May
23
2025
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What Is a Good Entry Level Salary? A Guide for New Grads

By | Building Your Career, Life & Career, student_loan | Comments Off on What Is a Good Entry Level Salary? A Guide for New Grads

Starting salaries can vary greatly based on location or line of work, so there’s no one answer to the question, “What is a good starting salary?” The size of the paycheck will differ based on where someone lives, the industry they work in, the hiring institution or company, and other hard-to-tabulate variables.

It can be worthwhile to figure out a good starting salary in your field before sitting down with a prospective employer or HR representative to discuss pay. Here are some helpful resources to get a handle on entry level salary rates across the U.S., along with tips for negotiating compensation.

Key Points

•   Entry-level salaries vary widely by location, industry, and role.

•   New hires can often negotiate for higher pay or benefits by highlighting their skills and preparing a confident pitch.

•   Besides salary, consider negotiating for benefits like tuition reimbursement, flexible schedules, or professional development support.

•   Living on a starting salary can be tough, especially with student loans. Budgeting and choosing lower-cost areas may help.

•   Refinancing student loans may reduce monthly payments or interest rates but for federal loans, it means forfeiting federal protections and benefits.

Understanding Entry Level Salaries

Entry level salary information changes on a regular basis, but many job-focused websites offer insights into the going rates. For instance, ZipRecruiter, a well-known employment marketplace, lists the average U.S. starting salary by state. In spring 2025, entry-level wages in North Carolina are $12.39 per hour or $25,763 per year, while New York pays $17.51 per hour or $36,426 per year, on average.

Still, even state-by-state salary averages don’t show the whole picture. Although 34 U.S. states currently have minimum wage requirements higher than the federal minimum wage, which remains set at $7.25 per hour, the amount an early-career new hire might expect can also vary by county and city within the same state.

Along with location, the industry an individual works in can play a big role in what kind of starting salary a new hire might expect. For instance, a data scientist at a tech company might be able to earn as much as $165,000 right out of the gate, while a newly minted journalist might expect something closer to $61,000.

One way to grasp what sort of salary an employee might expect is to do targeted research on the specific industry, location, and position you’re interested in. If you’re in the early stages of college, you might want to align your course of study with a high-paying entry level job.

How to Research a Good Starting Salary for Your Career Path

If you’re interviewing for jobs and you want to know if you’re being offered the current market rates for a particular position (or location), there are some websites that can help, including:

•   Payscale, for example, allows employees to create personalized salary reports based on their job title, years of experience, and city.

•   Salary.com offers a similar feature, allowing job seekers to search for positions by keyword and compare them accordingly.

•   Glassdoor publishes employee-generated information on salary by specific company and position. It also hosts reviews by current and former employees, which may help a job applicant learn more about what it’s actually like to work there.

Recommended: Average Pay in the U.S. Per Year

Negotiating a Higher Offer

If your dream job doesn’t come with a dreamy paycheck, there are ways to negotiate a higher offer.

Negotiating a salary can be scary, especially for a recent grad who’s never done it before. Nevertheless, discussing salary up front can have a significant effect on your paycheck — and, by extension, your long-term earnings.

When thinking about the salary negotiation, don’t forget about the benefits package. In addition to higher pay, you may want to factor such things as tuition reimbursement, a flexible schedule, or commuting expenses into your total compensation package.

Preparing to Negotiate

Before you sit down with the employer to negotiate, having a well-researched starting salary in mind is a good place to start.

Of course, it’s not likely that an early-career new hire can simply negotiate up to the salary of an employee in the same role with years of experience. But it’s still possible to make the case to hiring managers about why a higher starting rate is merited.

As you negotiate, be sure to:

Highlight Your Skills

When asking for a higher starting salary, it could be helpful to give concrete examples of how your current skills might benefit the company. In these conversations, it may be possible to push an offer up a few percentage points, especially when the skills required are in high demand.

Practice Your Pitch

Rehearsing what you’ll say ahead of time can help you hone a confident delivery style. What’s more, it can help you be prepared for questions that come your way regarding why you deserve higher pay.

Negotiate Other Benefits

On top of baseline salary, as mentioned, it’s also possible in some roles and industries to negotiate for other valuable forms of compensation — such as fitness stipends, work-from-home time, funding for continued education, and more.

Job candidates may also inquire about future career growth and promotion potential, which could lead to a bigger salary later down the road.

Navigating Post-College Life, Financially and Beyond

Navigating life after college can be exciting and challenging. Trying to make ends meet on a starting salary might be particularly tough, especially for those who need to pay back student loans. Approximately 42.7 million borrowers have federal student loan debt, with the average balance being $38,375.

A flexible and adaptable approach to finances and location could make the transition to post-college life more manageable. For instance, recent graduates who are in a position to choose a new place to live might opt to move to a city with a lower cost of living.

Learning how to make a budget can also help college grads manage their bills and living expenses.

Refinance Student Loan Debt

For borrowers struggling to pay student loans on a starting salary, additional options exist. Those with outstanding federal student loans may qualify for income-driven repayment plans, loan forgiveness for public service, or student loan deferment.

Another option is to refinance student loans with a private lender. This involves replacing your current loans with a new loan that ideally has a lower interest rate or better loan terms.

Refinancing student loan debt could potentially save a borrower money each month — or help them pay off student loans faster — depending in part on the student loan refinancing rates they get.

A student loan refinancing calculator can help you see how much you might save and whether refinancing makes sense for you.

It’simportant to note that refinancing federal loans makes them ineligible for federal benefits, like income-driven repayment and loan forgiveness.

Recommended: Student Loan Consolidation vs. Refinancing

The Takeaway

Getting a good starting salary in your first job depends on your occupation and location and the company doing the hiring, among other factors. Entry level salaries can vary widely, but it is possible to negotiate. Do some research to find out what jobs in your field and area typically pay, and then make a pitch to the hiring manager about why you deserve higher compensation.

As you’re settling into your life after college and managing your finances on a starting salary, it can be helpful to make a budget. This can make it easier to cover your living expenses and the bills you owe, including student loan payments.

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 is considered a good starting salary in 2025?

A good starting salary in 2025 depends on where you live, your occupation, and the company or institution doing the hiring, among other factors. The average starting salary in the U.S. for 2025 graduates is $68,680, according to the National Association of Colleges and Employers. To get a sense of what someone in your field might earn for an entry-level job, you can check out websites like Payscale and Salary.com.

What’s the average entry-level salary in the U.S.?

The average entry-level salary in the U.S. for college graduates in 2025 is $68,680, according to the National Association of Colleges and Employers.

What are the highest paying entry-level business jobs?

In general, the highest paying entry-level business jobs are management consultant, which has an average entry-level salary of approximately $86,584; IT business analyst, with an average starting salary of about $62,390; and investment associate, with an average starting salary of around $53,056. Keep in mind that your salary also depends on where you live and the company that’s hiring, among other factors.

How can I increase my starting salary offer?

To increase your starting salary offer, be prepared to negotiate. First, research what the starting salary is for the position in your location. You can find this information on Payscale and Salary.com. Practice what you plan to say ahead of time so that you can speak confidently. Be sure to highlight the skills you would bring to the job and explain with concrete examples, how those skills could benefit the company.

Finally, in addition to salary, you can negotiate benefits such as vacation time, the ability to work from home, and even commuting expenses. Even if you don’t score an increase in your starting salary, you may be able to get some other valuable perks.

Is $50,000 a good starting salary out of college?

It depends on the field you’re in and your location, but $50,000 is below the average starting salary in the U.S. of $68,680 for college graduates in 2025. However, for those in certain fields, such as psychology, in which the average starting salary is $44,700, $50,000 would be a good entry level salary.

What factors affect a good starting salary?

Factors that affect a good starting salary include location, the industry you’re in, the degree you have, and the job you’re applying for. For example, in 2025, engineering graduates are expected to have the highest entry-level pay, with an average salary of more than $78,000. Plus, jobs in different locations pay different wages. The average general starting salary in New York state is more than $10,000 more than the average in North Carolina, for instance.

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

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.

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

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

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.

SOSLR-Q225-019

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May
23
2025

Fixed Rate vs. Variable Rate Student Loans: What to Know Before Borrowing

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

Every year, 30-40% of undergraduate students take out student loans to help fund their college education and almost 50% of grad students take out graduate loans. While all federal student loans have fixed interest rates, private student loans can have fixed or variable interest rates.

If you’re wondering, is a student loan variable or fixed rate?, it’s important to understand the difference between the two. Fixed interest rates do not change throughout the loan term. Your monthly payment will remain the same unless you choose to refinance through a private lender and get a new loan with a new rate.

Variable rates, on the other hand, fluctuate with the market. Your rate could go up or down throughout the term of the loan, making monthly payments less predictable than with fixed interest rates.

What factors are worth considering before deciding between a fixed or variable student loan rate? Read on to learn about the ways these two student loan options differ.

Key Points

•   Federal student loans only offer fixed interest rates, while private student loans may have fixed or variable rates.

•   Fixed rates remain constant over the life of the loan, offering predictable monthly payments.

•   Variable rates can fluctuate with the market, potentially increasing total repayment cost.

•   Generally speaking, borrowers planning to repay quickly may benefit from variable rates, while those seeking stability may prefer fixed rates.

Fixed Rate Student Loans

Federal student loans for undergraduate and graduate students have fixed rates. These loans have a locked-in interest rate for the entire loan term. This means that the interest rate on the loan when it is originally borrowed will be the same rate at the end of the term.

The only ways a borrower would be able to change the interest rate is to refinance student loans with a private lender or consolidate federal loans through the government.

When you refinance your federal or private student loans, your interest rate is based on the market and your personal financial situation, such as your credit profile and your debt-to-income ratio.

With a federal Direct Consolidation Loan, your interest rate is the average of the loans you are consolidating, rounded up to the nearest one-eighth of a percent. This rate is always fixed.

Fixed rate student loans are usually considered the safer option as there is no chance the interest rate will rise. All federal student loans (since July 1, 2006) have fixed interest rates that are set by Congress each year, so no matter which federal loan you qualify for, your interest rate will not change over the life of the loan.

Each type of federal loan will have its own fixed interest rate. For example, when it comes to grad school loans, Direct PLUS Loans for graduate and professional students and parents have a different fixed interest rate than Direct Unsubsidized Loans for graduate and professional students. For loans disbursed between July 1, 2024 and July 1, 2025, Direct Unsubsidized Loans have a rate of 8.08%, while Direct PLUS Loans have a rate of 9.08%.

Undergraduate Direct Subsidized Loans and Unsubsidized Loans disbursed between July 1, 2024 and July 1, 2025 have a fixed interest rate of 6.53%.

💡 Quick Tip: New to private student loans? Visit the Private Student Loans Glossary to get familiar with key terms you will see during the process.

Pros of Fixed Rate Student Loans

•   They’re not affected by market rate changes.

•   The monthly payments stay the same throughout the life of the loan.

Cons of Fixed Rate Student Loans

•   Market rates could decrease, meaning you could miss out on potential savings down the line with a fixed rate loan.

Recommended: Student Loan Consolidation vs. Refinancing

Variable Rate (or Floating Rate) Student Loans

As mentioned above, all federal student loans have fixed interest rates. Whether they’re looking for graduate loans or undergraduate loans, borrowers will only have the option to choose a variable rate student loan when borrowing from a private lender.

Variable rate student loans can be riskier than fixed interest loans. This is because the interest rate on a variable rate student loan can change (increase or decrease) throughout the life of the loan based on how the market performs at any given time.

While it can be a good thing if the interest rate goes lower than your original rate, there is also a possibility that the interest rate can increase.

Before choosing a variable rate student loan, it can be a good idea to ask your lender how often your interest rate can change on their end. Each lender has their own way of adjusting rates (some do it every month, where others will do it every few months).

You can also ask if there is a cap on the rate — some lenders will implement a cap such that a variable rate can’t exceed a certain percentage.

Pros of Variable Rate Loans

•   Borrowers could potentially save money if the interest rate drops.

Cons of Variable Rate Loans

•   Your loan’s rate can go up or down on a monthly, quarterly, or annual basis. Thus, the monthly payment may not remain stable, and may increase or decrease as the interest rate changes.

•   For those paying their loan off on a fairly long timeline, the interest rate has more time to go up, which could cost the borrower more in interest over the life of the loan.

Is a Student Loan Variable or Fixed Rate? Choosing the Right Option for You

The final decision depends on your unique situation.

However, be aware that the longer it takes you to pay off the loan, the more opportunity there is for interest rates to rise with variable rate student loans. You can help mitigate your risk by choosing a lender that caps its variable rates, but the rates will still fluctuate.

For borrowers who anticipate repaying student loans over a longer time period or those whose future income level is uncertain, a fixed rate student loan may make more sense.

Securing a New Interest Rate with Student Loan Refinancing

Whether you originally borrowed a fixed or variable student loan, the main thing to remember is that the rate assigned when the loan was initially borrowed doesn’t have to be the rate for the entire life of the loan. Knowing your refinancing options can help put your mind at ease.

Depending on student loan refinancing rates and your financial profile, refinancing might help you spend less in interest over the life of the loan.

You can use a student loan refinancing calculator to crunch the numbers to see if refinancing makes sense for you.

However, refinancing student loans isn’t the right option for everyone. Refinancing federal student loans makes them ineligible for federal forgiveness benefits and borrower protections like income-driven repayment plans or deferment. If you plan to use these benefits now or in the future, it is not recommended to refinance your student loans.

The Takeaway

The difference between fixed and variable rate student loans is that a fixed interest rate remains the same throughout the entire life of the loan, while a variable rate fluctuates with market changes over time.

All federal student loans have fixed interest rates that are set annually by Congress. Private student loans may be either fixed or variable.

If you are looking to change your student loan from fixed rate to variable rate or variable to fixed, or you’re simply hoping to get a lower rate to save money on interest, student loan refinancing is one option to explore.

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

FAQ

Is a student loan variable or fixed rate?

All federal student loans are fixed rate loans. Private student loans may be fixed rate or variable rate.

Are federal student loans fixed or variable?

All federal student loans are fixed rate with interest rates that are set annually by Congress. This means that no matter what type of federal loan you qualify for, your interest rate will not change over the life of the loan.

Can I switch from a variable rate student loan to a fixed rate?

If you have federal student loans, there are two possible ways to switch from a variable rate student loan to a fixed-rate loan: through student loan refinancing with a private lender, in which you replace your old loans with a new loan with new terms, or consolidating your loans through the federal government. However, be aware that refinancing federal student loans makes them ineligible for federal benefits like income-driven repayment and federal deferment.

If you have private student loans, it’s possible to switch from a variable to fixed rate through refinancing.

Which is better for graduate loans — fixed or variable interest rate?

Both fixed and variable rate loans have pros and cons, and only a borrower can decide what’s best for their situation. With a fixed rate loan, you might miss out on some potential savings if market rates decrease. However, fixed rates remain the same over the life of the loan, so your payments won’t fluctuate and you can plan for it accordingly.

The interest rate on variable rate loans can go up and down based on market conditions. In a high interest rate environment you could end up paying more in interest. And if interest rates drop, you could pay less.

What are the risks of a variable rate loan for grad school?

With a variable rate loan for grad school, there is the risk that the interest rate could rise with economic conditions, meaning your payments would be higher. Of course, the rates could also go down. One thing to keep in mind is that if the term of your loan is a long one, the interest rate has more time to fluctuate, which could potentially end up costing you more in interest.

What factors should I consider when choosing fixed vs. variable student loans?

When choosing fixed vs. variable rate student loans, weigh the pros and cons. Fixed rate loans have interest rates that remain the same over the life of the loan so your monthly payments won’t change.

The rates on variable rate loans can fluctuate depending on market conditions. You could end up paying more in a higher interest rate environment — or less if interest rates drop.

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

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.

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

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

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.

SOSLR-Q225-020

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May
22
2025
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Should You or Your Child Take Out a Loan for College?

By | Family Finances, Student Loans, student_loan | No Comments

The desire to help your child pay for college so they can focus on their studies is a strong one, but it’s important to consider your options when it comes to borrowing money.

Parents have a couple of options for borrowing to help pay for their child’s college education. They can borrow a Parent PLUS Loan — a type of federal loan — or a private student loan to help their child pay for college. Though, it may not always make sense for parents to take on debt on behalf of their child’s education.

Read on for a high-level overview of which types of student loans parents can apply for, as well as some advantages and disadvantages of taking out those loans in your name.

Key Points

•   Parents can consider two primary options for financing their child’s college education: Parent PLUS Loans, which are federal loans, and private student loans from individual lenders.

•   Parent PLUS Loans offer fixed interest rates and flexible repayment options, but they require the child to complete the FAFSA® before applying.

•   Private student loans may provide lower interest rates for parents with strong credit histories and allow for fixed or variable rates with customizable repayment terms.

•   Taking out loans in a parent’s name can reduce financial burden on the child, but repayment responsibility and the potential negative impact on credit scores must be considered.

•   Before resorting to loans, maximizing federal aid, scholarships, and grants is usually recommended to minimize future financial obligations.

What Are Parent Student Loan Options?

As mentioned, parents interested in borrowing a loan to help their students pay for college have two main options. The first is a Parent PLUS Loan, a federal loan available through the Direct Loan Program. The other is borrowing a parent loan from a private lender.

Parent PLUS Federal Student Loans

Parent PLUS Loans are a type of federal student loan that can be borrowed by the parent of an undergraduate student to help their child pay for college education costs. The benefits of a Parent PLUS Loan can include:

•   A fixed interest rate

•   Deferment under certain conditions

•   Flexible repayment options

•   Possible eligibility for Public Service Loan Forgiveness

To apply for a Parent PLUS Loan, your child must first file the Free Application for Federal Student Aid, also known as FAFSA®. Then, eligible parents of undergraduate students can fill out the Direct PLUS Loan application online.

It’s not possible to transfer a Parent PLUS Loan to your child. However, Parent PLUS refinancing with a private lender may allow your child to refinance a Parent PLUS Loan in their name.

Keep in mind that your child may be eligible for federal student aid including federal loans, scholarships, and grants too. If your child is taking out federal student loans, they may be eligible for:

•   Direct Subsidized Loans. Direct Subsidized Loans are subsidized by the federal government and students are not responsible for paying accrued interest while they are enrolled, during the loan’s grace period, or during qualifying terms of deferment.

•   Direct Unsubsidized Loans. Direct Unsubsidized Loans are not subsidized by the federal government and student borrowers are responsible for accrued interest costs on the loan while they are enrolled in school.

•   Direct PLUS Loans (for graduate school). Direct PLUS Loans are available for graduate students. These loans are unsubsidized, meaning they begin accruing interest immediately upon disbursement.

Depending on demonstrated financial need, your child may qualify for a combination of these loan types in addition to scholarships, grants, or work-study. However, if all other federal aid is exhausted, the Parent PLUS Loan might be an option to supplement your child’s tuition payments after federal aid, scholarships, or grants.

Private Student Loans for Parents

When federal student loan options are exhausted, some students and parents may turn to private student loans to help fund their education. Parents can take out a private loan in their own name to pay for college for their student. If you have a strong credit history, you might consider a private loan over the PLUS Loan — there’s a chance you could potentially qualify for a lower interest rate.

With a private student loan, you may have the option of a fixed- or variable-rate loan, potentially giving you more flexibility on repayment. You can also choose the term length of a loan, as well.

Your child can also apply for private loans, but in many cases, they’ll require a cosigner.

Private Student Loans for Parents vs Parent PLUS Loans

This table provides a high-level overview of the differences between private student loans for parents and Parent PLUS loans.

Private Student Loans for Parents

 Parent PLUS Loans
To apply, interested parents will need to fill out an application with an individual private lender. To apply, students first need to fill out the FAFSA, then parents can fill out the Direct PLUS Loan application on the Student Aid website.
The application process will usually involve a credit check. This will be used to help determine the loan terms an applicant qualifies for, in addition to other factors. There is a credit check, however, it will not be used to determine terms like the interest rate. Interest rates on Direct PLUS Loans are set annually by congress.
Interest rates may be fixed or variable. Interest rates are fixed.
Repayment plans will be determined by the individual lender. PLUS Loans qualify for some federal repayment plans.

Pros and Cons of Taking the Loan Out in Your Name

Taking out a student loan for your child in your name — federal or private — could mean less of a financial burden on your child as they enter college. Since the loans are in your name, it’s not up to your child to pay them, even after a degree is earned.

Pros of Taking Out a Loan for Your Child

Borrowing can be a tool to help you pay for your child’s education. If you can afford to make the loan payments without sacrificing your own financial security, this could be a helpful move for your child.

Another pro is that the loan payments will be made in your name — that means they’ll count toward your credit history. If you’re able to make all of the loan payments on time, it could prove to have a beneficial impact on your credit score.

If you have a strong credit history, you could potentially qualify for a more competitive interest rate than your child could.

Cons of Taking Out a Loan for Your Child

The most obvious con is that while you’ll be able to help your child pay for college, you’ll need to repay the money with interest. Other types of aid like scholarships, grants, and Direct Subsidized or Unsubsidized Loans borrowed by your child are generally prioritized over a parent loan.

Again, because the loan is in your name, any late payments or issues will be attributed to your personal credit history. Things like late payments have the potential to impact your credit score.

There’s nothing wrong with wanting to borrow for your child’s future, just consider all your options and think about what you, or they, can afford to pay back. It’s almost always a good idea to maximize federal aid and scholarships before resorting to loans of any kind.

The following table provides an overview of some of the pros and cons for borrowing as a parent to help your student pay for college.

Pros

 Cons
Parent student loans can allow parents to help pay for their child’s college education. Loans will need to be repaid with interest. Students and their families generally will prioritize other types of aid that don’t require repayment or that have a lower interest rate.
Parent student loans are in the name of the parent borrower. Therefore, the parent may benefit from any boost in credit score from making on time payments. A parent’s credit score could be negatively impacted if they are unable to make their monthly payments.

The Takeaway

Parent PLUS Loans are federal loans that allow parents of undergraduate students to help pay for their child’s education. These loans have a fixed interest rate and are eligible for most federal repayment plans.

Another option parents can consider is a private loan. Parents with a strong credit history may be able to qualify for more competitive interest rates through a private student loan.

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


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

FAQ

Which type of student loans can parents take out on behalf of the student?

Parents with undergraduate students have two options for borrowing to help their child pay for college. They can borrow a Direct PLUS Loan through the federal government or a private loan from a private lender.

Who is responsible for paying back Parent PLUS Loans?

Parent PLUS Loans are in the parent’s name. The parent is solely responsible for repaying the loan.

What can you do if you aren’t able to take out a Parent PLUS Loan?

If you aren’t able to borrow a Parent PLUS Loan, you can consider adding a cosigner to your PLUS Loan application. This may help your chances of getting approved. Additionally, if you are applying for a private loan, you may have the option of adding a cosigner which could potentially improve your chances of gaining approval or securing a more competitive interest rate.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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

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


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

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

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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22
2025
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Do You Have to Pay FAFSA Back?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

If you’re asking, “Do I have to pay back FAFSA?” or “Do I have to repay financial aid?,” what you’re really trying to find out is whether the federal student loans you become eligible for after completing the Free Application for Federal Student Aid (FAFSA®) must be repaid.

Yes, you will have to pay back those loans, but other types of student aid you get through FAFSA likely won’t need to be repaid. Aside from federal student loans, you can also use FAFSA to apply for grants and scholarships, as well as work-study jobs, for which you’d get funds you usually don’t need to pay back.

If you have loans through FAFSA and need to pay them back, read on for information on the three general types of federal student loans and your repayment options for each.

Key Points

•   While federal student loans obtained through the FAFSA must be repaid, other forms of aid such as grants, scholarships, and work-study funds typically do not require repayment unless specific conditions apply.

•   There are three main types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.

•   Most federal student loans have a six-month grace period after graduation, leaving school, or dropping below half-time enrollment before repayment begins.

•   Borrowers have access to various repayment plans, including income-driven repayment options, deferment, and forbearance, to manage their loan payments based on their financial situation.

•   In addition to funding received through completing the FAFSA, students can use cash savings and private student loans to pay for college.

Direct Subsidized Loans

With Direct Subsidized Loans, the government (more specifically, the U.S. Department of Education) pays the interest while you’re still in school at least half-time. That’s what makes them “subsidized.”

The maximum amount you can borrow depends on whether you are a dependent or an independent student, as well as what year of school you are in. However, it is ultimately up to your school how much you are eligible to receive each academic year.

Not everybody qualifies for a subsidized loan. You have to be an undergraduate (not a graduate student) demonstrating financial need and attending a school that participates in the Direct Loan Program. Additionally, the academic program in which you’re enrolled must lead to a degree or certificate.

You also should check how your school defines the term “half-time” because the meaning can vary from school to school. Contact your student aid office to make sure your definition and your school’s match. The status is usually based on the number of hours and/or credits in which you are enrolled.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are a type of federal student loan available to both undergraduate and graduate students, regardless of financial need. Unlike Direct Subsidized Loans, these loans begin accruing interest as soon as the funds are disbursed. Borrowers are not required to demonstrate financial hardship to qualify, and the amount awarded is determined by the school based on the student’s cost of attendance and other financial aid received.

Since interest accrues during all periods — including while the student is enrolled in school, during the grace period, and during deferment — borrowers can either pay the interest as it accrues or allow it to capitalize, which increases the total loan balance.

Recommended: Comparing Subsidized vs Unsubsidized Student Loans

Direct PLUS Loans

There are two types of Direct PLUS Loans:

•   Grad PLUS Loans: These are for graduate or professional degree students.

•   Parent PLUS Loans: Parent PLUS Loans can be taken out by parents as long as their qualifying child is a dependent or undergraduate student.

Unlike most other federal loans, PLUS Loans require a credit check, and you cannot have an adverse credit history. If you or your parents have bad credit, a cosigner on the loan application may be an option.

With Direct PLUS Loans, you can borrow as much as you need for the cost of attendance, subtracting the other financial aid you’re getting. However, the interest rate for PLUS Loans is generally higher than it is for the other types of federal student loans.

Do I Get a Grace Period on My Federal Student Loan Repayment?

Whether you get a grace period — time after you graduate (or drop below half-time enrollment) during which you do not have to make loan payments — depends on what type of federal student loan you have. Not all federal student loans offer a grace period. Direct Subsidized and Unsubsidized Loans offer a grace period of six months, whereas Direct PLUS Loans don’t offer a grace period at all.

Grace periods are meant to give you time to find a job and organize your finances before you have to start making loan payments. They are usually one-time deals; in most cases, you often can’t get a second grace period ​once the initial one ends.

Keep in mind that grace periods are usually not interest-free. Some loans accrue interest during grace periods. Many students subscribe to the strategy of making interest payments even during the grace period. Doing this to put money toward student loans can ultimately lower the amount you owe, and interest payments are generally more affordable to handle than principal payments.

Federal Student Loan Standard Repayment Plan

Once you graduate, your repayment plan will depend on various factors, but most of the time the government will place you on its Standard Repayment Plan. The general rule here is that you’re expected to pay off your loan over the course of a decade, and your payments will remain the same for the duration.

Before you are placed on that Standard Repayment Plan, the government gives you a chance to choose a few other repayment options (which we’ll discuss below). If you don’t choose one of those, you’ll automatically be placed on the Standard Repayment Plan.

Additional Repayment Options

Here are a couple of your other repayment options beyond the Standard Repayment Plan:

•   The Extended Repayment Plan: The Extended Repayment Plan can extend your term from the standard 10 years to up to 25 years. To qualify, you must have at least $30,000 in outstanding Direct Loans. As a result, your monthly payments are reduced, but you could be paying way more interest.

•   The Graduated Repayment Plan: Another option, the Graduated Repayment Plan, lets you pay off your loan within 10 years, but instead of a fixed payment, your payments start low and increase over time. This may be a good option if your income is currently low but you expect it to steadily increase.

You can also choose to refinance or consolidate your student loans. Refinancing is done through a private lender, and consolidation is done through the government.

Difference Between Refinancing & Consolidating Student Loans

While you can’t refinance student loans with the government, you can do so with a private loan company. Before you consider refinancing, be sure to know the difference between refinancing and consolidating student loans:

•   Refinancing means taking out a brand new loan so that you can pay off your existing loans. To refinance, you’ll choose a private lender with (hopefully) better interest rates and repayment terms. Refinancing student loans can be used for both federal and private loans. Keep in mind that when you refinance federal loans with a private lender, you lose access to federal benefits and protections like loan forgiveness programs and repayment plans.

•   Consolidation means combining all of your federal loans into one loan with one monthly payment. When you consolidate multiple federal student loans, you’re given a new, fixed interest rate that’s the weighted average of the rates from the loans being consolidated, rounded up to the nearest one-eighth of a percent.

Before you apply for that refinancing plan, it’s a good idea to check your credit score, as it is an important factor that lenders consider. Many lenders require a score of 650 or higher. If yours falls below that, you may consider a cosigner on the loan.

Lenders typically offer fixed and variable interest rates, as well as a variety of repayment terms (which is often based on your credit score and many other personal financial factors). The loan you choose should ultimately help you save money over the life of the loan or make your monthly payments more manageable.

The Takeaway

FAFSA can include grants, scholarships, work-study, and federal student loans. Grants and scholarships do not need to be repaid, and work-study is money that you earn from a job.

If you received federal student loans, you will need to pay those back. Exploring available repayment options, including income-driven plans, deferment, and forbearance, can provide flexibility based on your financial situation.

Other ways to pay for college include cash savings and private student loans. Private student loans, though, should be a last resort after you’ve explored all federal aid options.

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.

Check your rate for student loan refinancing in just two minutes with SoFi.

FAQ

Do I have to repay all financial aid received through the FAFSA?

No, not all financial aid obtained via the FAFSA requires repayment. While federal student loans must be repaid, other forms of aid like grants, scholarships, and work-study funds typically do not need to be paid back.

When does repayment begin for federal student loans?

Repayment for most federal student loans starts six months after you graduate, leave school, or drop below half-time enrollment. This period is known as the grace period.

Are there repayment options if I’m struggling to make payments?

Yes, federal student loans offer various repayment plans, including income-driven repayment plans, deferment, and forbearance options, to assist borrowers facing financial hardships.


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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. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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

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


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

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

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

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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May
22
2025
A graduation cap and tassel are shown to illustrate the concept of a student loan payoff letter.

Comparing Subsidized vs Unsubsidized Student Loans

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

When financing higher education, understanding the differences between Direct Subsidized and Direct Unsubsidized Loans is essential. Both are federal student loans offered by the U.S. Department of Education, but they vary in terms of eligibility, interest accrual, and repayment responsibilities.

Keep reading to learn the similarities and differences between subsidized and unsubsidized loans, plus additional ways to pay for college.

Key Points

•   With Direct Subsidized Loans, the federal government covers the interest while the student is enrolled at least half-time, during the six-month grace period after leaving school, and during periods of deferment.

•   Direct Unsubsidized Loans accrue interest from the time the loan is disbursed, including while the student is in school and during grace or deferment periods.

•   Direct Subsidized Loans are available only to undergraduate students who demonstrate financial need. Direct Unsubsidized Loans, however, are available to both undergraduate and graduate students, and financial need is not a requirement for eligibility.

•   Annual and aggregate loan limits are generally higher for Direct Unsubsidized Loans compared to Direct Subsidized Loans.

•   In addition to subsidized and unsubsidized loans, students can pay for college with cash savings, scholarships, grants, and private student loans.

What Is a Direct Subsidized Loan?

Direct Subsidized Loans are available only to undergraduate students, and they are awarded based on financial need.

The U.S. government pays the interest on Direct Subsidized Loans as long as the student is enrolled in classes at least half-time. The accrued interest is also covered during the six-month grace period after the student leaves school or graduates and if the student’s loan is in a period of deferment.

The federal help is meant to give students a chance to get on their feet financially before the debt starts accruing interest they’ll have to pay.

What Is a Direct Unsubsidized Loan?

A Direct Unsubsidized Loan is a federal student loan available to eligible undergraduate, graduate, and professional students that accrues interest from the time it is disbursed, regardless of financial need.

Like subsidized loans, repayment doesn’t begin until six months after the student graduates, drops below half-time, or leaves school, but the interest will still accrue during this time.

Unsubsidized student loans can cost more in the long run than subsidized loans because of the accruing interest.

Differences Between Subsidized and Unsubsidized Loans

Subsidized and unsubsidized student loans both can help pay for college, but they vary in terms of eligibility, interest accrual, and long-term cost. Knowing how each works can help you make smarter borrowing decisions. Differences between the two include:

•   Subsidized loans are only available to undergraduate students who demonstrate financial need.

•   Unsubsidized loans are available to both undergraduate and graduate students, regardless of financial need.

•   With subsidized loans, the government pays the interest while you’re in school at least half-time, during the grace period, and deferment.

•   Subsidized loans typically cost less over time due to the government covering interest during specific periods.

•   Annual and aggregate loan limits are higher for Direct Unsubsidized Loans than for Direct Subsidized Loans.

Similarities Between Subsidized and Unsubsidized Loans

While there are notable differences between subsidized and unsubsidized student loans, these two federal loan types also share several important similarities. Similarities include:

•   Both loans are part of the federal Direct Loan Program and are issued by the U.S. Department of Education.

•   Eligibility for both loan types requires students to complete and submit the Free Application for Federal Student Aid (FAFSA®).
Subsidized and unsubsidized loans come with fixed interest rates set annually by the federal government.

•   Both loan types offer a six-month grace period after graduation, leaving school, or dropping below half-time enrollment before repayment begins.

•   Borrowers of either loan may qualify for federal repayment options, deferment, forbearance, and certain loan forgiveness programs.

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

How Do I Get a Federal Student Loan?

The process to receive federal financial aid begins when the student completes the Free Application for Federal Student Aid (FAFSA), which must be filled out annually. The form asks for information about the student (name, date of birth, address, financial information from tax forms and bank statements). If the student is a dependent, there will be similar questions about support from home that will help determine financial need.

Borrowers who don’t demonstrate enough need may not qualify for subsidized loans. They can, however, qualify for unsubsidized student loans, scholarships, grants, and work-study.

Based on the results of the FAFSA, the schools the student listed on the application will send a financial aid offer to the student, and the school will explain how to accept all or part of the federal financing.

The FAFSA deadline is typically June 30, but each college and state may have its own deadlines.

Recommended: Navigating Your Financial Aid Package

What if Federal Loans Aren’t Enough?

If a student doesn’t qualify for federal student loans — or if more funding is required — there are other options for financing a college education.

Private student loans can help fill the gaps if federal loans don’t cover all the costs of attending school. These loans are offered by private lenders, including banks, credit unions, and online financial institutions, so the terms vary from one to the next — and the qualifications and terms will be different from federal loans.

Private student loans can have fixed or variable interest rates, and some lenders offer more competitive rates than others. (All federal loans have fixed interest rates.)

A borrower’s credit rating and income, among other factors, will generally be used to determine the interest rate and how much may be borrowed. Those who need help qualifying could consider tapping a trusted student loan cosigner.

Repayment terms on private loans also differ from lender to lender — and they’re generally less forgiving than the repayment plans offered for federal student loans. It’s important to understand what’s expected before signing for any type of loan.

Recommended: Private Student Loans vs Federal Student Loans

The Takeaway

Subsidized federal student loans do not accrue interest while the borrower is attending school at least half-time. Unsubsidized federal student loans lack this benefit, and borrowers are responsible for interest that accrues as soon as the loan is disbursed. Both loans offer federal benefits and protections, such as income-driven repayment plans and student loan deferment.

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


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

FAQ

What is the main difference between Direct Subsidized and Unsubsidized Loans?

The primary difference lies in interest accrual. With Direct Subsidized Loans, the federal government pays the interest while the student is in school at least half-time, during the six-month grace period after leaving school, and during deferment periods. In contrast, Direct Unsubsidized Loans accrue interest from the time the loan is disbursed, and the borrower is responsible for all interest, including during in-school, grace, and deferment periods.

Do both loan types require repayment to begin at the same time?

Yes, repayment for both Direct Subsidized and Direct Unsubsidized Loans begins six months after the borrower graduates, leaves school, or drops below half-time enrollment. However, interest accrues differently during this period: subsidized loans do not accrue interest, while unsubsidized loans do.

Are there loan limits for Direct Subsidized and Unsubsidized Loans?

Yes, both loan types have annual and aggregate limits, which vary based on the student’s year in school and dependency status. Notably, the loan limits for Direct Unsubsidized Loans are generally higher than those for Direct Subsidized Loans.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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


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

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

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

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