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Paying for college is one of the biggest expenses a parent plans for, and it can seem overwhelming. At times, you might find yourself saving up for your kid’s future education while also trying to save for your own retirement, fund a house down payment, and pay off your own debt.

With the average cost of college tuition and fees for the 2022-2023 school year at $10,950 for public in-state students, $28,240 for public out-of-state students, and $39,400 for private school students, it’s no wonder parents are taking out loans to help pay for their child’s undergraduate education.

One popular federal parent loan program is the federal Direct PLUS Loan, but before you start comparing parent PLUS vs. private parent student loans, it’s important to understand what a parent PLUS loan is.

What Are the Different Loans for College?

There are four types of federal Direct Loans offered by the U.S. Department of Education:

•   Direct Subsidized Loans are loans offered directly to the student, where the interest on the loan is paid by the U.S. Department of Education while the student is in school and during a six-month grace period after graduation. Thus, they are subsidized.

•   Direct Unsubsidized Loans are also offered directly to the student, but the interest is not paid by the federal government and it accrues while the student is in school.

•   Direct PLUS Loans are loans for professional or graduate students, or for parents of undergraduate students.

•   Direct Consolidation Loans allow you to consolidate all federal loans into one loan with an interest rate that’s a weighted average of all your federal loans’ interest rates, rounded up to the nearest eighth of a percent.

Note that the federal parent loans can go by a number of names: parent PLUS Loans, Direct PLUS Loans, Direct parent loans. Those are all the same thing.

The main difference between the Direct student loans offered to undergraduates and the Direct PLUS Loans offered to parents is that certain Direct Loans (Direct Subsidized Loans) for undergraduates are awarded based on financial need, whereas the PLUS loans are not awarded based on financial need, but do require a credit check when applying.

In addition to federal loans, there are also private student loans available both for students and for parents. Private student loans are loans from banks or private lenders, which set their own interest rates and terms.


💡 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.

What Can These Loans Be Used For?

When a student’s financial aid package and other sources of funding aren’t enough to cover the cost of college and other educational expenses, parent PLUS loans and private student loans can help fill in the gaps. They can be used to cover expenses like tuition, room and board, books, and other supplies related to the total cost of attendance.

While they can both be used to cover the same expenses, they each have different benefits and terms so it’s worth considering your options as you determine how to pay for your child’s college education.

Parent PLUS Loans vs Private Student Loans Compared

Beyond the major difference that Parent PLUS loans are federal student loans and private student loans are borrowed from individual lenders, there are other similarities and differences to consider.

Similarities

Here’s an overview of the major similarities between these two types of loans.

Primary Borrower

Both Parent PLUS loans and private student loans can be borrowed by parents of undergraduate students to help them pay for their education. On both a Parent PLUS loan and a private student loan borrowed by a parent, the parent will be considered the primary borrower on the loan.

Interest Accrual

While the application processes for these loans will be different, both loan types will accrue interest. The interest rates for the Parent PLUS loans are set annually by congress. Interest rates on private student loans are set by the lender based on factors including the applicant’s credit score, income, and financial history, among other factors.

Loan Disbursement

Regardless of loan type, most student loans are disbursed directly to the school where they pay for the cost of tuition and room and board.

Differences

Here’s an overview of the major differences between Parent PLUS loans and private student loans.

Application Process

One of the major differences between these loans is the application process. Because Parent PLUS loans are a type of federal student loan, students must first fill out the FAFSA. Then, parents are able to apply for a Parent PLUS loan through the Federal Student Aid website.

Private student loans are administered by private lenders. To apply for a private student loan, parents will need to review the application requirements at their chosen lender.

Recommended: FAFSA Guide

Interest Rate

While both PLUS loans and private student loans will require a credit check during the application process, it will not impact the interest rate available for PLUS loans. Applicants with a strong credit history could potentially qualify for a more competitive interest rate with a private student loan than with a Parent PLUS loan, which, as mentioned, has an interest rate that is set annually by Congress.

Repayment Plans

Parent PLUS loans are eligible for federal repayment plans. The repayment plan for a private student loan will be set by the lender.

The chart below illustrates some more general comparisons between parent PLUS loans and private parent student loans:

Pros and Cons of Parent PLUS Loans

Understand what a parent PLUS loan is before you start comparing it to private loan options.

Pros of a Parent PLUS Loan

The first step to qualifying for any type of federal loan is to fill out the Free Application for Federal Student Aid (known as the FAFSA®). It’s a required step to document your child’s financial needs. Colleges use the FAFSA information to determine a financial aid package — which could include grants, work-study, subsidized loans, and/or unsubsidized loans.

If your child is offered a financial aid package, you can then figure out how much of their tuition will be covered by financial aid vs how much you might need to take out additional loans to cover any remainder. At that point, you can start to weigh the benefits of private student loans vs. parent PLUS loans.

A Direct PLUS Loan allows parents to borrow the remainder of their child’s costs not covered by financial aid. As mentioned, the interest rates on PLUS loans are set by the federal government and are fixed for the life of the loan. There are a few repayment options that borrowers may be eligible for.

Cons of a Parent PLUS Loan

Fees on PLUS Loans are also higher than on the other Direct Loans. Most income-driven repayment plans are unavailable to parent PLUS loan borrowers, although they may be eligible for an Income-Contingent Repayment Plan under certain circumstances.

And you’ll have to start making payments on the loan as soon as it is disbursed — though you can request a deferment while your student is in school, but the interest on the loan will still accrue and add up. Of course, the loan is taken out in the parent’s name, so responsibility for paying the loan back is on you, not on your kid.

Pros and Cons of Private Student Loans

Qualifying for a private parent student loan is usually similar to qualifying for most other types of private loans. Private lenders will review an applicant’s credit history and score, among other personal financial criteria, to determine the rate and terms they’ll qualify for.

This typically means applicants with good or excellent credit could stand to qualify for a better interest rate when taking out a private parent student loan when compared to the interest rate on a PLUS loan.

There are a variety of private companies that offer parent student loans, so parents have the option to shop around to find an interest rate and terms that suit their needs.

Some private lenders, including SoFi, have a prequalification process that allows potential borrowers to see personalized interest rate estimates based on a soft credit pull (which means their credit score won’t be impacted).

After selecting the preferred lender, borrowers typically file an application for a private parent loan. The exact process will vary slightly by lender.

	Parent PLUS Loan	Private Parent Student Loan
Who is the primary borrower?	Biological, adoptive, or stepparent of a dependent undergraduate student.	Many lenders allow any adult sponsor of that child (parent, grandparent, friend, etc.) to borrow for a student.
Credit criteria for the Borrower?	Parents may not have adverse credit history. Parents with adverse credit history can apply with a cosigner or submit documentation that outlines extenuating circumstances for adverse credit history.	Generally, a strong credit history and score are key factors. Exact requirements will vary by lender.
Is school certification required?	Yes	Yes
Is the FAFSA® required?	Yes	No
Interest Rate	For loans disbursed on or after July 1, 2023, and before July 1, 2024, the interest rate is fixed at 8.05%.	Varies by lender and is based on an individual borrower’s history and other factors. Rates can be fixed or varied.
Is there a rate reduction for enrolling in automatic payments?	Yes, enrolling in autopay can result in a 0.25% reduction.	Varies by lender; SoFi offers a 0.25% reduction for enrolling in autopay.
Are there any loan fees?	PLUS loans have a fee of 4.228% for loans disbursed on or after October 1, 2020 and before October 1, 2024.	Varies by lender (SoFi has zero fees, including late fees and insufficient funds fees).
Annual Loan Limits	Cost of attendance (COA) minus other student aid.	Cost of attendance (COA) minus other student aid.
Where are funds disbursed?	Funds are disbursed directly to the school.	Funds are typically disbursed directly to the school.
Are there any grace periods?	Payments are required immediately upon disbursement.	Options vary by lender.
Forbearance Options	Yes, limits can vary. For a full breakdown on forbearance options available to PLUS loan holders, review the Federal Student Aid Website .	In terms of forbearance, many lenders offer 12 months of forbearance for the life of the loan. But this will vary by lender.
Repayment Terms	PLUS loans are eligible for the Standard, Extended, or Graduated repayment plans.	Repayment terms vary by lender (SoFi offers repayment terms of 5, 7, 10, or 15 years).
Death Discharge	PLUS loans can be discharged in the event the student or parent dies.	Some lenders offer death forgiveness if the student who receives the benefit dies while in school or after graduation. When a parent with a private parent loan dies, the estate is typically responsible for the loan.
Disability Discharge	Parent only	Disability discharge varies by lender. Some lenders allow for total discharge dependent on disability.
Can the loans be consolidated?	Yes. Can be consolidated through a Direct Consolidation Loan.	Yes, private loans can be consolidated and refinanced through a private lender. New rates and terms will vary by lender and based partially on a borrower’s credit history.

Pros of a Private Student Loan

One of the biggest pros of private parent student loans is a potentially lower interest rate when compared to PLUS loans for well-qualified borrowers.

As you compare private parent loan quotes, pay attention to additional fees like origination fees. These will vary by lender. Some lenders, like SoFi, don’t charge an origination fee for their private student loans.

Once you have an idea of the rates and terms available for private student loans, you can compare them to PLUS loans. Note that parent PLUS loans currently have an origination fee of 4.228% of the total loan amount.

Private parent student loans may also offer borrowers increased flexibility when it comes to repayment options. Private lenders typically allow parents to take out the loan on their own, or share the loan with their child. PLUS loans can only be taken out by the parent and cannot be transferred to the student.

Cons of a Private Student Loan

Private parent student loans don’t come with the same borrower protections as a federal PLUS loan. In the event a borrower runs into temporary financial difficulty, a PLUS loan might qualify for deferment or forbearance. While some private lenders, including SoFi, do have policies to help borrowers who might be struggling in place, not all do.

Further, private student loans could potentially have higher interest rates than PLUS loans, depending on a variety of personal financial factors.


💡 Quick Tip: Pay down your student loans faster with SoFi reward points you earn along the way.

Choosing Between a Direct PLUS Parent Loan vs Private Loan

When you’re deciding between a parent PLUS loan and a private loan, you’ll want to weigh all the costs and consider your other options too.

Besides the Direct PLUS parent loan, there are other ways to finance your kid’s college education. Many parents start a 529 savings plan when their kid is very young, and could potentially have enough set aside by the time they start college.

Another possibility is a home equity line of credit, if you own a home, which could potentially have a lower interest rate than a Parent PLUS Loan, but would also put your house on the line and extend your mortgage repayment.

You might even be weighing the possibility of taking out a 401(k) loan or withdrawing money from your retirement account. But the latter comes with penalties for early withdrawal, so you’ll likely want to compare the costs to private loans.

Borrowers with strong credit histories and income might be able to qualify for a lower interest rate on a private parent loan.

Depending on a variety of financial factors, you might also be able to secure a lower interest rate or a shorter term, which could be a boon if you’re willing and able to repay the loan on a shorter repayment plan than is available on PLUS loans — which can help you save money in the long term.

Stretching out a loan repayment and using forbearance when you don’t need to are just a few of the common mistakes people make with student loans.

However, if you need to cover the costs of your kid’s education and you don’t qualify for a lower interest rate, then a PLUS loan might be the best option for you. Additionally, if you want to take advantage of federal benefits, such as income-driven repayment or deferment options, then you’ll likely want to consider a PLUS loan.

PLUS loans may allow you to defer repayment while your student is enrolled and for a grace period of up to six months after graduation, although the interest builds up during that time and you’ll end up paying more over the term of the loan.

Parent Student Loans With SoFi

Given how much college costs these days, it’s likely you and your child will have to take out some loans — whether student loans, parent loans, or both. SoFi offers low-rate, no fee parent student loans that are built to help you pay for your child’s education. And when we say no fees, we mean no fees. That means no origination fees, no late fees, no prepayment penalties, and no insufficient funds fees.

SoFi private student loans offer competitive interest rates for qualifying borrowers, flexible repayment plans, and no fees.

FAQ

Can Parent PLUS loans be forgiven?

PLUS loans borrowed by parents cannot be forgiven. However, parents may be able to consolidate their PLUS loan(s) into a Direct Consolidation loan, and would then be eligible to enroll in an income-driven repayment plan and pursue Public Service Loan Forgiveness. Additionally, qualification for the PSLF Program is dependent on the parent borrower’s employment, not the employment of the student.

Can a student pay off a Parent PLUS loan?

Yes, a student can make payments on a Parent PLUS loan. (In fact, lenders and creditors typically accept payments from anyone with the correct account information.) However, the parent is still solely responsible for repaying the loan, and there may be tax implications as a result of this “gift.” Families may also refinance Parent PLUS loans and take out the new loan in the student’s name.

Is a Parent PLUS loan considered a federal student loan?

Yes, a Parent PLUS loan is a type of federal student loan.

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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.

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

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

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.

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No one wants to see their hard-earned cash sitting in the bank and earning a miniscule amount of interest. Instead, most people want their money to work hard and churn out even more moolah at a healthy rate.

Achieving that may be as simple as switching banks or even just swapping account types. Or trying a couple of other smart financial moves that can help your wealth grow.

Read on to learn smart strategies that can help you earn more interest than you are currently.

What Is Interest?

Interest is the percentage paid when money is borrowed or loaned out. Here are a couple of examples.

•  When you deposit your money into an account at a financial institution, the bank may pay you interest. This is your reward for keeping your cash there, where they can lend some of it out or otherwise use it as part of their operations.

•  When you borrow money (like a mortgage or car loan) or open a line of credit (say, for a credit card), you pay interest to your lender. You are paying for the privilege of using their money.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do You Earn Interest?

When you deposit money into a bank account, you are in effect loaning them the money. They pay you interest in return.

The financial institution can use that money in any number of ways, including lending it out to others. Say you deposit $10,000 in a savings account that earns a 3% interest rate. The bank could then use some of your money and that of other depositors to make a $100,000 mortgage loan at 7% to a borrower.

The difference between the 7% they are charging the person with the home loan and the 3% they are paying you and other savings account holders is one of the ways banks make money. And it’s also a good example of how and why you earn interest on your deposit.

How Does Interest Work?

Interest can work in a couple of different ways.

•  With simple interest, interest is earned only on the principal, or the amount of money you deposited.

•  With compound interest, interest is generated on the principal and the interest as it accrues. This makes your money grow more quickly. Interest can be compounded at different intervals, such as quarterly, monthly, or daily.

Here’s an example of what a $10,000 savings account would look like at the end of a year if you earned 3% simple interest:

$10,000 principal +$300 interest = $10,300 at the end of the year.

However, if that interest was compounded daily, by the end of the year, you would have:

$10,000 principal + $304.53 interest = $10,304.53 at the end of the year.

While it doesn’t sound like much, over time, the difference is amplified. If you’re wondering how to make money with interest, consider what the numbers would look like after 10 years:

Simple interest: $13,000
Compound interest: $13,498.48

It can be wise to check with financial institutions and see how often interest is compounded. The more frequent the compounding, the more your money will grow.

Recommended: How to Get Your Money to Work Harder

7 Ways to Gain Interest on Your Money

Now that you understand what interest is, consider these seven ways you might help your money grow faster thanks to the power of interest.

1. High-Interest Savings Accounts

Want to earn more interest on savings? Some banks offer high-interest or high-yield savings accounts that can pay higher rates than traditional savings accounts, while still providing fairly easy access to your money.

How big a difference can this make? In mid 2023, regular savings accounts were paying as little as .01% to .15% annual percentage yield (APY) while high-yield accounts were in the 4.25% to 4.75% zone. When looking for a good interest rate for a savings account, most people would rather snag the latter.

Typically, these high-interest accounts limit you to six withdrawals or transfers per month per Federal Reserve requirements. While this Regulation D rule has been suspended since the coronavirus pandemic, some banks will still charge fees or have other penalties for more than six withdrawals, so be sure to check.

You are more likely to find high-interest savings accounts at online-only banks. Because these institutions tend to have lower operating costs than brick-and-mortar banks, they often offer higher rates than traditional banks. They may also be less likely to charge monthly fees.

A high-yield savings account can be a great place to build an emergency fund or save for a vacation or home repair while providing safety and liquidity.

2. Rewards Checking Accounts

Checking accounts are traditionally used for storing money that you use frequently, and they typically don’t pay interest. However, some banks offer rewards checking accounts. These may pay higher interest rates than traditional checking and savings accounts. For instance, as of mid 2023, while some standard checking accounts paid zero interest, rewards accounts offered up to 3.30% APY.

However, there may be some restrictions. For instance, the balance that earns the elevated rate may be limited. In addition, you may have to meet certain direct deposit or debit card transaction requirements each month to earn the higher rate.

Like other checking accounts, rewards checking accounts are highly liquid and typically come with check-writing privileges, ATM access, and debit cards. Plus, deposits can be withdrawn at any time.

If you’re considering a rewards checking account, however, you may want to first make sure you can meet any requirements.

💡 Quick Tip: Your money deserves a higher rate. You earned it! Consider opening a high-yield checking account online and earn 0.50% APY.

3. Credit Unions

Another of the best ways to earn interest on your money is to consider joining a credit union.

Unlike banks, credit unions are owned by the people (or members) who hold accounts at the credit union. Because of this, these financial institutions work for the benefit of account holders instead of shareholders.

In some cases, that can translate into lower fees, better account perks, and higher interest rates. To join a credit union, you typically need to live or work in a certain geographic area or work for a certain employer.

If you have a credit union near you, you may want to check the rates it offers and see if you can get a good deal.

4. Money Market Accounts

A money market account is a type of deposit account that usually combines the features of both checking and savings accounts. This kind of account often requires a higher minimum balance to open than a standard savings account and typically earns a higher interest rate.

Some money market accounts also come with a debit card or checks (which you generally won’t find with savings accounts), but financial institutions may require that they not be used more than six times per month. Some will charge a fee if you go over that number.

It can also be a good idea to ask about other fees, such as monthly account fees and penalties, before opening one of these accounts.

Recommended: Guide to Deposit Interest Rates

5. Certificates of Deposit

Certificates of deposit (CDs), which are a kind of time deposit, typically offer higher interest rates than traditional savings accounts in exchange for reduced withdrawal flexibility.

One benefit of CDs is that you lock in the interest rate when you open the CD.

When you put money in a CD, you agree to leave the money in the account for a set period of time, known as the term. If you withdraw your deposit before the term expires, you’ll usually have to pay an early withdrawal penalty.

One benefit of CDs is that you lock in the interest rate when you open the CD. Even if market rates drop, you’ll keep earning the same rate. On the other hand, if rates rise, you’ll be stuck earning the lower rate until the CD matures.

One way to work around this is to open several CDs that mature at different times, a technique known as CD laddering. Having a mix of short- and long-term CDs allows you to take advantage of higher interest rates, if they bump up, but still have the flexibility to take advantage of higher rates in the future.

A CD ladder also helps with the lack of liquidity that comes with CDs. Because of the staggered terms of the certificates, one is likely to be coming due (or available) if you need to use the cash.

6. Bank Bonuses

Many banks offer special bonuses from time to time; these can be a way to boost the earnings on your money. You may want to keep your eyes open for high-yield savings accounts that offer a sign-up bonus or an interest rate bonus. These incentives can boost your earnings, though you may have to maintain a high minimum balance in the account to earn the higher rate.

You may want to keep your eyes open for high-yield savings accounts that offer a sign-up bonus.

Some banks also offer cash bonuses to customers who open new checking accounts. While this may also come with some requirements, such as setting up direct deposit and/or keeping your account open for a certain number of months to earn the bonus, it can be another good way to increase the income you earn on your bank deposits.

7. Bonds or Bond Funds

Another way to gain interest on your money could be with bonds, which are loans that the government or companies issue. These pay investors interest on a regular basis until the bond hits its maturity date.

These investments, however, aren’t insured the way an account is at a bank or credit union by the FDIC or NCUA. U.S. Savings Bonds are backed by the government, but other bonds may carry risk.

Type of Account	Pros	Cons
High-Interest Savings	Higher interest	May have withdrawal limits
Rewards Checking	Higher interest, unlimited withdrawals, checks, and a debit card	May have requirements such as certain number of debit card or ATM transactions
Credit Union	Higher interest	May need to live in a certain area or work in a certain profession to open an account
Money Market	Higher interest; checking account privileges such as a debit card and checks	May charge fees and/or limit number of transactions
Certificates of Deposit	Higher interest, guaranteed interest rate	Money must be kept on deposit for a specific time period or else penalties can be assessed
Bank Bonuses	Higher interest and/or cash to add to your account	Not offered by all banks; may be minimum deposit requirements or rate may decrease after introductory period
Bonds	Pay interest to grow your investment	May not be insured

Other Ways to Make Your Money Work For You

If you’re planning to park your cash for at least five years or so and you are willing to take some risk, you may want to consider investing your money in the market.

While an investment might generate a higher return, all investments come with the risk that you could lose some or all of your money.

You can better weather this risk by investing for the long term, which essentially means only investing savings that you would not likely need to touch when the market is down.

There are a variety of ways to start investing. If your employer offers a 401(k), that can be one of the easiest ways to start investing. Another option for retirement is an individual retirement account (IRA).

You could also open a brokerage account for financial goals outside of retirement. This is a taxed account, typically opened with a brokerage firm, that allows you to buy and sell investments like stocks, bonds, and mutual funds.

If you’re ready to start investing, you may want to speak with a qualified financial advisor who can help you establish your savings goals and risk tolerance and help you develop a personalized investment strategy.

💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.

Creating a SoFi Savings Account Today

If you’re looking to make more interest on your money, you may be able to increase returns by opening a high-yield account at SoFi.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What does it mean to “gain interest”?

Gaining interest is similar to earning interest. It means that your money (the principal) is growing over time thanks to the interest rate being paid. The exact amount it grows will be determined by the interest rate, how long it sits, and how frequently (if at all) the interest is compounded.

Where can you get 7% interest on your money?

As of mid 2023, only one financial institution offered an account with 7% interest: Landmark Credit Union. It was paying 7.50% annual percentage yield (APY) on its Premium Checking Account, which had requirements for e-statements and direct deposits in order to earn that amount of interest.

How much interest does $10,000 earn in a year?

How much interest $10,000 will earn in one year will depend on the interest rate and how often the interest is compounded, if at all. If the interest rate is 3%, without compounding, it would earn $300. With daily compounding, it would earn $304.53. If the interest rate were 7%, the account holder would have $700 in interest at the end of the year with simple interest, and $725.01 with daily compounding.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

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Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

Choosing a Student Loan Repayment Option

It’s never too early to think about student loan repayment. Whether you’re still in college, or you recently graduated and are in the ‘grace period’ before repayment begins, strategizing now can help you weigh the options.

If you’ve graduated and are already working and making payments, it can be a good idea to re-evaluate your repayment plan over time. As your financial circumstances change, the way you’d like to manage your student loans may also shift.

Before considering your options, take inventory of all your student loans. Be sure to list the principal, the interest rate, the repayment period, and the servicer for each loan.

All federal student loans issued in recent years have fixed interest rates, but private student loans or older federal student loans may have variable rates. If the rate is variable, be sure to note that as well.

Different Student Loan Repayment Options

Once you understand the details of your student loans, it’s time to think about your repayment options. The simple choice if you have federal student loans is the Standard Repayment Plan. It’s the “default” repayment plan, so unless you sign up for another option, this is the plan you’ll have. Under the Standard plan, you typically pay a fixed amount every month for up to 10 years.

There is no “standard repayment plan” for private student loans; the interest rate may vary based on market factors, and your repayment term might be shorter or longer.

The federal government also offers graduated and extended repayment plans for borrowers. With the Graduated Repayment Plan, payments start smaller and grow over time, while the Extended Repayment Plan stretches repayment over a period of up to 25 years and payments may be either fixed or graduated.

Opting for the Standard Repayment Plan may work for you, but for some borrowers, it’s not the most cost-effective choice. These borrowers may be eligible for special federal programs that can reduce the amount they owe monthly based on financial circumstances, and in some cases, forgive balances if they meet certain requirements.

Or some borrowers might be able to find a more competitive interest rate by refinancing their loans through private lenders.

💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.

Here’s an overview of some student loan repayment options that may help if you are choosing a repayment plan:

1. Student Loan Consolidation

Federal student loan consolidation allows you to combine multiple federal student loans into a single new loan. You can’t consolidate private student loans using this federal program.

When you consolidate your federal student loans into a Direct Consolidation Loan, your new loan’s interest rate will be the weighted average of all your old student loans’ interest rates, rounded up to the nearest eighth of a percent. This means your interest rate won’t necessarily be lower than the rate you were paying before consolidation on some of your student loans.

When you consolidate, you’ll also have the option to select a new repayment plan. The standard plan would still be available, but consolidation can also be a first step toward other plans of action, like student loan forgiveness or income-driven repayment.

2. Student Loan Forgiveness

While President Biden’s federal student loan forgiveness program — which would have canceled up to $20,000 in student loan debt for eligible borrowers — was blocked by the Supreme Court in late June 2023, there are other available forgiveness plans that certain borrowers may be able to take advantage of. For instance, some federal student loans and Direct Consolidation Loans are eligible for modified payment plans that forgive outstanding student loan balances.

Health care professionals, teachers, military service members, and those employed full-time by qualifying nonprofit or public service organizations may be eligible for certain federal student loan forgiveness programs.

For instance, under the Public Service Loan Forgiveness (PSLF) program, those who have worked for qualified employers, such as the government or some nonprofit agencies and have made 10 years of payments on a qualified income-driven repayment plan, can apply for forgiveness of all of their remaining federal student loan balances. That forgiveness is not considered taxable income.

The Federal Student Aid website has additional information on which federal student loans qualify for which types of forgiveness, cancellation, and/or discharge.

3. Income-Based Repayment

If the payments under the Standard Repayment Plan seem too high, federal student loans offer a variety of income-based repayment plans, which tie the amount you pay to your discretionary income.

These income-driven repayment plans, which come in a variety of configurations, may help lower your monthly payments. In some cases, however, you might end up paying more over the life of the loan than you would have on the Standard Repayment Plan. That’s because with low monthly payments that stretch out over more years, you could be paying more in interest over time.

However, under the new Saving on a Valuable Education (SAVE) income-driven repayment plan introduced by the Biden Administration at the end of June 2023, any unpaid interest would be covered by the government (meaning the interest would not accrue) as long as you make your monthly payments. This plan also aims to reduce a borrower’s monthly payments by half.

Additionally, with income-driven repayment plans, you may be eligible for some student loan forgiveness programs if the remainder of your student loans aren’t paid off after 20 to 25 years (and in some cases under the new SAVE plan, after 10 years) of consistent, on-time payments.

4. Student Loan Refinancing

Refinancing student loans through a private lender offers the opportunity to consolidate multiple student loans into a single payment and potentially decrease your interest rate or lower your monthly payment.

Loan repayment terms vary based on the lender, and borrowers with better credit and earning potential (among other financial factors that vary by lender) may qualify for better terms and interest rates.

One important thing to know about refinancing, however, is that once you refinance a federal student loan into a private loan, you can’t undo that transaction and later consolidate back into a federal Direct Consolidation Loan.

This can be relevant for professionals in health care or education where federal student loan forgiveness plans are offered, or for those considering long-term employment in the public sector.

In addition, refinancing federal student loans with a private lender renders them ineligible for important borrower benefits and protections, like income-driven repayment and deferment.

💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

Can You Change Your Student Loan Repayment Plan?

If you have federal student loans, it is possible to change your repayment plan at any time, without any fees. You’ll have the option to choose from any of the federal repayment plan options, including income-driven repayment plans.

There is less flexibility to change the terms of a private student loan. Some private lenders may offer alternative payment plans for borrowers. Check with your lender directly to see what options may be available to you.

SoFi Student Loan Refinancing

Refinancing is another avenue that can result in a new repayment plan. An important consideration, however, is that refinancing federal student loans will remove them from any federal programs or protections, so this won’t be the right choice for everyone.

The Takeaway

Federal student loan borrowers have the ability to change their repayment plan at any time, without being charged any fees. There are different plans to choose from and you can look for one that suits your situation and needs.

Changing your repayment plan is a bit more challenging for private student loans, though some private lenders may offer alternative options for borrowers. Refinancing is another option that could allow some borrowers to adjust their repayment terms.

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

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What student loan repayment options are available to me?

Borrowers with federal student loans can choose from any of the federal repayment plans, including the standard 10-year repayment plan, or income-driven repayment options, including the new SAVE plan introduced by the Biden Administration at the end of June 2023, which is designed to make student loan debt more manageable.

For private student loans, repayment options will be determined by the lender.

What is a standard repayment plan for student loans?

The Standard Repayment Plan for federal student loans is fixed monthly payments over a period of 10 years. For consolidation loans, repayment may extend up to 30 years.

How long is a typical student loan repayment?

The typical student loan repayment period may vary from individual to individual. The Standard Repayment Plan for federal loans is 10 years, but income-driven repayment plans or Direct Consolidation loans may have a term of up to 25 to 30 years.

The repayment terms for private student loans vary by lender.

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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 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.

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.

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