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May

2025

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What Is a Federal Direct Subsidized Loan?

By Kayla McCormack | Student Loans | No Comments

A Direct Subsidized Loan is a type of federal student loan available to undergraduate students who demonstrate financial need. The federal government subsidizes this type of loan by paying the interest that accrues while the student is enrolled in school at least half-time and during qualifying periods of deferment, such as the grace period.

The Direct Subsidized Loan is one of three federal student loans available to student borrowers. The others are the Direct Unsubsidized Loan, Direct PLUS Loan, and Direct Consolidation Loan. Read on for more information about the benefits of Direct Subsidized Loans and details about other types of student loans available to eligible students.

Key Points

• A Federal Direct Subsidized Loan is a type of federal student loan for eligible undergraduate students with financial need.

• With a Direct Subsidized Loan, the U.S. Department of Education covers the interest while the student is enrolled at least half-time, during the six-month grace period after leaving school, and during qualifying deferment periods.

• Eligibility is determined through the Free Application for Federal Student Aid (FAFSA®), which assesses a family’s financial situation.

• For dependent undergraduates, the maximum total subsidized loan amount is $23,000. The specific amount a student can borrow each year depends on their academic level and dependency status.

• In addition to Direct Subsidized Loans, students can rely on scholarships and grants, Direct Unsubsidized Loans, and private student loans to help pay for college.

What Are the Benefits of a Federal Direct Subsidized Loan?

Like other types of student loans, you will be responsible for paying back your Federal Direct Subsidized Loan after you finish school. Unlike many other student loans, however, having a Direct Subsidized Loan means you won’t be responsible for paying interest while you are in school or during a six-month grace period after graduation (or during other deferment periods). The U.S. Department of Education subsidizes this type of loan by paying the interest on your behalf during those periods.

Since the government is paying the interest that accrues while you are in school and during the grace period, no interest will be added to your balance before you begin repayment. This might sound like a minor detail, but not having to pay interest while you are in school and for six months after you graduate can significantly reduce the overall cost of your loan.

Like a Direct Unsubsidized Loan, you’re not obligated to make payments during school — and the interest rate is relatively low. For the 2024-25 academic school year the interest rate for a Subsidized or Unsubsidized Direct Loan is 6.53%.

How Do You Apply for a Federal Direct Subsidized Loan?

To apply for a Federal Direct Subsidized Loan, you will need to complete the Free Application for Federal Student Aid (FAFSA). The FAFSA is available for free online, and contains questions about you and your family’s financial circumstances.

The information you submit through the FAFSA is transmitted to your school and then used to determine what types of aid (including federal loans, grants, scholarships, and work-study) you are eligible to receive. The FAFSA must be completed annually.

There is no credit check involved in applying for a Federal Direct Subsidized (or Unsubsidized) Loan, and you don’t need to worry about having a certain credit score.

How Is Your Eligibility for a Federal Direct Subsidized Loan Determined?

After your FAFSA has been reviewed, your selected school will send you an award letter that tells you your total cost of attendance, the award money you’ve been given, and what federal aid programs and loans you qualify for based on your FAFSA information.

You school will determine exactly how much you are eligible to borrow in federal loans based on a number of factors, including the amount the federal government expects you and your family to contribute to your educational costs, your current enrollment status, the school’s cost of attendance, any other financial aid you receive, and whether you are a dependent or independent student.

However, there are limits on the amount you can borrow with a Direct Loan, regardless of your financial need. If you are a dependent student, you can borrow a total of $31,000 for your undergraduate education in federal loans, but no more than $23,000 of this amount may be in Direct Subsidized Loans. Graduate and professional students cannot borrow subsidized loans.

Beyond Subsidized Loans: Other Options Available to Student Borrowers

Since eligibility for Direct Subsidized Loans is based on borrower need, and there are annual borrowing limits, you may be interested in learning about other available loan options. There are three other types of federal loans, and some borrowers may also want to consider private student loans.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are available to undergraduate and graduate students, and eligibility is not based on financial need. Unlike Direct Subsidized Loans, however, interest starts accruing as soon as the money is disbursed to your school. You may choose not to pay this interest while you’re in school and during your six-month grace period, but any unpaid interest that accumulates during this time will be added to your total balance.

How much you can borrow with an unsubsidized loan depends on your year in school as well as if you’re a dependent or an independent student.

Direct PLUS Loans

Direct PLUS Loans are options for graduate and professional students and parents of students who are interested in borrowing a loan to help their child pay for college. Eligibility for this type of loan is not based on need, but the application process does require a credit check.

The terms of these loans are somewhat less favorable than Direct Loans, which is why families will want to look at Direct Unsubsidized and Subsidized loans first. The interest rate on PLUS Loans for the 2024-25 academic year is 9.08%. These loans also have an origination fee of 4.228%.

Direct Consolidation Loan

This federal loan isn’t awarded to borrowers as a part of their financial aid package. Instead, a Direct Consolidation Loan allows borrowers with multiple federal loans to combine (or consolidate) them into a single loan, usually after school. The loan’s new interest rate is the weighted average of the current interest rates on the student loans that will be consolidated, rounded up to the nearest one-eighth of a percent.

Private Student Loans

Private student loans are available through private lenders, including banks, credit unions, and online lenders. They come with a variety of terms and can offer competitive interest rates for students (or parent cosigners) with good or excellent credit. Unlike federal student loans, which offer only fixed rates, private student loans can have fixed or variable interest rates.

However, private student loans don’t come with the same protections, such as government-sponsored loan forgiveness and income-driven repayment plans, as federal loans. Because of this, you may want to consider private loans only after you’ve exhausted federal loan options.

To apply for private student loans, potential borrowers will need to fill out an application directly with the lender of their choice.

The Takeaway

Undergraduate borrowers with Federal Direct Subsidized Loans are not responsible for the interest that accrues while they are enrolled in school at least half-time or during the grace period or other qualifying periods of deferment. Instead, the interest is subsidized by the U.S. government. To qualify for this type of federal student loan, borrowers must be qualifying undergraduate students who demonstrate financial need.

Other options for students looking to pay for college may include Federal Direct Unsubsidized Loans and PLUS Loans, scholarships and grants, federal work-study programs, 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.

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

FAQ

What is a Federal Direct Subsidized Loan?

A Federal Direct Subsidized Loan is a need-based federal student loan where the government pays the interest while you’re enrolled at least half-time, during your six-month grace period after leaving school, and during deferment periods.

Who is eligible for a Direct Subsidized Loan?

Only undergraduate students who demonstrate financial need based on their FAFSA application are eligible for a Direct Subsidized Loan.

Do Direct Subsidized Loans require a credit check?

No, Direct Subsidized Loans do not require a credit check or a cosigner, making them accessible to students without established credit history.

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.

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

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

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.

SOISL-Q225-020

May

2025

How to Get a Student Loan

By Kayla McCormack | Student Loans, student_loan | No Comments

Applying for a student loan generally works one of two ways. Students interested in borrowing a federal student loan can apply by filling out and submitting the Free Application for Federal Student Aid (FAFSA®) each year.

Private student loans run independently of the federal loan program. Students are able to apply for a private student loan at any time during the school year.

Keep reading to learn more on how to get both federal and private student loans, plus other ways to pay for college.

Key Points

• Completing the Free Application for Federal Student Aid (FAFSA) is essential to determine eligibility for federal student loans and other financial aid.

• Private student loans are offered through banks, credit unions, and online lenders. You can apply for private student loans anytime.

• Federal loans often offer lower interest rates and more flexible repayment options compared to private loans, which may require a credit check or cosigner.

• It’s important to evaluate different loan terms, interest rates, and repayment plans to find the best fit for your financial situation.

• In addition to student loans, students can pay for college with scholarships and grants, work-study, and by getting a part-time job.

Understanding The Difference Between Private and Federal Student Loans

There are a few important differences between federal and private student loans.

Federal Student Loans

For federal student loans, the U.S. Department of Education runs the William D. Ford Federal Direct Loan Program. The program has four types of loans to consider:

• Direct Subsidized Loans: Direct Subsidized Loans are for undergraduate students with financial need, where the government pays the interest while the student is in school at least half-time, during the grace period, and during deferment.

• Direct Unsubsidized Loans: Direct Unsubsidized Loans are available to undergraduate and graduate students regardless of financial need, and interest begins accruing as soon as the loan is disbursed.

• Direct PLUS Loans: Direct PLUS Loans are available to graduate or professional students and parents of dependent undergraduates to help pay for education expenses not covered by other financial aid, and they require a credit check.

• Direct Consolidation Loans: Direct Consolidation Loans allow borrowers to combine multiple federal student loans into a single loan with one monthly payment and a fixed interest rate.

Private Student Loans

Private student loans are offered through private lenders. As a part of the application process, lenders will generally evaluate a borrower’s personal financial information and history, including their credit score, among other factors.

Private loans don’t have to follow the same government regulations as federal loans, and they don’t offer the same borrower benefits or protections — like income-driven repayment plans or Public Service Loan Forgiveness. For this reason, private loans are generally considered an option only after other sources of funding have been exhausted.

💡 Quick Tip: SoFi offers low fixed- or variable-interest rates. So you can get a private student loan that fits your budget.

How to Apply for a Federal Student Loan

The first step in applying for a federal student loan is to complete and submit the Free Application for Federal Student Aid (FAFSA®). The FAFSA is typically available starting in the fall of the year before school starts and will remain open until June 30th of the academic year. So for example, for the 2025-2026 school year, the FAFSA application opened on November 21, 2024, and will close on June 30, 2026.

While there is a large window to fill out the FAFSA, there may be college or state deadlines that fall before the federal deadline. Additionally, some aid is awarded on a first-come, first-served basis, so it can be beneficial to fill out the FAFSA as early as possible.

Once the FAFSA is submitted, your school will review and determine your financial aid offer, which may include federal student loans, scholarships, grants, and work-study.

Before you receive any federal student loan that you apply for, you’ll be required to complete entrance counseling, which is designed to help you understand your obligation to repay the loan. You’ll also be asked to sign a Master Promissory Note, which says you officially agree to the terms of the loan.

How To Apply For Private Student Loans

You may want to consider a private student loan after you’ve explored your options for federal financial aid. Private lenders typically have their own qualification criteria, but you may be eligible to apply for a private student loan if you’re an undergraduate or graduate student, pursuing a certificate, a student of the dental, medical, or other health professions, studying to take the bar exam, or relocating for medical or dental residencies.

Parents may also be eligible to take out private loans to pay for their child’s education.

Private student loans can usually be used for any type of expenses related to your education, including tuition, room and board, fees, books, supplies, equipment, computers and electronics related to your schoolwork, transportation, and personal needs at school.

To apply for a student loan, you may need to provide:

• Your name, address, phone number, and email address

• Date of birth

• Social Security number

• Employer’s name

• Proof of income (a recent pay stub)

• Bank account balances

• Monthly housing payment (rent/mortgage)

• School name

• Estimated cost of attendance

• Your current student status (freshman, full time, for example)

• Other financial aid you’ve received so far

• Anticipated graduation date

• References

• Student loan cosigner and cosigner’s information, if applicable

Private student loan lenders may let you submit your loan application online, and some may even be able to give you an answer the same day. Of course, underwriting timeframes and documentation requirements can vary greatly by lender.

What Is Private Student Loan Approval Based On?

Private student loan approval is based on your income, credit history, and credit score, among other factors. That means the lender looks at your history of borrowing money and paying it back, which also determines your loan’s interest rate.

If your credit history is unestablished or less than stellar, applicants may consider adding a cosigner to the loan. A cosigner will be responsible for paying it if you are unable to do so.

Beyond Student Loans: Other Ways to Pay for College

Students can explore other options to pay for college, including scholarships, work-study, grants, and more.

Scholarships and Grants

Scholarships and grants are types of aid that don’t need to be repaid. Grants are generally awarded based on financial need and may be awarded by your school, the government, or another organization such as a nonprofit.

Scholarships are awarded based on various criteria such as academic achievement, athletic ability, artistic talent, financial need, or community service. Scholarships can come from schools, private organizations, nonprofits, or government programs, and applying early can increase a student’s chances of receiving aid.

Recommended: SoFi’s Scholarship Search

Work-Study

The Federal Work-Study Program offers part-time employment to undergraduate students who demonstrate financial need. Eligibility for work-study is determined by the FAFSA. Some schools may match students to a work-study job, while other schools may require that students apply for positions.

Part-Time Job

Working part-time can be another way to earn extra cash to pay for college expenses. Students could look into jobs such as tutoring, babysitting, or working at a local business in their college town.

The Takeaway

To get a federal student loan, students fill out the FAFSA in order to see which type and how much aid they may be eligible for. The application process for private student loans may vary by lender. Private student loans can help students pay for college if they don’t get enough federal aid.

Students can also explore other options to help pay for college, such as scholarships and grants, work-study, or another part-time job.

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

FAQ

What is the first step in applying for a federal student loan?

The first step is to complete and submit the Free Application for Federal Student Aid (FAFSA), which determines your eligibility for federal student loans and other financial aid.

What types of federal student loans are available?

Federal student loan options include Direct Subsidized Loans for students with financial need, Direct Unsubsidized Loans available regardless of financial need, and Direct PLUS Loans for graduate students or parents of undergraduates, which require a credit check.

What should students consider when choosing a student loan?

Students should evaluate factors such as interest rates, repayment terms, eligibility requirements, and the total cost over time to determine the loan option that best fits their financial situation.

SOISL-Q225-023

May

2025

Understanding Parent PLUS Loan Repayment Options

By Becca Stanek | Family Finances, Fresh Out of School, Student Loans, student_loan | No Comments

If you took out a Direct PLUS Loan for parents to help fund your child’s education, you’re going to eventually have to start paying the money back. Parent PLUS Loans generally can’t be transferred to your child — even once they graduate and get a steady job — so you’re the one who’s on the hook for paying them off in full. That prospect can be daunting, since this may be your largest chunk of debt outside of a mortgage.

Fortunately, there are a number of ways to delay payments on Parent PLUS Loans or make them more affordable. Keep reading to learn more on Parent PLUS Loan repayment options.

Key Points

• Parent PLUS Loans lack a grace period, meaning repayments start immediately after the loan is fully disbursed, often creating a financial burden for parents.

• Deferment and forbearance options exist to temporarily pause payments, but interest continues to accrue, potentially increasing the total debt owed.

• Three primary repayment plans are available: Standard, Graduated, and Extended, each varying in payment structure and loan duration, impacting overall interest paid.

• Forgiveness options for Parent PLUS Loans are limited, but income-driven repayment plans and Public Service Loan Forgiveness may provide relief under specific conditions.

• Refinancing with a private lender can lower interest rates and monthly payments but will result in the loss of federal loan benefits, such as forgiveness and forbearance.

When Do Parent PLUS Loan Payments Start?

Repayment for Parent PLUS Loans typically begins once the loan is fully disbursed. Unlike some other federal student loans, Parent PLUS Loans do not have a grace period — a six-month break after the student graduates or drops below half-time enrollment, before payments are due.

The idea behind the delay with other student loans is that it gives your child a chance to get settled financially. The federal government assumes you, as a parent, don’t need the same accommodation.

If you’re not ready to start paying, you have a couple of options for pausing repayment on your Parent PLUS Loan:

1. Apply for deferment. Your first payment on a Parent PLUS Loan is typically due once the loan is fully paid out, often after the spring semester. However, you can opt to defer Parent PLUS Loan payments while your child is enrolled at least half-time and up to six months after they graduate or drop below half-time enrollment. To do this, you simply need to apply for a deferment with your loan servicer. Just keep in mind that interest will still be piling up, even if you’re not making payments. If you don’t pay the interest during this period, it will be capitalized (i.e., added to the loan principal) when the deferment is over, which can increase how much you owe over the life of the loan.

2. Request forbearance. If your child is already more than six months post graduation, you may still be able to temporarily stop or reduce what you owe by requesting a forbearance. To be eligible for forbearance, however, you must be unable to pay because of financial hardship, medical bills, or a change in your employment situation. The amount of forbearance you can receive for your payments depends on your situation. Interest will still accrue during this period, but if you’re going through a temporary financial difficulty, it may be worth approaching your loan servicer for a forbearance rather than risking missed payments.

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

Parent PLUS Loan Repayment Options

You typically can’t put off payments forever. Depending on the repayment plan you choose, you will have between 10 and 25 years to pay off the loan in full. However, you have three different repayment options to choose from. Here’s a closer look at each plan.

Standard Repayment Plan

One of the most straightforward options is the Standard Repayment Plan. In this scenario, you will pay the same fixed amount each month and pay the loan in full within 10 years. The benefit is that you always know how much you owe and you’ll accrue less interest than with most other plans, since you’ll be repaying the loan in a faster time frame.

The difficulty is that this results in monthly payments that may be too high for some people. It’s a good option if you can afford the payments and you don’t expect your situation to change in the next ten years.

Graduated Repayment Plan

With the Graduated Repayment Plan, you will also pay off your loan within 10 years. However, the payments will start out smaller and then gradually increase, usually every two years. You’ll pay more overall than under the previous plan because you’ll accrue more interest, but less than if you were to sign on for a longer repayment term. This plan can be a good option if you expect to earn more in the relatively near future.

Extended Repayment Plan

A third choice is the Extended Repayment Plan, which spreads payments out over 25 years. You can either pay the same amount every month, or have payments start out lower and ramp up over time. You’ll end up paying more over the life of the loan because you’ll be racking up interest over a longer time period. However, this payment plan can be a good way to make monthly payments more affordable while knowing you are on track to pay off the loan in full.

💡 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.

Loan Forgiveness for Parent PLUS Loans

Parent PLUS borrowers don’t have as many opportunities for loan forgiveness as students do. However, there are other options to get debt relief for Parent PLUS Loans. Here are two to consider.

Income-Contingent Repayment Plan

You do have one option for tying payments to your income, but you have to jump through one hoop first — you’ll need to consolidate your Direct PLUS Loans into a Direct Consolidation Loan. You can (and will need to) do this even if you only have one Parent Plus Loan.

A Direct Consolidation Loan combines any existing federal Parent PLUS Loans into one and may change your monthly payment, interest rate, or the amount of time in which you have to repay the loan. You can’t, however, consolidate Direct PLUS Loans received by parents to help pay for a dependent student’s education with federal student loans that the student received.

Once you consolidate, you may be eligible for the Income-Contingent Repayment (ICR) Plan. Under this plan, your monthly payment would be no more than 20% of your discretionary income for 25 years. After that time, any remaining debt is forgiven.

The ICR plan can potentially lower the required monthly payment to an affordable level. Depending on your income, you can potentially get a payment as low as $0.

Public Service Loan Forgiveness

Another way you might be able to get your loans forgiven is by signing up for Public Service Loan Forgiveness (PSLF). You might qualify if you work in a public service job, including for a government organization, nonprofit, police department, library, or early childhood education center. Note that you are the one who has to work in this field, and not the student.

To be eligible for PSLF, you’ll need to first consolidate your Parent PLUS Loans into a Direct Consolidation Loan and start repayment under the ICR Plan. Once you make 120 qualifying payments on the new Direct Consolidation Loan, your loan may be forgiven (prior Parent Plus Loan payments do not count towards 120 payments required for PSLF).

Considering Student Loan Refinancing

If you’re looking for another way to tackle your Parent PLUS Loan, you may want to consider refinancing your Parent Plus Loan with a private lender. This involves taking out a new loan and using it to repay your current Parent PLUS Loan.

Refinancing can potentially reduce the total interest you pay over time, lower your monthly payment, and/or help you get out of debt faster. Note: You may pay more interest over the life of the loan if you refinance with an extended term. Depending on the lender, you may also have the option to transfer the debt into your student’s name.

When you apply for a Parent PLUS Loan refinance, the lender will conduct a credit check and look at your income and other debts to determine if you qualify for a refinance and at what rate. Generally, the better your credit, the cheaper the loan will be. In fact, if you have exceptional credit, your interest rate could be substantially lower than what the federal government originally offered you. Keep in mind, however, that when you refinance a federal student loan with a private lender, you are no longer eligible for federal student loan benefits, such as forgiveness or forbearance.

Recommended: How to Refinance Student Loans

The Takeaway

By taking out a Parent PLUS Loan, you are generously supporting your child’s dream of getting a college education and launching a successful career. But that doesn’t mean that loan payments need to become a burden for you. If you learn about your options for reducing or managing payments, you’ll be on track to paying off your loan with peace of mind.
Other ways to pay for college include cash savings, grants and scholarships, federal student loans taken out by your child, and private student loans.

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

FAQ

When does repayment begin for Parent PLUS Loans?

Repayment for Parent PLUS Loans starts immediately after the loan is fully disbursed. Unlike some other federal student loans, there is no automatic grace period. However, parents can apply for deferment while their child is enrolled at least half-time and for up to six months after the student graduates or drops below half-time enrollment. It’s important to note that interest continues to accrue during deferment.

Are Parent PLUS Loans eligible for income-driven repayment plans?

Parent PLUS Loans are not directly eligible for income-driven repayment plans. However, by consolidating them into a Direct Consolidation Loan, borrowers can access the Income-Contingent Repayment (ICR) plan. Under ICR, payments are based on income and family size, and any remaining balance may be forgiven after 25 years of qualifying payments.

Is refinancing a Parent PLUS Loan a viable option?

Refinancing with a private lender can potentially lower interest rates and monthly payments. Some private lenders, like SoFi, may allow the loan to be transferred to the student. However, refinancing federal loans into private ones means losing access to federal benefits, such as income-driven repayment plans and loan forgiveness programs.

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 Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY 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).

SOISL-Q225-021

May

2025

Everything You Need to Know About Personal Loan Origination Fees

By Timothy Moore | Debt Payoff, Family Finances, personal_loan | Comments Off

A personal loan origination fee is a one-time, upfront charge that a lender collects to cover the costs of processing and setting up a loan. They typically range from 1% to 10% of the loan amount, but you may see ads for zero origination fees. The specific amount depends on factors relating to both the lender and the borrower.

Personal loans can be a good way to receive a lump sum of cash to be used for almost any purpose, but it’s worth noting that there are usually fees beyond the interest you pay. Learn more about origination fees here.

Key Points

• Personal loan origination fees typically range from 1% to 10% of the loan amount, depending on the lender and borrower’s creditworthiness.

• These fees cover the cost of processing the loan and are typically deducted from the loan disbursement.

• Borrowers with higher credit scores and lower debt-to-income ratios may qualify for lower origination fees.

• Origination fees can significantly impact the total cost of the loan, so it’s important to factor them into the decision.

• Some lenders offer loans with no origination fees, which may be a more cost-effective option for borrowers.

Personal Loan Origination Fees Defined

Personal loan origination fees are an upfront, one-time charge by the lender that covers the costs of processing the loan, including the application, underwriting, and funding.

Typically, lenders charge origination fees as a percentage of the total loan amount. It’s usually 1% to 6% of the principal, but origination fees may go as high as 8%, 10%, or even 12% of the loan amount. In some instances, a lender may charge a flat fee instead.

Not every personal loan has an origination fee, and lenders may differ in how they require consumers to pay it, if it’s included.

Recommended: Should I Get a $5,000 Personal Loan?

How Do Personal Loan Origination Fees Work?

If a lender charges an origination fee for a personal installment loan, it’s usually a percentage of the loan amount, somewhere between 1% on the low end and 10% on the high end. For example, if you take out a personal loan for $15,000 and there’s a 5% origination fee, you’ll pay $750 in fees.

Lenders typically subtract this fee from the total loan amount. In our example, that means they’d offer you a loan for $15,000, subtract $750 from the amount, and give you $14,250. But you’d still have to repay $15,000, plus interest. If you truly need the full $15,000, it’s a good idea to request more than $15K to ensure that you have enough funds after the origination fee is deducted.

In other cases, a lender may require that origination fees be paid out-of-pocket by the borrower, or the fees are added to the loan total. Ask your lender to be sure of their policy.

In this case, the personal loan origination fee would be reflected in the APR, or annual percentage rate, calculation. That’s why experts often suggest comparing loans by their APRs. The APR, which includes the interest rate plus fees, represents the annual cost of a loan and will give you a true picture of what you’ll pay over the life of the loan.

How Much Are Personal Loan Origination Fees Usually?

Personal loan origination fees typically vary between 1% and 10% of the total loan amount. Depending on how much you’re borrowing, this fee can get extraordinarily high.

For example, if you borrow $100,000 with an 8% origination fee, that’s an extra $8K you’re paying on top of the loan amount and interest.

Recommended: What to Know Before You Borrow Money Online

How Are Origination Fees Calculated?

Lenders may advertise a set origination fee or a percentage range. If it’s the latter, how exactly do they determine the percentage you’ll pay?

1. Credit Score and Financial History

Unsurprisingly, lenders primarily consider your credit score and debt-to-income (DTI) ratio. The stronger your credit score and the lower your DTI ratio, the lower origination fees you might be offered. Lenders that don’t charge origination fees at all may have strict requirements that only borrowers with good or excellent credit can meet.

2. Loan Amount and Term Length

Lenders may also consider the length and size of how the personal loan works. Having a cosigner with good credit can help reduce your fees. In addition, lenders may ask your reason for borrowing or use other information from your application when setting your fees.

3. Lender Policies and Market Conditions

The lender’s policies may impact how much you’ll pay in origination fees. Some may feature a 0% offer to attract new clients; others may earn money by charging a double-digit fee.

Market conditions can also impact rates. When lenders need to compete aggressively to win customers, they may drop their fees. Conversely, when rates are high and it may seem riskier to lend, financial institutions may raise the origination fees they charge.

Recommended: Personal Loan Calculator

When Is an Origination Fee a Dealbreaker?

It’s wise to compare the loan APRs, which represent your total annual costs. A loan with no origination fee but a higher interest rate may wind up costing you more in the long run; comparing APRs can help you figure it out.

So when is a personal loan origination fee a dealbreaker? If the fee makes your total cost of borrowing higher than another offer, you should consider the better loan offer.

All lenders are required to disclose their fees as part of the Truth in Lending Act. If a lender advertises no origination fees, it’s a good idea to check the fine print to see if they’ve disguised the fee with a look-alike fee, like an “administrative” or “application” fee. If a lender does this and it gives you bad vibes, go with your gut — you should always feel good about the lender you choose.

Ways to Minimize or Avoid Origination Fees

If you, like most people, want to pay as little in terms of origination fees as possible while still getting a good overall deal, consider the following.

1. Comparing Lenders and Shopping Around

Don’t sign on with the first quote you get, nor assume that a “no origination fees” offer is the best. Shop around, and see the total cost of a loan: what you will pay in terms of interest and fees. That way, you can feel confident that you are getting the best deal.

2. Negotiating Loan Terms

You can ask a lender to work with you on loan costs. They may be willing to make reductions in fees in order to snag your business. This can be especially true if you have a solid credit profile.

3. Considering No-Fee Loan Options

As noted above, some lenders offer no-fee loan options, which can help with affordability. But do your research: Take a close look to make sure that the overall cost of the loan suits your needs. You don’t want to sign on to a no-fee loan with a higher interest rate that makes the loan more expensive overall. Also read to fine print to see if origination fees are actually being charged but appear under a different name, such as application fees.

The Takeaway

When you are thinking about getting a personal loan, origination fees may be charged; these are typically between 1% and 10% of the loan amount, though some no-fee loans may be offered (and flat fees as well). The origination fee you are assessed may vary with the lender’s policies, your credit profile, and market conditions. It’s important to consider how origination fees can impact the overall cost of your personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

How much are personal loan origination fees typically?

Personal loan origination fees typically range between 1% and 10% of the loan amount. Factors that impact rates include the lender’s policies, your credit score, and market conditions.

Do private loans always have origination fees?

Many private lenders charge origination fees, but that is not always the case. Before taking out any loan with a private lender, it’s a good idea to compare origination fees and APRs.

Can origination fees be negotiated?

You can often negotiate origination fees for certain types of loans, such as mortgages and personal loans. Just be sure that lower origination fees don’t mean higher interest rates and negate any savings. You’ll be in the best position to negotiate fees with a solid credit profile.

Are origination fees refundable if I pay off my loan early?

Generally, origination fees are not refundable if you pay off a loan early, according to Experian. However, you may be able to get a partial refund from some lenders.

What are other personal loan fees to consider?

In addition to interest and origination fees, personal loans may collect application fees, late fees, and returned payment fees.

Photo credit: iStock/lechatnoir

*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.

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

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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May

2025

Helping Your Child with Homesickness in College

By Kayla McCormack | Life & Career, Student Loans, student_loan | No Comments

In the fall of 2024, more than 19 million students attended American colleges and universities.

As exciting as this phase of life can be, experiencing some level of homesickness during the home-to-college transition is common. As a parent, you may feel a sense of responsibility when it comes to helping your now-adult child get over their homesickness. And there could be a reason for concern, since studies have shown that emotional or mental distress in college students can impact academic performance.

Fortunately, there are a number of ways parents can help their child adjust to being away from home (perhaps for the first time) and get the most out of their college experience. Read on to learn some simple ways you can help your child feel less homesick at college.

Key Points

• Many college students, especially first-years, experience homesickness as they adjust to a new environment.

• Regular communication, sending care packages, and listening without judgment can help your child feel emotionally supported, even from afar.

• Joining clubs, making new friends, and participating in campus activities can help students build connections and feel more at home in their new surroundings.

• Encouraging your child to develop healthy routines — including sleep, exercise, and nutrition — can support emotional balance and reduce stress related to homesickness.

• Paying for college can be stressful for both parents and students. Having a plan in place can help ease your student’s mind.

Strategies to Help Your Child Cope with Homesickness

Watching your child experience homesickness from afar can be challenging. It may be tempting to rush to the rescue, but it is also important that your child find their footing on campus. These tips and ideas may be helpful as you support your child as they navigate homesickness and life on-campus.

Acknowledging the Situation

It can be comforting to know that you’re not the only one struggling with a given situation. As a parent, it might be helpful to share with your child how common homesickness is among first-year students. Providing comfort and reassurance that they are not alone and that in time, their feelings of homesickness will pass, can go a long way.

Keeping In Touch

As you and your child adjust to your new dynamic, you may need to find new ways to keep in touch. Keep in mind that while your child is adjusting to on-campus life, you don’t want to be overbearing. Try setting up a weekly video chat or sending over fun updates from home in a text message. Remember to give your child the space they need to find their footing at school.

Recommended: College Planning Guide for Parents

Sending a Care Package

When packing for college, adding a few items that bring the comfort of home could be helpful if your child starts feeling tinges of homesickness. Things like a favorite book, a blanket, or a stuffed animal could be just the thing when homesickness creeps in.

Sending over a care package with some of their favorite cookies, candies, or snacks and a photo of a fun memory can provide a touch of home, too.

Encouraging Your Child to Get Help if They Need It

If your homesick college student seems like they may benefit from professional help, you might encourage them to visit their campus counseling center. Many colleges also offer mental health services and counseling on campus, often at little to no cost.

If there are fees involved, they may be covered (at least partially) by health insurance. If your child is no longer on a family medical plan, it’s likely you’ve enrolled them in a college health insurance plan, which is often rolled into costs of tuition, room, and board.

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

Helping Your Child Find a New Familiar

It’s probably not the best idea for parents to visit their child every weekend — though it may be hard to control yourself if your child’s university is easily accessible. As lovely as it is that you’re a familiar face, it might be more helpful for your child to find a new familiar.

Instead, you might encourage your child to find ways to make their not-yet-so-familiar home feel more known. If your college student loves coffee, they might want to find a local shop they can visit frequently — turning it into their own personal hang-out spot.

If they’re into museums, discovering the best ones nearby could help them feel more grounded in their new environment.

Getting Involved on Campus

When someone is feeling down, it can be tempting to stay indoors and wallow in those feelings. Getting involved on campus can help students build community and connect with their peers. Colleges often have many clubs and extracurriculars that can help students find like-minded individuals.

If committing to a club feels like too much, your child might connect with peers in a more casual way, from making friends in class or meeting new people during a dorm hall function.

Developing Healthy Routines

Physical health and mental health go hand in hand, so if your homesick college student is making less-than-healthy choices during this tough transition period, you might encourage them to make some changes in their routine.

This might look like starting their day with a walk to the campus coffee shop or finding a weekly exercise class. Creating a schedule and finding new, healthy routines can give your student something to look forward to.

Developing a Plan to Pay for College

In addition to homesickness, paying for college can be an added layer of stress for both parents and students. If your child is worried about money or constantly working at a job to help cover costs (rather than acclimating to college), you might want to look into additional sources of funding, such as scholarships and grants and/or student loans.

It’s important to fill out the Free Application for Federal Student Aid (FAFSA) every year, since this is required for a student or parent to qualify for federal funding.

For some students, federal student loans and other sources of aid may be enough to fund their college education. If it’s not, parents also have the option of taking out loans, such as the Direct PLUS Loan or a private student loan.

When comparing federal vs. private student loans, keep in mind that private student loans aren’t required to offer the same borrower protections, like deferment options or income-driven repayment plans, as federal student loans. For this reason, you generally want to look at private student loans only after you’ve exhausted federal loan and aid options.

💡 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.

The Takeaway

The transition to college life can be stressful for both students and their parents. Being in an unfamiliar environment, while trying to balance classes and making new friends can lead to feelings of apprehension, anxiety, and homesickness. As a parent, providing support from a distance can include things like sending a care package, checking in with a video call once a week, and encouraging your child to get involved in extracurricular activities.

Hopefully, in time, your child will settle into their life on campus — finding a new normal. If money worries are adding to your child’s (or your own) college stress, it can also be a good idea to explore funding options you or they might qualify for. Once the financial side of college is taken care of, your child will be free to focus solely on assimilating into campus life and fully embracing this exciting time in their life.

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

FAQ

How common is homesickness during college?

Homesickness is incredibly common in college students, with 94% experiencing it in the first 10 weeks. Homesickness is an emotional response to being in a new environment and can affect a student’s academic performance and overall well-being.

How can parents support their homesick college student from afar?

Parents can support their child by acknowledging that homesickness is normal, maintaining regular but nonintrusive communication, sending care packages with familiar items, and encouraging their child to seek campus resources if needed.

What strategies can help students adjust to college life and alleviate homesickness?

Encouraging students to get involved in campus activities, establish healthy routines, and find local spots that bring comfort can help them build a sense of belonging and reduce feelings of homesickness.

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