Jul
21
2023

4 Ways to Pay for Your Child’s Tuition

By | Family Finances, Student Loans, student_loan | Comments Off on 4 Ways to Pay for Your Child’s Tuition

If you’re a parent hoping to send your child to college someday, you’re probably well aware that higher education costs have skyrocketed over the past 10-plus years.

Tuition and fees for the 2022-2023 academic year averaged $10,940 at public colleges (for in-state residents), $28,240 at public colleges (for out-of-state residents), and a whopping $39,400 at private colleges. And the price tag for an undergraduate degree typically goes up every year. Any way you look at it, college is a huge expense for families.

The good news, however, is there are a number of ways to make college more affordable for parents, everything from tax-advantaged college savings accounts to merit- and need-based scholarships to federal student loans.

Smart Ways to Pay for College

What follows are four key strategies that can help you cover the cost of a child’s college education — without going broke.

1. Starting Early With a Savings Plan

There are a variety of accounts to help parents save for college. While you can simply put money aside each month (or year) in a regular savings account, there are advantages to using a savings vehicle that is specifically designed for college savings. Here are two to consider.

529 Savings Plans

A 529 savings plan is a tax-advantaged investment account designed to help save for future education expenses. Your contributions to the account are made with post-tax dollars but, as long as the money stays in the account, no income taxes will be due on earnings. When you take money out to pay for qualified education expenses, those withdrawals may be federal income tax-free — and, in many cases, free of state tax too.

While 529 plans used to be limited to higher education, the funds can now be used for kindergarten through grade 12, as well as certified apprenticeship programs and qualified student loan repayments.

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

Coverdell Education Savings Account

Like a 529, a Coverdell Education Savings Account (ESA) is a tax-advantaged account designed to help save for a child’s future education expenses. Contributions are made on an after-tax basis, but earnings aren’t taxed. When you withdraw the money and use it for qualified education expenses, the investment profits are tax-free.

However, Coverdell accounts come with income and contribution caps. Contributions are capped at $2,000 per year, and you can only make them until your child turns 18. To open and contribute to a Coverdell ESA, your income must be below a certain limit ($110,000 for single filers; $220,000 for married couples).

Coverdell ESA funds must be withdrawn when the beneficiary turns 30, or rolled over to another eligible beneficiary in the family.

2. Looking for Ways to Get Free Money

When figuring out how to pay for your kid’s college, there are numerous resources available, including scholarships, grants, and other forms of financial aid. These sources of “free money” can provide significant assistance to students based on academic merit, extracurricular achievements, or financial need.

Your Free Application for Federal Student Aid (FAFSA) will automatically match you with any federal scholarships and grants you’re eligible for, but there are other types available. You can look for additional funding options on your own using a search engine like FinAid or SoFi’s Scholarship Search Tool.

You can also research various scholarships offered by corporations, foundations, and non-profit organizations related to your child’s interests and intended field of study.

In addition, your child also can check out the high school guidance department for any information, and you may want to make an appointment with a school counselor to get any tips that might help your search.

If your child has a college selected, funding information is usually available on that school’s website as well.

Recommended: How Do You Find Non-Academic Scholarships for College?

3. Considering an After-School Job

Encouraging your child to work part-time during high school or college can contribute to funding their education and teach valuable life skills. A part-time job provides them with their own income, reducing their dependence on student loans and parental contributions.

Many colleges offer work-study programs where students can work on campus or in community service roles while earning money for their education expenses. In addition, summer jobs or internships can be an excellent way for students to save for college during their break.

However, it’s important to strike a balance between work and academics to ensure that your child’s studies remain a top priority. You may need to help your child manage their time efficiently to avoid overworking themselves and compromising their academic performance.

A job won’t pay for everything, but it will pay for some things, and that could mean fewer costs to cover with savings or financing.

4. Researching Student Loan Options

With the high cost of getting a degree these days, you may not be able to avoid taking on at least some student loan debt. You and your child may want to take some time to research and understand all the student loan options out there — both federal and private — and how they work well-ahead of senior year.

The amount a student can borrow in federal loans will depend on their year in college, status as dependent or independent, and the type of loan or loans they take out.

Parents of dependent undergraduate students also can apply for Direct PLUS Loans to help pay for education expenses that aren’t covered by other federal financial aid.

Federal student loans usually have more benefits than loans from banks or other private lenders, so be sure to compare the benefits of each private student loan program, as well as the interest rates and terms.

For example, federal loans offer deferment and forbearance along with programs like Public Service Loan Forgiveness (PSLF) and income-driven repayment plans. Private lenders don’t usually offer such perks and protections. It’s generally recommended that students exhaust all federal loan options prior to borrowing private student loans.

While researching different options for private student loans, you may encounter different ways for you and your child to apply, such as taking on a private student loan yourself or acting as a cosigner for a private student loan.

There are, of course, pros and cons to both of those options, so it’s important to do your due diligence on the private lenders you may be considering. What benefits do they offer? What are their rates and terms? Is there any fine print?

If your child doesn’t qualify for enough federal student aid to cover the cost of attending college, private student loans may be a viable option to look into to close the gap.

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

The Takeaway

There’s no one-size-fits-all way to pay for college. Students and their families may end up using a blend of savings, scholarships, grants, work-study, and different types of student loans to finance their education. When looking at aid options, you may want to prioritize federal sources of aid before borrowing private student loans.

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

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

 

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.

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.

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.

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Jul
20
2023
How Rising Inflation Affects Student Loan Interest Rates

How Rising Inflation Affects Student Loan Interest Rates

By | Fresh Out of School, Going to College, Student Loans, student_loan | Comments Off on How Rising Inflation Affects Student Loan Interest Rates

Inflation indirectly causes student loan interest rates to rise. That’s because the government tends to increase interest rates to combat rising prices, which typically raises the cost of borrowing.

Student loan interest rates have in fact risen since the Federal Reserve began raising interest rates to combat inflation during the Covid-19 economic recovery. For example, the fixed interest rate on newly disbursed federal student loans for undergraduates went from 2.75% in July 2020 to 5.50% in July 2023.

The fixed interest rate on newly disbursed federal student loans is largely determined by the high yield of the final 10-year Treasury note auction held each year in May. Bond yields are typically higher when interest rates go up.

High inflation is bad news for people seeking new student loans and those with variable interest rate loans, though people with fixed-rate loans won’t see their rates go up.

What Exactly Is Inflation?

Inflation — the rising cost of everyday items — is an important economic factor to everyone from investors to policymakers to borrowers. The reason it matters to borrowers is that inflation can lead to higher interest rates on every kind of debt, including student loans.

Put simply, inflation means that the price of bread will be higher tomorrow than it is today. So lenders may increase their interest rates during times of high inflation, given that borrowers will be paying the money back when those dollars will buy less. That’s one reason inflation and many interest rates have typically risen or fallen in step with each other.

The Federal Reserve is another reason. The country’s central bank plays a major role in managing the economy, especially with factors like interest rates and inflation.

The Fed began its rate-hiking campaign in March 2022 to combat high inflation and continued raising rates into 2023. Increases to the federal funds rate have prompted commercial banks to raise the price of consumer loans and other financial products, including private student loans.

What Does Inflation Mean for Student Loans?

To someone with student loan debt, inflation may not always be bad news. That’s because price inflation may influence wage inflation.

Inflation typically drives up the price of everything, including wages. As a result, some borrowers are paying back certain fixed-rate loans, for example, with dollars that have less value than the ones they borrowed.

There are exceptions. If a borrower took out a variable rate private student loan, it’s likely that inflation will lead to higher interest rates, which will translate into higher interest rates that the borrower has to pay. But if the borrower has a fixed-rate private student loan and their salary keeps up with the pace of inflation, then inflation can be helpful.

With the Federal Reserve in 2023 still aiming to cool down inflation or Consumer Price Index (CPI) growth, it’s worth checking to see whether your private student loan has a fixed or variable rate.

As a quick primer, fixed-rate loans have the same interest rate from when borrowers take out the loan to when they pay it off. Variable-rate loans change the interest they charge, which is influenced by Federal Reserve rate changes.

Variable-rate loans, also sometimes called “floating rate” loans, usually start out with lower interest rates than fixed-rate loans.

All federal student loans disbursed since July 2006 have fixed interest rates. Meanwhile, banks and other private lenders may offer fixed-rate and variable-rate private student loans.

When Does Refinancing Make Sense?

Student loan refinancing may be right for you if you qualify for a lower interest rate. Refinancing federal student loans with a private lender would remove your access to federal income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). A student loan refinancing calculator may come in handy as you weigh your options.

The first step is to check the interest rates on your existing student loans against the rates offered by other lenders. If they offer a better rate, then it may be possible to pay off that student loan debt faster or reduce your monthly payments with refinancing.

Some lenders refinance both federal and private student loans. If you choose to refinance federal student loans with a private lender, realize that you will give up federal benefits and protections like IDR plans and PSLF.

After a three-year pause, interest accrual on federal student loans will resume on Sept. 1, 2023, and payments will be due starting in October 2023. If you qualify for a lower interest rate, student loan refinancing may reduce your borrowing costs. Refinancing for a longer term, however, may increase your total interest costs.

Recommended: SAVE Plan for Federal Student Loans

The Takeaway

Borrowers with variable-rate student loans may see their borrowing costs go up during times of rising inflation. Whether your student loans have a fixed or variable interest rate, the impact of consumer price inflation across the economy may impact your ability to make ends meet.

If you find student loan refinancing is right for you, SoFi can help. SoFi refinances federal student loans, parent PLUS loans, and private student loans with no origination or prepayment fees.

See if you prequalify for a student loan refinance with SoFi.

Photo credit: iStock/MicroStockHub

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.


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

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

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Jul
20
2023
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How to Apply for Student Loans

By | Student Loans, student_loan | No Comments

College students often use a combination of funding including grants, scholarships, student loans, and savings to pay for their college education. Scholarships and grants are helpful because they typically don’t have to be repaid. But in many cases, students rely on borrowed funds to help pay for some college costs.

Student borrowers have two major options available to them — private and federal student loans. While both types can be used by students to help pay for college there are big differences in how a student will apply for them. Continue reading for more details on the differences between private and federal student loans and their application process.

Federal Student Loans vs Private Student Loans

Federal student loans are provided by the federal government. Private student loans are issued by institutions such as banks, some schools, and other private lenders. In order to make an educated borrowing decision it’s important to understand the major differences between federal vs private student loans. These differences include:

Repayment Terms

Federal student loans have a standardized set of repayment options. Borrowers can choose any of the federal plans and can adjust their repayment plan at any time without incurring any costs by contacting their loan servicer.
These repayments include income-driven repayment options which aim to make repaying student loans more affordable by linking monthly payments to your income.

The repayment terms on private student loans are set by the lender at the time the loan is borrowed. Some lenders may offer flexible repayment terms, but they are not required to do so. Thoroughly review the loan terms before borrowing.

Interest Rates

All federal student loans have fixed interest rates, which are determined annually by Congress.

Private student loans may have either fixed or variable interest rates. With variable rates, the starting rate depends on factors such as your credit score, income, and employment history, and it can change as the economy fluctuates. Lenders determine the interest rate on a loan based on reviewing borrower information such as income, credit history and score, among other factors.

In-School Deferment Options

Your choice between federal and private student loans may also determine when you start paying back your loans.

If you have a federal student loan, you generally aren’t required to start making payments until you graduate, leave college altogether, or reduce your course load below half-time. Many federal loans offer a six-month grace period after you leave school or cut back to below half-time, meaning you don’t have to make student loan payments during this time.

Certain private lenders allow you to wait to make payments on your private student loans just as you would with federal loans, but others require you to start paying them while you’re still in school full-time. This varies depending on the lender, so it’s important to check the specifics before taking out a loan.

Recommended: Using In-School Deferment as a Student

Which Type of Student Loan Should You Apply for First?

Federal student loans tend to be more flexible in regards to repayment options and loan forgiveness, and sometimes offer lower interest rates than private student loans. Because private loans are awarded based on borrower criteria including credit history, undergraduate students with limited credit history may need to add a cosigner to strengthen their chances of being approved for a private student loan.

Generally speaking, federal loans are prioritized over private student loans. But, in situations where borrowers have exhausted their federal borrowing options, private student loans can help fill financing gaps.

How Does the Application Process Differ Between Federal and Private Student Loans?

We’ll dive into an overview of how to apply for student loans, broken down by federal and private loans. But you should know that there are two main differences in the processes: where to apply and when to apply.

Federal Student Loan Deadlines

For federal student loans, you’ll fill out the Free Application for Federal Student Aid, better known as the FAFSA®. You will need to fill out the FAFSA each year you are in school.

When it comes to timing, there are important FAFSA deadlines set by the state and sometimes your individual college. Some states offer aid on a first-come, first-served basis, so procrastinating may not be in your best interest. Jumping on the FAFSA® early could make a difference in how much aid you receive.

Private Student Loan Deadlines

To apply for a private student loan, you’ll fill out an application directly with an individual lender. While private student loans are known for being more stringent with their terms and requirements, they can actually be more flexible when it comes to application timing. There’s no universal private student loan deadline. That’s one reason you may prefer to apply for federal student loans before private ones—to see how much federal financial aid you receive first, then, if needed, you can fill in the gaps with private loans.

Recommended: When to Apply for Student Loans: Student Loan Deadlines

Applying for Federal Student Loans

To apply for federal student loans, the first step is to fill out the FAFSA.

Filling out the FAFSA

You can fill out the FAFSA online at the Student Aid website. You can list up to 10 colleges on your FAFSA® form. If you want to list more than 10, you just have to follow a couple of extra steps.

The FAFSA form will ask for personal and financial information about the student and their parents (if the student is a dependent). These questions cover your age, marital status, level of degree you’re acquiring, military status, and your own dependents.

You’ll provide the necessary financial information. This includes your federal income tax returns and tax documents (and/or your parents’ returns and documents, if you’re considered a dependent). This may sound like a lot of work, but the website makes it relatively easy. It includes an IRS Data Retrieval Tool, and once you enter the relevant information, it should be able to pull up you and/or your parent’s tax return(s).

Just a heads up — you won’t submit the most recent tax return. For example, if you’re applying for aid for the 2023-24 school year, you’ll attach your 2021 tax returns.

If you have any untaxed income from that particular calendar year (the year 2021 from our example), you’ll need to provide records for those earnings. If you’re a dependent, this could include your parent’s income, including sources like child support or disability benefits.

Last but not least, you and/or your parents will provide bank statements. These statements should be current at the time you fill out the application, not from the year of the tax documents and untaxed income reports you submitted.

Recommended: SoFi’s FAFSA Guide

Completing FAFSA Follow-up Steps

After receiving your Student Aid Report, you may want to double-check with the schools you listed on the FAFSA® to make sure they received your information and to ask if they need you to fill out any more documents. Some schools require different documents, so it may be beneficial to contact each one.

Once a school has processed your information, you’ll receive an award letter from the institution that officially reports how much aid you’ll be receiving. Colleges differ in how long they wait to send out award letters, so if you’re feeling antsy, you can call to inquire about their reward deadline.

Now for a huge follow-up step: applying for private student loans if scholarships, grants, and federal loans don’t cover everything.

Types of Federal Student Loans

There are four types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans for graduate and professional students, and Direct PLUS Loans for parents.

Direct Subsidized vs Unsubsidized Loans

Direct Subsidized Loans are available for undergraduate students. These loans are for students in financial need, and you don’t have to pay the interest until six months after you’ve graduated, left school, or dropped below half-time enrollment. These six months are referred to as the “grace period.” Interest will still accrue while you’re in school, but the government covers interest while you’re enrolled and during the grace period.

Direct Unsubsidized Loans are also for undergraduate students, but they aren’t disbursed based on your financial situation. The government doesn’t cover the cost of interest while you’re in school, so interest will accumulate throughout your time in college. You have the option to pay off the interest while you’re still a student, or you can wait until you start repaying your loans after the grace period—just keep in mind that unlike with Subsidized Loans, you’re responsible for paying the interest from this time period, not the government.

Direct PLUS Loans

The third type of federal student loan is a Direct PLUS Loan for graduate or professional students. The student takes out the loan, which is unsubsidized.

The fourth type is the Direct PLUS Loan for parents. This loan is for the parents of undergraduate students, so the parents would apply for and are held responsible for paying back the loan. Parent PLUS Loans are also unsubsidized.

Direct PLUS Loans require a credit check, unlike Direct Subsidized and Unsubsidized Loans.

Applying for Private Student Loans

As mentioned above, you can typically apply for private student loans directly on the lenders’ websites. If you’re having trouble deciding where to apply for private loans but have already narrowed down your top schools, you can contact those institutions. Some colleges have “preferred lender” lists.

However, you aren’t necessarily bound by those lender lists. You may still want to research private student loans to find the right interest rates, interest rate types (fixed or variable), payment schedules, and included fees for your specific needs. Remember, private student loans tend to vary in their terms, so a little research can’t hurt.

Lender Requirements

Make sure you meet the requirements to receive a private student loan. For example, will you be enrolled in school at least half-time?

You should also make sure you’re attending a school that’s eligible for private student loans. If you’re attending a community college or trade school, you may or may not be able to receive a private loan.

Keep in mind that private student loan lenders tend to check things like your credit, income, and job history when you apply. This step will affect everyone differently, but if you’re fresh out of high school, this step could throw you for a loop. What if you’ve never had a job? What if you didn’t even know credit scores were a thing before this moment?

Considering a Cosigner

One thing that may help in this predicament is finding a student loan cosigner.

Your options for a cosigner are fairly flexible, but many borrowers choose someone they trust, such as a parent, close relative, or trusted friend.

Cosigners can also come in handy if you aren’t a U.S. citizen. Maybe someone from your host family or study abroad program can cosign for you.

Still, it may be possible to get a private loan without a cosigner if you have low credit and/or income. Just be prepared to possibly pay more in interest!

Other Ways to Finance Your Education

Yes, federal and private student loans are tools for receiving money to pay for college. But they aren’t the only options! Remember, you can always apply for scholarships and grants.

Scholarships and Grants

Scholarships are “gift aid,” which means they don’t usually need to be repaid, and are typically merit-based. You can search for scholarships based on skill, such as academic, athletic, or music scholarships.

There are also scholarships available for people of certain demographics, such as ones for minorities or for women. You could even find scholarships for people of a certain religion/denomination or for those who’ve engaged in community service.

Grants are gift aid awarded based on your financial need. Some grants are provided by the government (state or federal), while others may be offered by your school or a private company.

Work-Study Program

The federal work-study program awards students with financial need the option to work part-time jobs to help pay for college. If you are interested in participating in the work-study program, you can indicate your interest when you fill out the FAFSA.

If you do not qualify for work-study, you may consider getting a part-time job.

The Takeaway

To apply for a federal student loan, and other forms of federal financial aid, students will fill out the FAFSA annually. Students interested in private student loans will fill out applications directly with private lenders.

Private student loans can be a tool when all other forms of aid have been exhausted. But if scholarships, grants, and federal student loans don’t cover your cost of attendance, finding a suitable private student loan could be the final step to supplementing your education costs. SoFi offers fee-free private student loans with competitive interest rates for qualifying borrowers. Plus, SoFi members can access even more benefits like career coaching.

Ready to get started? SoFi offers private undergraduate, graduate, and parent student loans, and student loan refinancing with flexible repayment options.

Ready to get started? SoFi offers private undergraduate, graduate, parent student loans, and student loan refinancing with flexible repayment options.

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.


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.

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Jul
20
2023

Getting Private Student Loans Without a Cosigner

By | Financial Independence, Fresh Out of School, Student Loans, student_loan, Terminology | No Comments

With the average cost of tuition at a private college close to $40,000 per year, it’s no surprise that many students will take out student loans to pay for their education. These student loans come in all shapes and sizes: federal or private, subsidized or unsubsidized, cosigned or not.

Most federal student loans do not require a credit check and can be borrowed without a cosigner. While the majority of students who take out private loans have a cosigner to guarantee the loan, that’s not an option for everyone. A cosigner — generally a family member or close friend — is someone who guarantees they will pay back your student loan if, for some reason, you can’t.

If you don’t have enough established credit to qualify for a private student loan on your own, turning to a cosigner, if possible, may also help you get approved at a better interest rate. However, not everyone has someone to cosign their student loans, and that’s okay too. There are plenty of ways to potentially qualify for both private and federal student loans without a cosigner. Here’s what you need to know.

Purpose of Adding a Cosigner

There are two main reasons why adding a cosigner to a private student loan may make sense — one is to improve your chances of being approved for a loan and the other is to potentially help secure a more competitive interest rate.

If you’re applying for student loans, you may not have a long credit history yet. To lenders, a lack of credit history can be seen as risky because you haven’t proved how well you can manage your financial obligations. You might need a cosigner to convince a lender to give you a student loan, since having a cosigner with more financial security or a better credit history reduces risk to the lender.

A cosigner with a strong credit history may also help you get approved for a loan with a lower interest rate, which could help reduce the amount of money you pay in interest over the life of the loan.

A cosigner will need to share their financial information with the lender, so it’s a good idea to make sure that your cosigner has plenty of time to get their documents in order and discuss loan applications with you.

Named a Best Private Student Loans
Company by U.S. News & World Report.

Can You Get a Federal Student Loan Without a Cosigner?

The short answer is yes. The first step in qualifying for a federal financial aid package is to fill out the Free Application for Federal Student Aid (FAFSA) .

You’ll submit your financial information and, if you’re a dependent student, your parents’ information too. Depending on your financial need, you’ll then be offered a combination of federal student loans — including subsidized and unsubsidized Direct or PLUS Loans — and work-study programs.

Federal student loans typically do not require a cosigner, nor a credit check, and they often have competitive interest rates. Direct PLUS Loans , which are primarily offered to parents and graduate or professional students, however, do require a credit check.

You’ll want to keep in mind that there are limits on how much you can take out in federal loans. For example, dependent students whose parents are unable to obtain PLUS Loans cannot take out more than $9,500 as a first-year undergrad. And, no more than $3,500 of this amount may be in subsidized loans. For more information on loan limits, check here . Because of these limits, students may look for additional sources of funding.

💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

Can You Get a Private Student Loan Without a Cosigner?

Yes, it is possible to get a private student loan without a cosigner, but you will likely need to have an established credit history or be willing to pay a higher interest rate.

To qualify for a private student loan, which are available from banks, credit unions, and online lenders, you generally have to be age 18 or older, a U.S. resident, and enrolled in school at least part time. Additionally, certain lenders may only approve loans if you are enrolled at schools that meet their criteria, which can vary from lender to lender.

To qualify for a private student loan without a cosigner, you typically must meet certain credit requirements. This often includes at least two years of established credit history, a credit score in the “good” range (670-739), and a certain minimum amount of income.

Some private lenders will provide student loans without a cosigner even if you have a limited credit history or income. However, you will almost definitely pay a higher interest rate.

If you know you’re going to need a student loan without a cosigner, one option is to start building your credit as early as you can. There are several ways to begin building credit. One is to be added as an authorized user on a credit card held by someone (usually a parent) with good credit. If you’re over 21, you might consider applying for a low-limit credit card. This type of credit card can help keep you from going overboard on spending, while still allowing you to establish credit.

💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.

Why It Can Help to Have a Cosigner on a Private Student Loan

Having a cosigner on a private student loan can help you qualify for a loan you might not otherwise be able to get. In addition, it can help you get approved for a larger loan amount, as well as lower rates and fees.

You’ll also want to keep in mind that having a cosigner is not necessarily a permanent situation. Some lenders will “release” a cosigner from a loan after the primary borrower meets certain requirements, like a certain number of payments and a credit check.

You also may consider refinancing your loan once you’re out of school, which will then be a way to have the loan in your own name. It can be a good idea to talk through what your cosigner expects and anticipates for the life of the loan, so that you’re both on the same page.

What is the Minimum Credit Score for a Student Loan?

If you apply for a federal student loan, your credit score won’t be a factor, since a credit check is not even part of the application process. However, private student loans often require a credit score of at least 670 to get a loan without a cosigner.

The exact qualification criteria will vary from lender to lender but, generally, the higher your credit score, the more likely you are to qualify and obtain a competitive interest rate for a private student loan.

Before you apply for a private student loan, you may want to get copies of your credit reports (available free at AnnualCreditReport.com ) and check your credit score to get a sense of where you may stand in the eyes of a lender. You also can check your credit report for any errors, which could bring down your score.

Who is Eligible for Student Loans That Don’t Require Cosigners?

Federal student loans don’t require a cosigner. There are also some private student loans that don’t require a cosigner, though you typically need to meet certain credit and income requirements.

You may be able to check your private student loan eligibility before you apply for a loan without a cosigner. This triggers what’s known as a “soft” credit check. A soft credit check does not affect your credit score, but can give you an approximate idea of whether or not you’ll be approved for a loan and what the interest rate on the loan may be.

Keep in mind, though, that your loan won’t be finalized until you apply for the loan. At this point, a hard credit check will be performed and final approval decisions will come through. But checking loan eligibility is one way to know whether or not a lender may consider your application without a cosigner.

What are Your Options If You Can’t Get a Student Loan Without a Cosigner?

If you can’t get a student loan without a cosigner and you don’t have someone who can be your cosigner, don’t panic. There are other potential paths forward depending on your goals and your circumstances:

•   Take a gap year. Some students take a year off to build credit, grow their income, and reapply once they feel their finances are on more secure footing.

•   Consider a less expensive school. Some students who can’t get a cosigner decide to go to a community college and take core credit courses. They may also work during this time. Then, when they feel their finances are on more secure footing, they transfer to their intended school to finish their degree.

•   Rethink your education priorities. If you can’t get a cosigner and are having trouble shouldering loans on your loan, you may recalibrate your educational goals and consider different degree programs or institutions that may have a less expensive price tag. It can be helpful to talk to people who work in your future career field — they may have thoughts on how you can save money on education or may have tips for alternate paths toward the job you want.

•   Talk with your financial aid office. Chances are, your financial aid office has seen similar situations and may have ideas. They may also be able to connect you with other funding opportunities, as well as students who have independently financed their education.

Other Ways to Help Finance Your Education

Besides taking out federal student loans or private student loans without a cosigner, there are a few other options to help finance your education.

There are many grants and scholarships available, including need-based grants and merit-based grants (grants available for students who reach a certain level of academic excellence) that you do not need to repay. You can search for scholarships online to see if there are any you might qualify for. You might also ask your high school’s college counselor or selected college’s financial aid office for information on any scholarships or grants you may be eligible for.

You might also consider working while you’re in school. Some students find they can manage a job alongside their studies, while others find that it’s challenging to find a balance. There is no “right” way to pay for your education. Some students may take a year or more off to save up for school, and then focus full-time on school. Talking to graduates can help you see different pathways and that there is no “one size fits all” when it comes to financing an education.

The Takeaway

Applying for a private student loan with a cosigner can help a potential borrower secure a more competitive interest rate or preferable loan terms. This is because the cosigner provides additional security for the lender — if the primary borrower runs into any issues repaying the loan, the cosigner is responsible.

Federal student loans, aside from Direct PLUS loans, do not require a credit check or cosigner. If you find that your federal loans aren’t going to cover your education, a private student loan may help. And, some private lenders will offer student loans without a cosigner. Just keep in mind that private student loans lack the borrower protections offered by federal student loans.

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


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

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.

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

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.

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Jul
18
2023
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Graduate Student Loan Limits: How Much Can You Get?

By | Budgeting & Goals, Going to College, Student Loans, student_loan | Comments Off on Graduate Student Loan Limits: How Much Can You Get?

Students applying for financial aid for graduate school are likely familiar with the process of applying for federal financial aid, but graduate students should be aware of the fact that they’re almost always considered independent, and many will want to learn the maximum amount they can borrow.

The lifetime graduate student aggregate loan limit for Subsidized and Unsubsidized federal loans is $138,500. Of this amount, no more than $65,500 can be in subsidized loans. This is the aggregate limit that includes loan amounts borrowers use to pay for undergraduate and graduate studies.

Students could also borrow private student loans, which could potentially increase the amount of student loans an individual could borrow. Continue reading for more details on the different types of student loan limits.

Federal Student Loan Limits

Students can apply for federal aid to help fund graduate school. Students are encouraged to fill out the FAFSA® (the Federal Application for Federal Student Aid) to see if they qualify for help. Graduate requirements of FAFSA are similar to those for undergraduate students. Eligibility for federal aid is based on a student’s income, among other factors, so not everybody will be eligible for all types of aid.

As mentioned, the lifetime aggregate limit for Subsidized and Unsubsidized student loans is $138,500 for graduate or professional students. Of this amount, no more than $65,500 can be in subsidized loans. This is the aggregate limit, so does include student loans borrowed during undergraduate study.

Recommended: High Income Financial Aid

If students want to take out more federal loans, they’ll have to pay off some of their debt first. Then they can borrow up to the limit again. There are also maximum borrowing limits in place for Direct Unsubsidized Loan and Direct PLUS Loans for graduate or professional students. These limits are outlined below.

Direct Unsubsidized Loans

Let’s look at direct subsidized vs. direct unsubsidized loans. Graduate students cannot receive direct subsidized loans. Those loans are only available to undergraduate students who show financial need. If students took out these loans as undergraduates, that amount will be included in the lifetime limit of federal loans they’re allowed to receive.

For direct unsubsidized loans, the annual limit is $20,500. All graduate or professional students are considered independent for this loan. Unsubsidized loans aren’t dependent on students demonstrating financial need. The schools will decide how much students receive based on their annual costs and how much aid they’re receiving from other sources.

Direct PLUS Loans

Graduate students with eligible credit can also take out Direct PLUS Loans, issued by the U.S. Department of Education. These loans have an annual limit of the cost of attendance, subtracting any other aid that is received.

Private Student Loan Limits

The maximum amount that students can borrow with a private student loan will depend on the lender. Usually, they won’t lend students more than it costs to attend school.

The cost of attendance is an estimate of tuition and fees, books and supplies, living expenses, transportation, and other miscellaneous expenses. The estimate can also include dependent care, study-abroad programs, and costs related to disabilities.

Recommended: Private Student Loan Guide

Graduate Student Loans vs Undergrad Student Loans

Undergraduate students may be eligible for Direct Subsidized Loans. The government covers the interest that accrues while a student is enrolled at least half-time in school. Graduate students are not eligible for this loan type.

Direct Unsubsidized Loans are available to both graduate and undergraduate students. The undergraduate student federal loan has a lower interest rate than the unsubsidized loan for graduate students. Undergrads have an interest rate of 5.50% for the 2023-2024 school year, while it is 7.05% for graduate students.

Direct PLUS Loans are available for graduate students. Only undergraduate students who are considered independent, or who are dependent undergraduate students whose parents are unable to obtain PLUS Loans may be eligible to borrow a PLUS loan.

Graduate School Resources

Be sure to fill out your grad school FAFSA to see if you qualify for federal aid including federal student loans. Some students will hit the max of federal aid but still need more. In that case, they have a couple of options. Students can try to pay off some of the loans and then borrow more, up to the limit, again. If they don’t want to or are unable to pay off some of their federal loans to take out more federal loans, they can opt for a private loan.

Grants and Scholarships

When students submit their FAFSA®, their eligibility for certain grants will be considered. The school may also have information on local or institutional-based grant programs.

Grad students also have the option of doing a graduate assistantship, where they teach or work on research under the supervision of a professor. Assistantships sometimes pay a stipend or provide benefits like housing. Students can check with their schools to see if that option is available to them.

Scholarships and fellowships are also available to help pay for graduate school. There are many ways students can go about finding and applying for grad school scholarships. Students can check with their school’s financial aid department, or even the department they’re studying under, to see what is available. There’s usually a wide variety of scholarships available from various sources, including schools, employers, companies, and nonprofit organizations. Scholarships can be either merit based or need based, so the eligibility will vary.

Recommended: Scholarship Search Tool

The Takeaway

The aggregate limit for Unsubsidized and Subsidized loans for graduate students is, as mentioned, $138,500, no more than $65,500 can be in subsidized loans. For the PLUS Loan, the annual borrowing limit is no more than the cost of school minus other forms of financial aid. Limits for private student loans may vary by lender but, generally, a private lender will not let you borrow more than the cost of attendance.

Private loans could be an option for students who have exhausted federal options and still need more to fund their education. SoFi offers student loans with competitive interest rates for qualifying borrowers and an easy, online application. Plus, as a SoFi member, you’ll be able to access additional benefits like career coaching.

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

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.

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.

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