SoFi

Students currently enrolled in college and graduate school are eligible to apply for forgiveness of up to $20,000 of the federal student loans they’ve received if they meet certain family income requirements, according to information posted by Federal Student Aid (FSA), an office of the U.S. Department of Education (DOE).

When President Joe Biden’s plan for one-time loan cancellation was announced in August, it was clear that college graduates with federal loans were eligible, as were those who had dropped out of college but still needed to pay back their federal loans.

Now it has become apparent that students enrolled in college before June 30, 2022, will also be able to apply for federal loan forgiveness.

“Borrowers are eligible for debt relief regardless of whether they’re in repayment, in school, or in grace, as long as they meet the income requirements and have eligible loans,” according to the FSA Fact Sheet “One Time Student Loan Debt Relief .”

Recommended: Student Loan Forgiveness: Programs for Relief and Mass Forgiveness

What Are the Requirements for Students to Apply for Forgiveness?

Current students can apply for forgiveness for federal loans if they received them before June 30, 2022. (Unfortunately, this means that freshmen who started this fall aren’t eligible.) If the students are dependents of their parents, FSA will be looking at the annual income of the parents to certify eligibility, not the student.

“If you were enrolled in school as a dependent student for financial aid purposes between July 1, 2021, and June 30, 2022, your eligibility is based on parent income. After you fill out your own application form, we’ll contact you so your parent can complete a Parent Income Form,” explains the FSA Fact Sheet.

Current undergraduates and graduate students can apply for forgiveness, as can those who did not complete their degree. “Current students and borrowers who have federally held undergraduate, graduate, and Parent PLUS loans that were distributed on or before June 30, 2022 are eligible for the relief, said Megan Walter, a policy analyst for the National Association of Student Financial Aid Administrators,” in U.S. News & World Report.

For dependent students, the important question is “What is the income of your parents?” The income cutoff for this one-time debt cancellation is $125,000 for a single parent or $250,000 for the household. If the student’s parents meet this eligibility requirement, then the student could receive up to $10,000 in debt relief.

As for the $20,000 in debt relief that has been announced, the only students eligible to apply for it are those who have already received a Pell Grant and whose parents’ household incomes do not exceed $250,000.

A Pell Grant is awarded to undergraduate students with low or moderate income. If you’re unsure, you can log in to StudentAid.gov to see if you received a Pell Grant.

Recommended: How to Apply for Biden’s Student Loan Forgiveness

When Will the Loan Forgiveness Application Be Available?

The application for one-time federal student loan forgiveness went live online on Oct. 17, 2022. After you apply, the DOE will determine your eligibility and will contact you if they need more information. Your loan servicer will notify you when your relief has been processed.

Nearly 8 million borrowers may be eligible to receive relief without applying for it because the DOE already has their income information. But if you are uncertain whether you fall into that group, it’s recommended that you fill out the application.

Qualified borrowers whose repayments are set to resume or start in 2023 are advised to apply without delay in order to receive relief before the pause on all federal loan payments expires after Dec. 31, 2022.

Which Federal Student Loans Are Eligible for Forgiveness?

Subsidized loans, unsubsidized loans, parent PLUS loans, and graduate PLUS loans held by the Department of Education (ED) are eligible for forgiveness programs. The following specific types of federal student loans with an outstanding balance as of June 30, 2022, also qualify for relief:

•   William D. Ford Federal Direct Loan (Direct Loan) Program loans

•   Federal Family Education Loan (FFEL) Program loans held by ED or in default at a guaranty agency

•   Federal Perkins Loan Program loans held by ED

•   Defaulted loans (includes ED-held or commercially serviced Subsidized Stafford, Unsubsidized Stafford, parent PLUS, and graduate PLUS; and Perkins loans held by ED)

Consolidation loans are also eligible for relief, as long as all of the underlying loans that were consolidated were ED-held loans and were disbursed on or before June 30, 2022.

Additionally, consolidation loans comprised of any FFEL or Perkins loans not held by ED are also eligible, as long as the borrower applied for consolidation before Sept. 29, 2022, says the FSA website.

What About Private Student Loans?

Private (non-federal) loans are not eligible for Biden’s debt relief. Also, if you consolidated federal loans into a private loan, the consolidated private loan is not eligible for debt relief. Once you refinance, you cannot apply for any of Biden’s forgiveness programs for that loan.

Will the Canceled Student Loan Debt be Taxable?

One-time student loan debt relief won’t be taxed at the federal level. Some states may be taxing this debt relief, however, so check with your state of residence for the latest information.

The FSA site said, “If you would like to opt out of debt relief for any reason — including because you are concerned about a state tax liability — contact your loan servicer by phone or email and tell them that you don’t want to receive one-time student loan debt relief.”

Recommended: What Biden’s Student Loan Debt Relief Means for Your Taxes

Is Federal Student Loan Relief a Certainty?

Biden’s debt relief plan may face obstacles. The burden placed on students by their large loans has been a burning controversy for years. Some 43 million Americans are paying down their student loans. The average student debt per person is over $37,000, with half of all student borrowers still owing $20,000 more than 20 years after they entered school.

When President Biden announced his student loan relief plan in August, he said, “In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023.”

Biden has emphasized that the debt relief targets low- and middle-income families.

Nonetheless, the relief plan has met with opposition. Some say it will worsen inflation, others believe that Biden does not have the authority for a debt cancellation. And there are those who say that debt relief is unfair to people who made personal sacrifices to pay off their loans without government forgiveness.

Several lawsuits have been filed to try to halt the one-time debt cancellation. As of October 12, none had succeeded in stopping Biden’s relief plan.

Recommended: What You Need to Know About the Challenges to Biden’s Student Loan Forgiveness

The Takeaway

Current students are eligible for President Biden’s one-time student loan debt forgiveness of up to $20,000 if their federal loans were disbursed before June 30, 2022, and if income criteria is met. If the student is a dependent, the annual income the FSA will be looking at is that of the parents, not the student. That income can’t exceed $125,000 for a single parent or $250,000 for the household.

3 Student Loan Tips

1. Can’t cover your school bills? If you’ve exhausted all federal aid options, private student loans can fill gaps in need, up to the school’s cost of attendance, which includes tuition, books, housing, meals, transportation, and personal expenses.
2. 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.
3. Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too. You can submit it as early as Oct. 1.

Recommended: FAFSA Guide

FAQ

How old do student loans have to be to qualify for Biden’s forgiveness plan?

Federal student loans received by a student before June 30, 2022 will be eligible for one-time relief as long as the income requirement for eligibility is met.

How long do I have to apply for debt relief?

Once the application is live, you’ll have until December 31, 2023, to submit your application for student loan debt relief.

Photo credit: iStock/Drazen Zigic

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.

In our efforts to bring you the latest updates on things that might impact your financial life, we may occasionally enter the political fray, covering candidates, bills, laws and more. Please note: SoFi does not endorse or take official positions on any candidates and the bills they may be sponsoring or proposing. We may occasionally support legislation that we believe would be beneficial to our members, and will make sure to call it out when we do. Our reporting otherwise is for informational purposes only, and shouldn’t be construed as an endorsement.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

SOPS1022001

As a student (or parent) it can be easy to focus solely on the college application process, and completely forget about financial aid. You spend so much time studying for the SATs (or ACTs) and tweaking your college essay so it perfectly represents you, that after you’ve been accepted and the reality of tuition payments set in, you might feel momentary panic.

It’s no secret that college tuition is expensive. Students and parents save for years to pay for higher education, but sometimes that’s just not enough. According to a Sallie Mae® study, “How America Pays for
College 2021 ,” parent income and savings covered 45% of college costs while student income and savings covered 8% of the costs.

Many of us rely on financial aid to bridge the payment gap. Financial aid may come from multiple sources, including scholarships, grants, work-study, federal student loans, and private student loans.

Scholarships and grants are extremely useful forms of financial aid, since students are not typically required to pay back the money they receive. An online survey of students and parents found 72% of college families in 2021 relied on scholarships and grants to cover a portion of college expenses, according to Sallie Mae’s study.

Scholarships, grants, and savings often aren’t enough to cover the cost of attending college. Sallie Mae says 47% of college families borrowed money to help pay for college in 2021. Some families used home equity loans and credit cards, but federal student loans represented the most frequently used source of borrowed money followed by private student loans.

To top it all off, the financial aid application process can be confusing. Between federal aid and other scholarships, it can be difficult to keep everything straight.

Most often, the first step in applying for financial aid is filling out the Free Application for Federal
Student Aid (FAFSA®). You can begin filling out the FAFSA on October 1 for the following academic year. The federal FAFSA deadline for the 2023–24 academic year is June 30, 2024, but you’ll likely want to file well before the school year starts – colleges and states may have their own FAFSA deadlines.

Some schools use an additional form to determine scholarship aid — the College Scholarship
Service Profile .

Taking the effort to apply for financial aid early can have a positive impact on your tuition bill. Below we highlight seven financial aid secrets you should know.

1. Decision Day vs Summer Melt

May 1 is usually decision day, the deadline when prospective college students must decide which college they plan to attend in the fall. But even after this deadline, students can change their minds. This phenomenon is known to industry professionals as “summer melt,” and sometimes it’s triggered by FAFSA verification setbacks.

Students who receive insufficient need-based financial aid, for example, might be compelled to reconsider their college enrollment decisions. Summer melt can give you an opportunity to select a more affordable school for you if you’ve encountered a FAFSA verification roadblock.

Summer melt is a common problem that causes schools to lose students during the summer. Because of this, schools may have a bit of secret wiggle room in their acceptance policy to admit new students over the summer for the fall semester.

2. Writing a Letter

You might be able to take advantage of summer melt with this secret: write a letter. After you get your financial aid offer, you could write a letter to your school’s financial aid office to open the lines of communication.

Let them know how excited you are to attend school in the fall. That’s where you could include a thoughtfully worded inquiry for any additional aid that you might qualify for as a result of summer melt.

When students decide to switch schools or not attend at the last minute, it means that they also won’t be using their financial aid award — which could now be available to other students.

3. Calling the Financial Aid Office

Another way to potentially take advantage of summer melt is to call your school’s financial aid office. Instead of calling immediately after you receive your financial aid award, think about calling in June or July. This allows financial aid offices time to account for students who have declined their financial aid packages.

An appropriately timed call to the financial aid office at your school could mean additional financial aid is allocated to your package — no guarantees, of course, but it never hurts to ask.

4. Submitting Paperwork and Applications On Time

Every school’s financial aid office has to follow a budget. Some financial aid is offered on a first-come, first-served basis, so it helps to submit forms, like the FAFSA, and other applications, on time or even ahead of schedule.

You may be out of luck if you apply for assistance after your university’s financial aid office has met their budget for the year. Some states have early winter deadlines for awarding scholarships and grants. Tennessee residents, for example, must complete their FAFSA by February 1 to be considered for a state-funded Tennessee Student Assistance Award grant.

You can check the deadlines for financial aid in your state through the U.S. Department of Education’s Federal Student Aid website .

5. Being Prepared

Have the basics ready to go before you sit down to fill out the FAFSA. If you have all of the information you need before you begin filling out the FAFSA, you’ll likely have an easier time filling out the information.

Usually, each parent and the student will need to create a username and password, which is called the Federal Student Aid ID (FSA ID). You’ll also need:

•   Social Security numbers (for you and your parents)

•   Bank statements and records of untaxed income (possibly)

•   You and your parents’ tax returns (aid awards are based on income from two years ago)

•   Any W2 forms

•   Net worth calculations of your investments (for students and parents)

6. Being Wary of Services that Charge You for Help

If you need assistance filling out the FAFSA, avoid any services that charge you. The first F of FAFSA stands for “Free,” so there is no need to pay for a service to fill the form out for you.

If you need assistance filling out the FAFSA, there are plentiful online resources through the U.S. Department of Education .

7. Filing the FAFSA Every Year

For every year you are a student and want to receive federal aid, you’ll have to file the FAFSA. Get in the habit of filing it every fall, so you’re closer to the top of the financial aid pile.

The Takeaway

Scholarships and grants can be super helpful additions to a federal financial aid package. The money can reduce your tuition bill and doesn’t usually need to be repaid. Work-study can also be beneficial in helping college students make ends meet.

If you need additional help financing your college experience, SoFi offers private student loans with an entirely digital application process and no fees whatsoever. Potential borrowers can choose between a variable or fixed interest rate and have the option to add a cosigner to the loan.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SOSL18228

So, you’ve been accepted to law school — congrats! You’re well on your way to embarking on a career that could help you fight for others’ rights and further the public good.

These are all laudable motivations, but chances are there’s something stronger weighing on you: How to pay for law school? There are a variety of law school scholarships available to help students finance their way to the courtroom.

The Average Cost of Law School

U.S. News & World Report notes that the average annual cost of a public, out-of-state law school is $42,754, or $29,610 for in-state. For private law schools, the average is $53,034. Because students aren’t yet racking up those billable attorney hours, it can be helpful to research law school scholarship opportunities before applying.

Types of Law School Scholarships

Per the numbers mentioned above, there might be a fair amount of sticker shock for those who haven’t yet applied for graduate school and are only thinking of someday going the lawyer route. (Here’s SoFi’s guide on how to apply to law school.) Fortunately, there are a range of options for aspiring attorneys seeking to fund law school.

Full-Ride Tuition Law School Scholarships

In some cases, there are full-ride tuition scholarships and need-based grants out there. Full-rides, of course, are not available at all law schools. If a law school doesn’t explicitly advertise or highlight information regarding full-ride opportunities, interested students can contact the school to ask.

Students deciding whether to apply to law school may want to familiarize themselves with the language universities adopt to explain these scholarships. In some cases, specific scholarships are designated for particular students. Full-ride law school scholarships can be highly competitive — with some schools offering as few as two to four per enrollment year. One potential tip for the search for scholarships is to target law schools with more tuition help.

General Law School Scholarships

There are lots of options for law-school hopefuls to find potential scholarships. The nonprofit organization Law School Admission Council (LSAC) has compiled a list of the many law school scholarships available to applicants.

From the LSAC’s list, the Attorney Ken Nugent Legal Scholarship ($5,000) and the BARBRI Law Preview’s “One Lawyer Can Change the World” Scholarship ($10,000) are worth pinning, due to the sizable chunk of change they offer.

Many law schools themselves offer competitive scholarships to attract stronger candidates. It might be helpful to check if a school also offers in-state residents specific tuition reductions or grants — especially true, if the applicant is considering a public school in their home state.

Law School Scholarships from Law Firms

Similarly, some law firms offer scholarships. Usually applying is a straightforward process: Some may require a short essay, a transcript, and sometimes references to be considered. One such law firm scholarship is offered by The Dominguez Firm, which offers $2,500 annually to a student applicant.

On top of this, there’s the rising trend of law firms helping new hires to repay a portion of their student debt once onboarded.

Diversity Law School Scholarships

Some scholarships are awarded to students with diverse backgrounds. One example of this is the Legal Opportunity Scholarship Fund offered by the American Bar Association. This scholarship is awarded to law students from a racial or ethnically diverse background.

The NAACP Legal Defense Fund also offers a scholarship for diverse students.

Law School for Women

Some scholarships require candidates to be women. One example of this is the American Association of University Women Selected Professions Fellowship. The fellowship offers a maximum grant of $25,000.

Finding Scholarships for Law School

There are dedicated resources like Fastweb and SoFi’s scholarship search tool to help prospective students find scholarships for which they may qualify. Fastweb is an online resource to help students find scholarships, financial aid, and even part-time jobs in support of college degrees.

The American Bar Association’s law-student division also has a running list (along with deadlines) of law student awards and scholarships. Additionally, the Law School Admission Council offers a list of diversity scholarships available to students from diverse racial and ethnic backgrounds. Here’s another guide on unclaimed scholarship money.

Another resource that could be useful in factoring living expenses is this student loan calculator for aspiring law school students. Tools like this can, usually, auto-load the tuition and cost-of-living breakdowns for specific law schools. From here, it’s possible then to compare how much degrees from particular schools may end up costing.

Recommended: Applying to Graduate School: Smart Tips & Strategies 

Negotiating Wiggle Room

Doing all this research and the math around law school scholarships could put applicants in a more informed position when evaluating which program to attend — and, potentially, help them to identify schools more likely to be interested in their application.

A reality of today’s admissions process for law school is negotiating scholarships. Some schools have a strict policy against negotiating, but others fully expect their initial offer to be countered. That’s why it can help to save acceptance letters and anything in writing from schools that offer admission.

Suggestions for Negotiating Law School Scholarship Offers

Offer letters could be shared with competing schools, asking if they’re able to match another university’s aid. It might be uncomfortable asking for more tuition assistance upfront, but a little discomfort now could help applicants shoulder less law school debt later on. If arguing a position makes an applicant uncomfortable, it might be worth pondering whether to become a lawyer.

Doing research on law schools (and figuring out the likely cost-of-living expenses at each institution) could help applicants to determine which scores or grades to aim for in an effort to make law school more affordable for them. Tabulating expenses (and having them on hand) may also demonstrate to universities that the amounts being negotiated are based on well-documented expenses.

Federal vs Private Loans for Law School

Students wanting to apply to law school could consider the differences between federal and private student loans. Federal loans come with certain benefits not guaranteed by private ones (such as, forbearance or income-driven repayment).

Private loans — like SoFi’s — can also help applicants to cover the expense of graduate school. So, it might be a good idea to weigh the pros and cons of both federal and private student loan options for law school.

For example, Direct PLUS loans for grads charge 7.54% in disbursement fees for the 2022-2023 academic year. SoFi Graduate Student Loans, by comparison, have no fees whatsoever — not even late or overdraft fees. Another great resource in understanding federal loans can be found over at studentaid.gov.

It’s important to note that private student loans don’t offer the same benefits and protections afforded to federal student loan borrowers, like Public Service Loan Forgiveness (PSLF). If a law school applicant is interested eventually in becoming a public defender or pursuing non-profit legal work, forgiveness and forbearance perks may play a role in their decision.

In addition to the financial aid resources mentioned above, more information can be found in SoFi’s private student loan guide. Those interested in figuring out how to pay for law school may want to check out SoFi’s competitive-rate private law school loans.

The Takeaway

Students looking to offset law school costs with scholarships can look to their law school, scholarship databases, local law firms and other organizations for resources. Consider contacting the financial aid office at your law school if you are looking for scholarship resources. If students interested in law school find themselves coming up short on funds for the JD after scholarships or federal aid, additional options may be available.

Some might seek out a student loan from a private lender, to name one possibility. SoFi’s private loans for law school offer competitive rates, flexible repayment options, and access to member benefits.

You can check your rates in just three minutes to see if a SoFi Law School Loan might help you pursue that dream of becoming a lawyer.

FAQ

What LSAT score will get me a scholarship?

One general rule of thumb is that students who have a LSAT score (and sometimes GPA) above the median for a certain school. Chances of qualifying for a scholarship are even greater if your score falls in the 75th percentile for the school.

What is a good scholarship for law school?

Any scholarship for law school is a good scholarship. Scholarships typically don’t need to be repaid and can help reduce a student’s debt burden. Students looking for law school scholarships can apply for institutional aid and aid through other sources like nonprofit organizations.

Do top law schools give scholarships?

While some top law schools do not offer scholarships, many law schools do offer law school scholarships to students. For example, in the 2021-2022 class at Yale, 76% of students qualified for some form of financial aid and 64% qualified for an institutional law school scholarship. Check in directly with the schools you are interested in to see if they offer scholarships to students.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

SOPS0622004

Generally speaking, promissory notes are legally binding contracts that state the terms of a loan, such as the amount to be repaid, the interest rate that will be charged, and any other important terms and conditions of that particular loan.

A student loan promissory note is no different; you’ll be required to sign one, accepting the terms of your student loan(s) before the lender disburses your money.

If a student loan promissory note sounds super important, that’s because it is. You can think of it as your student loan contract. Like any legal contract, it’s important to know the nuances of what you’re signing. Here’s what you should know about student loan promissory notes and master promissory notes.

What Is a Student Loan Promissory Note?

A promissory note is your student loan contract. It details the terms and conditions of that loan, as well as any rights and responsibilities you have as a borrower. Both federal student loans — loans backed by the U.S. government — and private student loans require that you sign a promissory note.

With private student loans, borrowers will generally be required to sign a promissory note for each student loan they borrow, because each loan’s terms and conditions may be different. Federal student loan borrowers may have the option to sign just one master promissory note.

What Is a Master Promissory Note?

Borrowers with federal student loans may be able to sign just one master promissory note. If eligible, a master promissory note covers all federal loans borrowed for a period of 10 years. There are versions of the master promissory note for both students borrowing Direct Subsidized or Unsubsidized Loans and a version for borrowers who are using Direct PLUS Loans.

Whether you’ll be able to sign a master promissory note is determined by the school you attend and the types of federal loans you have. Some schools do not offer the option to have students sign a master promissory note that covers borrowing over multiple years.

So be certain to understand what your school allows, and whether you need to sign multiple promissory notes or one master promissory note. The financial aid office at your college should be able to guide you through the process.

What to Look for on a Student Loan Promissory Note

Understanding the terms and conditions of a student loan promissory note is akin to understanding the terms of student loans. Here are some important items to consider on your loan, and note:

Federal vs Private Student Loan Promissory Note

First, it is important to know what type of loan you have — especially when it comes to federal vs. private student loans. Federal loans will have different terms than private loans, which are loans accessed through an independent bank, credit union, or other lender.

Repayment Options

Federal loans come with some options to help you manage your debt post-graduation, such as student loan forgiveness and income-driven repayment. If you have federal loans and access to multiple repayment plans, take some time to understand the ins and outs of different plans.

Deferment Options

Federal loans may also offer options for student loan deferment, which would allow you to suspend making payments during periods of economic hardship, immediately after you leave school, etc. Private loans may also offer some deferment options, but every lender is different, so you’ll need to check your note.

Recommended: How Student Loan Deferment Works

Interest Rate: Fixed vs Variable

The interest rate is a percentage of the principal loan amount that the borrower is charged for borrowing money. Be certain to understand the interest rate on your student loans, and whether that rate is fixed or variable. Federal student loans have fixed interest rates.

Private student loans may offer variable rates. If the rate is variable, it is possible that it will increase in the future, which would also increase your monthly payments. Be especially wary of private loans that offer introductory rate offers that later expire — they could end up costing you quite a bit of money.

Student Loan Fees

In addition to the loan’s interest rate, a student loan promissory note should include information on any additional costs, such as a loan fee (also known as an origination fee). Student loan fees will vary by lender, so be sure to check yours. Sometimes a loan fee is deducted directly from the amount that is disbursed.

Prepayment Penalties

Student loans — both private and federal — are not allowed to have prepayment penalties. Making prepayments on the principal value of the loan could help reduce the amount of money you owe in interest over the life of the loan.

Cosigner Requirements and Removal

With some loans, especially private loans, you may be required to have a cosigner. (That’s because private loans rely on your — or your cosigner’s — creditworthiness to determine the terms of your loan. Federal loans do not.) Upon graduation, some borrowers want to release their cosigner of the responsibility of having their name on the loan, so you may want to find out whether that’s a possibility.

How Funds Can Be Allocated

Some loans may require that the money is spent only on designated expenses, such as books or tuition. If you’re looking to upgrade your apartment, you might not be allowed to do so using student loan funds. Make sure to check on any stipulations on how you can spend the money.

When Is the Promissory Note Signed?

In general, borrowers will need to sign the promissory note for their loans before receiving any funds. Students who are borrowing federal student loans are able to sign their master promissory note online by logging into their federal student loan account. The student’s school should provide additional information for accessing the master promissory note.

Private lenders may have their own policies for signing a promissory note, it’s helpful to check in directly with the lender if you have any questions.

What if a Promissory Note Is Not Signed?

For federal loans, a signed promissory note is required before the loan is disbursed. So, failing to sign the promissory note could mean you won’t receive your funds, or at least won’t receive them until the promissory note is signed.

A promissory note is also generally required for private student loans, though each lender may have their own application requirements.

Do You Need a New Promissory Note Every Year?

You may be required to sign a new promissory note each year, but this may depend on your school’s policies and the loan types you are borrowing. For federal loans, some colleges require students to sign a promissory note each year.

Additionally, if you are taking out a new loan type from one year to the next, you’ll need to sign a new promissory note.

Private lenders typically require borrowers to sign a new promissory note for each loan they borrow.

Do Your Parents Need to Sign?

If you are borrowing a private student loan and your parents are acting as a cosigner, your parents signature may be required.

For most federal student loans, the student is the primary borrower and their parent’s signature is not required.
If your parents are borrowing a Direct PLUS Loan to help pay for your college education, they would be required to sign a promissory note in that case.

How Long Does the Master Promissory Note Process Take?

Each school will determine the process for signing a Master Promissory Note. You may be required to complete the promissory note in one setting and the process can take around 30 minutes. Check in with your financial aid office if you have any questions about the promissory note process or requirements at your school.

Understanding Your Options

If you haven’t picked up on it already, knowing how student loans work and understanding your student loan contract is the name of the game. Taking out a student loan can be a huge financial commitment and shouldn’t be done without careful consideration — which means knowing what’s on that promissory note.

Before going to sign your student loan promissory note, it’s also a good idea to spend some time thinking about your financial goals. A good place to start is by looking at how much you’ll take out in loans, total, and comparing that to how much money you can expect to make after you graduate from school. Use a student loan calculator to get an idea of what your monthly payments could be given your total debt and the interest rate.

Rarely is it financially sound to take out more in loans than you absolutely need. It might seem like Monopoly money now, but this is all money that you’ll have to pay back, with interest. The repayment process can be painstaking, especially as a person early in their career or during a setback, like layoffs or a health issue. Taking out the bare minimum in student loans may mean working part-time in college, exploring more affordable college options, or continuing to apply for scholarships after you’re enrolled.

Once you’ve graduated, keep in mind that refinancing your student loans is a way for some graduates to lower the interest rates on their loans or lower their monthly payments. Refinancing is a process where your existing loans are consolidated and paid off with a new loan from a private lender.

Generally, the borrower has the option to keep the same repayment schedule or increase or decrease the amount of time left on their loan. (Increasing the duration of a loan may result in paying more interest over time, whereas decreasing the duration of a loan may result in higher monthly payments, but less interest paid overall.)

If you’re planning on using your federal loans’ flexible repayment plans or student loan forgiveness programs, refinancing with a private lender may not be the right choice for you as you will lose access to those federal benefits. However, some private lenders, like SoFi, offer protections to borrowers who lose their jobs or experience economic hardship. SoFi even provides career counseling to help their borrowers get back on track.

The Takeaway

A student loan promissory note is a contract between the borrower and the lender that details the loan’s terms and conditions and where the borrower promises to repay the loan. Federal student loan borrowers may be able to sign just one master promissory note, which will cover all federal loans for a period of up to 10 years. Private lenders generally require a promissory note for each individual loan.

Understanding the terms and conditions of your loan when signing of the promissory note can help you set your expectations for borrowing and ultimately repaying your student loans.

Whether you need help paying for school or help paying off the loans you already have, SoFi offers competitive interest rates and great member benefits as well.

See what you’re prequalified for in just a few minutes.

FAQ

Do you have to do a master promissory note every year?

For federal student loans, you won’t necessarily be required to sign a master promissory note every year. If you are borrowing a new loan type, you will need to sign a new promissory note.

How do you get your student promissory note?

For federal loans, your school will have instructions for accessing your student loan master promissory note. Generally, this can be accessed online.

If you are borrowing private student loans, the lender will manage the process.

How long does it take for a master promissory note to process?

For federal student loans it can take about 30 minutes to complete the master promissory note. It may take the loan servicer a few days to process the master promissory note.

The process for private student loans will be determined by the individual lender.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.