbacks), here are some money management strategies you may want to put into place.

Setting a Budget

People tend to cringe at the word “budget” because it sounds like work, but having a budget in place can help simplify your finances and improve your money mindset.

To create a monthly budget, you simply need to gather up the last several months of financial statements and receipts and then use them to figure out how much you’re bringing in (after taxes) each month, as well as how much you are spending on average each month.

If the latter exceeds the former, or is so close there’s nothing left over for saving, you may want to drill down deeper.

To see exactly where your money is going you may need to track your expenses for a month or two and then determine exactly how much is going towards nonessential (or discretionary) purchases, where you may be able to cut back.

You may also want to consider adopting the 50-30-20 budget rule. With this type of budget, half your take-home income goes towards needs (or essential expenses), 30% goes towards wants (nonessentials), and 20% goes towards your financial goals — such as debt repayment beyond the minimum, building an emergency fund, and saving for a home or retirement.

Knocking Down Debt

Reducing debt may seem like a tall mountain to climb, but using a systematic approach can help make the process more manageable.

One method you might consider is the snowball method. This involves paying as much as you can each month toward your smallest balance while making the minimum payment on all your other debts so your accounts remain in good standing. Once you’ve paid off that smallest debt, you move on to the new smallest balance and continue this process until you’ve paid off all your accounts.

Another approach you may want to consider is the avalanche method. With this strategy, you start by paying as much as possible toward the debt with the highest interest rate, while making minimum payments on all the others. Once that debt is paid off, you move to the balance with the next-highest interest rate, and so on.

As briefly noted above, debt consolidation is an option as well, perhaps with a personal loan or a student loan refinance.

The Takeaway

It’s common to face money issues throughout your life, particularly when you are just starting out. Some of the most common include overspending, being burdened by debt, not having a financial cushion for emergencies, and not putting enough away for retirement.

Whatever financial challenges you are facing, you may want to clearly assess the issue and then come up with a spending, saving, and debt repayment plan that can help you get back onto solid ground.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What are common money problems?

Common money problems include high-interest credit card debt, lower income, student loan debt, a low credit score, and overspending.

What do people struggle with most financially?

What people struggle with financially will vary from person to person, but debt, inflation, high cost of living, and lack of savings for emergencies and retirement are common issues.

What are 4 common investment mistakes?

Four common investment mistakes include not establishing a long-term plan, letting emotions guide your decisions, attempting to time the market, and not diversifying your portfolio.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Who is eligible for a Direct Deposit Bonus?

SOBNK-Q225-027

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

To help keep the lines of communication open, it can be a good idea to set up regular calls and do your best to support your child without nagging. If you maintain a strong connection without overdoing it, they might even divulge more of the good times, and you’ll be able to share in the full experience of their new adventure.

Here are some tips for parents on how to stay close with college students, even if they now live many miles away from home.

Tips for Communicating with College Kids

Be Their Ally

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

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

Recommended: College Freshman Checklist for the Upcoming School Year

Let Them Know They Can Talk to You

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

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


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

Utilize Technology

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

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

What to Talk About

Talking to your child will, of course, come naturally. However, it’s always nice to have some topics in your back pocket to refer to.

Academics

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

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

Play to Your Strengths

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

Finances and Budgeting

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

It can be a good idea to have an ongoing dialogue about student loans — including both federal student loans and private student loans — and educate them on how not to make their debt even higher.

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

As for budgeting, know that many young adults make financial mistakes in their early twenties. It’s okay — mistakes allow students to learn and adjust their habits moving forward.

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

Recommended: How Do Student Loans Work?

Future Plans

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

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

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

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

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

The Takeaway

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

In addition to providing advice and guidance, you may also be helping your child pay for school. If your financial aid package (which may include grants, work-study, and federal loans) isn’t enough to cover the costs, you might also consider private student loans. If your child hasn’t yet established much credit, you will likely need to be a cosigner. Or, you might consider a private parent student loan.

Just keep in mind that private loans don’t offer government-sponsored protections, like forgiveness or forbearance, that come with federal student loans.

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

FAQ

What are some ways I can maintain a relationship with my college-aged child?

To maintain a relationship with your child in college, stay connected through regular check-ins, use technology like video calls and messaging apps, be a supportive listener, encourage their independence, and respect their need for space and new experiences.

How often should you call your child in college?

You can aim to call your college-aged child once or twice a week to stay connected without being overbearing. This allows you to check in and offer support while respecting their newfound independence and busy schedule.

What is the best way to communicate with college students?

The best way to communicate with college students is through a mix of video calls, text messages, and emails. Use their preferred method, be flexible, and keep conversations brief and supportive to respect their busy schedule.

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-Q325-002

Going to college is an exciting adventure, but it can also be incredibly nerve wracking, especially as a college freshman. With so much new and unknown ahead of you, it’s easy to let the stress build.

Being prepared for what’s ahead could help alleviate some of the first-year worries. This checklist is filled with things that you can do to prepare for your freshman year, starting with things like filling out the FAFSA, getting your packing list and school supplies together, and preparing financially for your life on campus.

Checklist for Preparing for Freshman Year

Acclimating to life on campus can be a big transition. Fortunately, there are things you can do to smooth the way before you even arrive.

Registering for Classes

Registration will likely take place before you get to campus for the school year. Some schools have freshman register during orientation, which gives them the opportunity to connect with an on-campus advisor. Once enrolled, check out the syllabus for each class to help you gauge expectations and determine what books and supplies you’ll need.

Recommended: 5 Ways to Start Preparing For College

Order Books and Other Supplies

Once you’re registered for classes, you’ll likely have a good idea of the books and supplies you’ll need. Cut costs on college textbooks by ordering used copies or renting the book.

Touching Base With Your Roommate

If you’re going to be living with a roommate, it’s a good idea to reach out to them before you get to campus. Open the lines of communication so you can discuss things like who’ll bring what. This is someone you’ll probably be spending a lot of time with, so establishing a friendly relationship, setting roommate guidelines, and discussing how you’ll share expenses with your roommate are important.

Packing for College

Making your college feel like home may take some careful preparation. To create the ultimate college packing list, think of things you use regularly that you’ll need on-campus. This might include clothes, bedding for your mattress, towels, toiletries, and more. Some schools may have restrictions on certain items, such as candles, so read any guidelines provided by the residential life office at your school.

Don’t forget to pack the supplies you’ll need for classes — depending on your course of study, this may include things like books, a computer, a calculator, and lab safety equipment.

Preparing Important Documents

Make sure you have identification information like your driver’s license or passport. Make a copy of your health insurance card so you’re prepared in the event of any issues.

Filling Out the FAFSA

The Free Application for Federal Student Aid, better known as the FAFSA®, is the application students fill out each year to apply for federal financial aid, including grants, scholarships, work-study, and federal student loans. If you are a dependent student, the FAFSA will also generally require your parent’s financial information as well.

Some aid is awarded on a first-come-first-served basis, so it may be beneficial to submit your application as early as possible. Schools may use information from the FAFSA to determine awards for school-specific scholarships, too.

Understanding how much aid, and what types of aid you can expect, will be important as you craft a plan to pay for college. Some students may consider private student loans in the event that other funding streams, like savings, federal student loans, and scholarships aren’t enough to cover their tuition. While private student loans can help fill in any financial gaps, they don’t always offer the same borrower protections — like deferment or the option to pursue Public Service Loan Forgiveness — as federal student loans. As a result, they are generally only considered after all other sources of aid have been exhausted.

Recommended: How to Complete the FAFSA

Getting Your Finances in Order

As a college student, this may be one of your first steps toward financial independence. Here are a few tips to help you prepare for the financial responsibilities that await you on campus.

Opening a Checking Account

As a college student, you may be living away from home for the first time. Now that you’re starting to be independent, you may find the need to open a checking account of your own (if you don’t have one already).

Some colleges have banks on campus that make it easy and convenient for you to open a checking account. It’s worth comparing different banks and credit unions before you make your final decision. Look at fees, minimum balance requirements, ease of online or app use, and branch locations.

Tracking Your Spending

Creating a budget can help you stay on top of your spending. If you’ve never stuck to a budget before, there’s no time like the present. Begin by listing all your monthly income, whether it comes from a job, helpful parents, or both. Then list your expenses, like car insurance, a phone bill, or books for school.

Also include your “fun” money for things like dining out, shopping, or travel. If your expenses are more than your income, you’ll need to make adjustments. You can find budget spreadsheets online or convenient apps to keep track of your spending if you don’t want to start from scratch.

And remember, a budget isn’t set in stone. It’s a living document that is always changing based on your financial situation. Try your best and always look to improve it.

Looking Into Getting a Credit Card (and Handling It Responsibly)

Now that you’re on your way to adulthood, it may be worth starting to build your credit history. If you can be responsible with the credit card, having one in college is one way to help you establish a baseline for your credit history.

If you do open a credit card, it’s important to make an effort to pay your bills on time and in full every month. Once credit card debt starts to build, it can be difficult to get out from under it, so it’s wise to take steps to avoid it in the first place.

Responsibly using a credit card is one thing that can help you establish and build credit history. Whether it’s to buy a home or a new car, a better credit score could help potential borrowers secure more favorable loan terms.

When You Get to Campus

Hopefully, all your preparation will help streamline your college transition. These final few tips could help you find your footing at school.

Exploring Campus and the Surrounding Area

College is a whole new world. Take some time to walk around and explore the campus, and make sure to know where the dining halls and libraries are in relation to your dorm. As you explore the campus, map out where each of your classes are located. This may help mitigate some of your college nerves.

Venture off campus and check out the town. You may just find a cute cafe perfect for study sessions.

Connecting with Professors and Advisors

Your professors are there to teach and want you to succeed. Take a few minutes to get to know them and don’t shy away from office hours. Go often and early with any questions or concerns.

Finding Extracurriculars

Colleges usually have a variety of extracurricular activities and clubs for students to join. Visit any activity fairs and find the clubs that interest you. Maybe it’s working for the school TV or radio station, intramural soccer, or an acapella club. Getting involved on campus can be a great way to get to know new people and make friends.

Establishing a Routine

As a college student, you’re likely experiencing a ton of newfound freedom. While all this autonomy is exciting, establishing a routine that works for you is important. For example, if you find you are most productive in the morning, block that time for classes and any top priority assignments. Then a break for a quick workout or lunch, followed by some studying. In addition to studying and classwork, it’s important to create healthy habits and space for self-care.

Checking Your List and Following Your Needs

College is a time to get out of your comfort zone and challenge yourself. It’s a learning experience in every sense of the word. This college freshman checklist is just a starting point to help you get acclimated.

Don’t forget to check in on — and add to — your college checklist as you continue your education. It can be easy to get swept up in the excitement of college, but it’s important not to lose sight of your financial and professional goals. Committing to your financial health and literacy now will help you even after graduation. Skills like budgeting and networking will always be applicable.

The Takeaway

With these tips in mind, you can put together a personalized freshman year checklist. This may include things like filling out the FAFSA, registering for classes, connecting with your roommate, and packing for the move to college. Getting ready for freshman year might seem overwhelming at first, but breaking down to digestible action items may make it feel more manageable.

Part of preparing for freshman year is figuring out how you’re going to pay for college. Once you fill out your FAFSA and receive your award letter, you’ll know where you stand, and whether you need to seek out any additional sources of funding.

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 should I pack for freshman year of college?

For freshman year, pack essentials like bedding, towels, toiletries, a laptop, textbooks, a planner, comfortable clothing, a first-aid kit, and basic kitchen supplies. Don’t forget a few sentimental items to make your dorm feel like home.

How many towels does a college freshman need?

A college freshman typically needs two to three towels: one for daily use, one for backup, and an extra for guests or emergencies.

How much should I budget for college freshman supplies?

Budget around $500 to $1,000 for college freshman supplies, including dorm essentials and personal items. This can vary based on your specific needs and the cost of living at your college.

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).

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SOISL-Q325-001

A Direct PLUS Loan is a type of unsubsidized federal student loan for graduate students or parents of a dependent undergraduate student.

Direct PLUS Loans can help pay for education costs that aren’t covered by other types of financial aid. Because they have higher interest rates than other types of federal loans, it’s generally recommended that a student exhaust all of their other Direct Loan options before considering a Direct PLUS Loan.

As you plan how to pay for your education, here’s what to know about Direct PLUS Loans to decide if this option is right for you.

What Is a Federal Direct PLUS Loan?

After pursuing financial aid options that don’t need to be paid back (such as grants, scholarships, and work-study programs), many students take out federal student loans to help pay for the cost of school.

There are several types of federal student loans from the William D. Ford Federal Direct Loan Program. Direct Loans can be subsidized for undergraduate students with financial need — meaning that the federal government will pay the loan interest while a student is in school at least half-time and during a grace period after graduating or during a period of deferment.

Direct Loans can also be unsubsidized for both undergraduate and graduate students. With a Direct Unsubsidized Loan, the borrower is responsible for all of the interest that accumulates on the loan. These loans are not dependent on financial need, but there is a cap on the amount a student can borrow.

So what is a Direct PLUS Loan? Direct PLUS Loans can be made to graduate students or parents of dependent undergraduate students to help meet the remaining costs of school.

Types of Federal PLUS Loans

As mentioned, Direct PLUS Loans are unsubsidized federal student loans that two groups of people can apply for to help pay for higher education that isn’t covered by other types of financial aid: graduate and professional students or parents of a dependent undergraduate student.

When a Direct PLUS Loan is made to parents of an undergraduate student, it’s often referred to as a parent PLUS loan. When made to a graduate or professional student, it’s called a grad PLUS loan.

Keep in mind that PLUS loans are some of the highest interest loans offered by the government — significantly higher than federal loans offered directly to undergrads — so it’s worth it to pursue other federal options first.

Eligibility for Federal Parent PLUS Loans

Parents can qualify for a parent PLUS loan as the biological, adoptive, and in some cases, stepparent of a qualifying undergraduate student enrolled at least half-time. It’s important to note that a federal Direct PLUS Loan made to a parent borrower cannot be transferred to the child.

Both parent and child must be U.S. citizens or eligible noncitizens and meet the eligibility requirements for federal student aid.

Unlike other types of federal loans, Direct PLUS Loans consider your credit history, and the requirements state that the borrower must not have an adverse credit history.

Some borrowers with credit issues may still be able to qualify if they meet certain additional eligibility requirements, such as having an endorser on the loan. Another option is to file an appeal and provide documentation of extenuating circumstances related to the adverse credit history.

Eligibility for Federal Grad PLUS Loans

When a Direct PLUS Loan is made to a graduate or professional student, it’s commonly called a grad PLUS loan. To qualify as an individual student borrower, you must be enrolled at least half-time in an eligible program leading to a graduate or professional degree.

As with parent PLUS loans, the borrower must meet the eligibility requirements for federal financial aid and can’t have an adverse credit history.

Interest Rates on Federal PLUS Loans

Direct PLUS Loans have some of the highest interest rates of all federal student loans. For the 2025-2026 school year, the federal student loan interest rate is 6.39% for undergraduates, 7.94% for graduate and professional students, and 8.94% for parents. The interest rates, which are fixed for the life of the loan, are set annually by Congress.

For the 2025-2026 school year, the federal student loan interest rate is 6.39% for Direct Subsidized and Unsubsidized Loans for undergraduates, 7.94% for Direct Unsubsidized Loans for graduate and professional students, and 8.94% for Direct PLUS loans for parents and graduate or professional students.

Is the Federal Direct PLUS Loan Subsidized or Unsubsidized?

Direct PLUS Loans are unsubsidized federal loans, meaning that the interest accumulates on the loan at all times.

If you are a graduate or professional student, you do not have to make any grad PLUS loan payments if you are enrolled at least half-time in school, and there is also a six-month grace period after you graduate or leave school.

If you don’t pay the interest on a federal unsubsidized loan during these periods, the interest on the loan is capitalized and added to the total principal amount of the loan. This amount will also accrue interest and increase the overall amount you owe.

Parent borrowers are expected to start making payments on a Direct PLUS Loan once it’s been fully paid out. But parents may request a student loan deferment while their child is enrolled in school or six months after.

Loan Fees on Federal PLUS Loans

There is a loan fee for Direct PLUS Loans. A percentage of the loan amount (currently 4.228%) is deducted from each loan disbursement. This percentage is higher than that for Direct Loans (currently 1.057%). Loan fees vary by the date that the loans are disbursed.

Loan Limits on Federal PLUS Loans

Direct PLUS loans allow graduate students or parents to borrow enough money to fund the costs of school that aren’t covered by other aid.

Unlike other federal loans, you can borrow up to the total cost of attendance with a Direct PLUS Loan, minus financial aid already received. The student’s school sets the amount that a graduate student or parent can borrow through a Direct PLUS Loan.

How to Apply for Federal PLUS Loans

Before applying for a Direct PLUS loan, a student must fill out the FAFSA® — the Free Application for Federal Student Aid. The borrower will undergo a credit check and may need to participate in credit counseling in some circumstances.

Once completed, schools at which students applied and were accepted will send award letters to students that include financial aid options for the upcoming school year, which may include Direct PLUS loans if the student and/or parent qualifies.

If a school doesn’t accept applications for Direct PLUS Loans via the federal Student Aid website, contact the school’s financial aid office to find out how to apply.

Recommended: FAFSA Guide

What to Do When Federal PLUS Loans Aren’t Enough

The amount that can be borrowed through Direct PLUS Loans is set by the student’s school and can’t exceed the total cost of attendance minus financial aid received. If you still need additional funds to cover other education-related costs, you may want to explore private loans.

Private loans, which are also capped at the total cost of attendance, can bridge the gap between what a student is able to borrow in federal loans and their remaining needs after accounting for aid such as scholarships or grants.

Your eligibility and the interest rate that you can get through a private loan will depend on factors like your credit score and income. Having a cosigner on your loan may help you secure more favorable terms.

Parents with strong credit and income may find lower interest rates on private parent student loans than on federal parent PLUS loans which, as a reminder, also come with an origination fee.

Recommended: The Differences Between Grants, Scholarships, and Loans

What to Do About Undergraduate School Loans

If you owe both PLUS loans and undergraduate student loans, you may be looking for ways to lower your monthly payments. An income-driven repayment plan is one option for making monthly payments more affordable.

Direct PLUS loans made to students are eligible for most income-driven repayment plans, but parent PLUS loans are not. The only IDR plan available to parent borrowers is the Income-Contingent Repayment plan, and you must consolidate your parent PLUS loan into a federal Direct Consolidation Loan to become eligible.

If you’re a graduate student and you have a high-interest rate on existing undergraduate loans or need to lower your monthly payment before grad school, it could be worth considering student loan refinancing. Refinancing student loans through a private lender offers the opportunity to consolidate multiple student loans, federal and/or private, into a single loan with a single payment and (ideally) a lower interest rate. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

Refinancing may be a long-term solution for some PLUS loan borrowers, especially if they do not qualify for income-driven repayment and are not planning to use other federal benefits. Keep in mind if you refinance federal loans, you lose access to federal benefits and protections, such as forgiveness, income-driven repayment plans, and forbearance.

The Takeaway

Direct PLUS Loans are unsubsidized federal loans that can be made to graduate students or parents of a dependent undergraduate student. Known as grad PLUS loans or parent PLUS loans, these federal loans take your credit history into account. If you have an adverse credit history, there are certain eligibility requirements you’ll need to meet to qualify.

Direct PLUS Loans allow you to borrow up to the full cost of attendance for graduate school minus the amount of financial aid you receive from other sources. Since they have higher interest rates and a higher origination fee than other types of federal loans, you’ll likely want to pursue a federal Direct Unsubsidized Loan first.

Private student loans can bridge the gap between what a student is able to borrow in federal loans and their remaining needs after aid such as scholarships or grants is considered. And remember, it’s possible to refinance student loans in the future if you might then qualify for a lower interest rate.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

How does a Direct PLUS loan work?

Direct PLUS Loans are unsubsidized federal student loans for graduate and professional students (often referred to as a grad PLUS loan) or parents of a dependent undergraduate student (often referred to as a parent PLUS loan).

Unlike other federal loans, you can borrow up to the total cost of attendance with a Direct PLUS Loan, minus financial aid already received. These loans are unsubsidized, meaning interest accrues as soon as they are disbursed.

What are the disadvantages of a Direct PLUS loan?

Disadvantages of Direct PLUS Loans include the fact that unlike other federal loans, these loans consider your credit history, and borrowers must not have an adverse credit history in order to be eligible for them (although some borrowers may still be able to qualify if they meet other requirements). In addition, Direct PLUS loans have higher interest rates and a higher origination fee than other types of federal loans.

Who pays back a Direct PLUS loan?

The borrower of a Direct Loan is responsible for paying it back. If you have a parent PLUS loan, the loan cannot be transferred to your child. The parent borrower is legally responsible for repaying the loan.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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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.