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You may have noticed when shopping around for student loans that some lenders display an interest rate, while others show an APR. What’s the difference? The main distinction is that APR (which stands for annual percentage rate) includes any fees or other charges the lender may add to the loan principal. The “interest rate” does not.

When shopping for a student loan, it’s key to know whether you’re looking at an APR or an interest rate, since this can have a significant impact on the total cost of the loan. Read on to learn more about APR vs. interest rate, what each number includes, and how to compare student loan rates apples to apples to find the best deal.

How Do Student Loan Interest Rates Work?

As with any loan, the interest rate represents the amount your lender is charging you to borrow money. It’s expressed as a percentage of your loan amount (or principal) and doesn’t reflect any fees or other charges that might be connected to your loan. Interest rates can be fixed (the same for the life of the loan) or variable (may fluctuate over the life of the loan).

Interest rates work differently depending on whether a student loan is federal or private. Congress sets the interest rate for federal student loans. The rate is fixed — and it’s the same for all borrowers. The federal student loan interest rate for undergraduates is 5.50% for new loans taken out for the 2023-24 school year, effective from July 1, 2023 to June 30, 2024.

Private student loan companies are allowed to set their own interest rates, which may be higher or lower than rates for federal loans. Interest rates on private loans may be fixed or variable and typically depend on the creditworthiness of the borrower (or cosigner) — those with higher credit scores generally qualify for lower rates, while borrowers with lower credit scores tend to get higher rates.

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

What Is the Student Loan APR, and How Is It Different From Interest Rate?

A loan’s annual percentage rate (APR) represents a more comprehensive view of what you’re being charged. It tells you the total cost of the loan per year, including any fees, such as an origination fee. Because of that, a loan’s APR may be higher than its interest rate.

Looking at the APR helps you compare different loan offers and get a real picture of the overall cost you will pay for borrowing money for your education. If a loan doesn’t have any fees then the interest and the APR will be the same.

Federal student loans publish interest rates but not the APRs, so it’s important to keep in mind that the headline interest rate of a federal student loan is not the total cost of that loan. These loans also charge an origination fee, which is 1.057% for Direct Subsidized and Direct Unsubsidized loans, and 4.228% for Direct PLUS loans (unsubsidized loans for the parents and graduate/professional students.)

For private student loans, origination fees vary by lender. While some private lenders charge origination fees, it’s possible to find a private loan that doesn’t come with these fees. However, it’s important to keep in mind that private student loans generally don’t come with the same protections as federal student loans, such as income-driven repayment plans and forgiveness programs.

What Fees / Charges Might Be Included in a Student Loan APR?

For student loans, the most common fee is the loan origination fee. Whether the loan is federal or private, this fee is typically based on a percentage of the total loan amount and will be deducted from your loan amount before the loan is dispersed. This means that if you borrow $10,000 and the origination fee is 1.057%, $105.70 will be deducted from your total loan amount — so you would actually receive $9,894.30 for the year.

While origination fees can be small, the cost can add up. Because these fees are deducted from the total loan amount, you are paying the fee with borrowed money and will pay interest on the fee paid.

Both private and federal student loans may also have late fees and returned payment (or insufficient funds) fees, both of which add to the total amount you must repay. However, you can avoid these fees by always paying your bill on time and making sure you have enough money in your bank account to cover the payment.

Fees vary widely from one lender to the next, and some private lenders may not charge any fees.

If a Loan’s Interest Rate and APR Are the Same, Does That Mean There Are No Hidden Fees?

Typically, yes. Just keep in mind that interest rates published for federal student loans are not APRs and do not include the origination fee. This fee will come out of the amount of money that is disbursed (paid out) to you while you’re in school.

The student loan APRs listed by private lenders include any additional charges and fees. If the lender doesn’t charge any fees, the APR and interest rate will be the same.

Recommended: Pros and Cons of Refinancing Student Loans

When Shopping for a Loan, Should I Look at Interest Rate, APR, or Both?

Whenever available, you’ll want to look at the APR of a student loan, since this number allows a more apples-to-apples comparison of loan costs. If you just compare straight interest rates, you can miss the big picture in terms of the total cost of the loan. Sometimes those additional fees can make a big impact.

It’s also important to know when the interest rate or APR will kick in. Although the interest rate is the same for federal Direct Subsidized and Direct Unsubsidized loans, the latter loan ends up costing significantly more because interest starts accruing from the time the funds are disbursed. With subsidized federal loans, the interest does not accrue while you are still in school.

With private student loans, interest typically begins to accrue as soon as the loan money is disbursed to your school.

Whether interest starts accruing immediately or later, you typically don’t have to start making any payments on private or federal student loans until after you graduate.

💡 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.

The Takeaway

A student loan’s interest rate is the cost of borrowing money, and is expressed as a percentage of the loan amount. APR includes the interest rate as well as the additional costs and fees associated with borrowing. As a result, it gives you a more complete picture of the total cost of the loan. Understanding APR vs. interest rate is important when you’re researching best rates for student loans. It will help you make informed decisions that may lower your cost of borrowing.

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

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

FAQ

What is a good APR for a student loan?

For new loans taken out for the 2023-24 school year, the federal student loan interest rate is 5.50% for undergraduates (whether the loan is unsubsidized or subsidized). For graduate students it’s 7.05% (subsidized) or 8.05% (unsubsidized). For parents, it’s 8.05%.

Average private student loan annual percentage rates (APRs) range from just under 4% to almost 15% percent.

Is APR better than interest rate?

The annual percentage rate (APR) gives you a more accurate picture of the true cost of financing. The APR of a loan tells you how much you will pay for a loan over the course of a year after accounting for the interest rate as well as any extra costs, like origination fees.

When comparing loan offers, it’s generally better to compare APRs than interest rates, since this allows you to compare loan offers apples to apples.

Can APR and interest rate be the same?

Yes. If no fees are added to your loan amount, the interest rate and the annual percentage rate (APR) will be the same.

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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.

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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Studying abroad can be a life-changing opportunity that will enrich your college experience. But that enrichment can come with a strain on your bank account. If you’ve always wanted to head overseas, your college years are a great time to do it. But, can you afford it?

If you’re looking for how to get money to study abroad, there are a few different student loan options that may be worth exploring. Whether you’re about to head off to college, currently enrolled, or in graduate school, student loans may be available to help finance your trip. Read on to understand how student loans to study abroad work.

Student Loans for Studying Abroad

As mentioned, studying abroad can be an outstanding opportunity for a college student to expand their cultural horizon, meet new friends, and maybe learn a new language. While this can be an incredibly enriching experience, it’s important to factor in both the pros and cons of studying abroad — it can also be expensive.

Costs for studying abroad vary depending on where you go, what you study, and how long you stay, but average costs can hover around $16,000 per semester as of 2023. Students can use a combination of savings, federal student loans, private student loans, or some scholarships or grants to pay for their study abroad experience.

Federal Student Loans for Studying Abroad

It’s possible to use federal student loans to pay for your study abroad experience. Federal student loans can be used to pay for any qualifying educational expense — you can even use student loans to pay for living expenses like rent or room and board.

To get federal financial aid — which includes grants and loans — you’ll need to complete the FAFSA® each year. The financial aid office at your domestic university should be able to tell you which forms of aid can be used to cover study abroad expenses. Be sure to file your FAFSA in plenty of time and check in with both your American school and the international school as additional paperwork may be required.

Private Student Loans for Studying Abroad

Federal financial aid may cover some expenses for certain study abroad programs, but there might not be enough cash to cover the whole experience. That’s where private student loans could come in handy.

Private student loans are available from private financial institutions and can be used to cover up to a school’s cost of attendance, less other forms of financial aid. Unlike most federal loans, private lenders will generally review information about the applicant including their credit score, among other factors, when making their lending decisions.

Recommended: What Is Cost of Attendance in College?

There are a few things to keep in mind before taking out a private student loan for study abroad, including:

•   Interest rate: A high interest rate can cause you to pay significantly more than you expected. Also, see if you’re signing up for variable or fixed interest rate loans, as variable rates fluctuate up or down depending on the markets.

•   Repayment: Review loan terms to see when you will start paying back your student loans. Federal loans usually start student loan repayment six months after graduation (or whenever you drop out or drop below part-time hours), but private loans can vary in their repayment schedule. Some may require you to start repayment even while you’re in school. At the very least, consider looking for loans that don’t require repayment until after you’ve graduated.

Recommended: Guide to Private Student Loans

Private student loans can be a tool to help students pay for college and study abroad costs, but because they don’t necessarily offer the same protections (like a grace period or income-driven repayment options) as federal student loans, they are generally borrowed after other options have been exhausted.

Grants and Scholarships

Many grants and scholarships can be used to help students pay for studying abroad costs. Some scholarships may require students to participate in specific study abroad programs, so be sure to review the details of each application closely. Looking for study abroad scholarships? Check out SoFi’s scholarship search tool.

Depending on your school’s policies and the program you choose you may be able to use the institutional or federal financial aid you receive to pay for study abroad costs. Some schools may require that you participate in a study abroad program affiliated with the school in order to apply institution-specific aid to the study abroad program. Check in with your school’s financial aid office to be sure.

Are Student Loans for Studying Abroad Different From Typical Student Loans?

Student loans for studying abroad are not different from the typical student loans used to pay for college. Federal student loans can be used to pay for study abroad costs so long as the program is offered through an eligible institution. As mentioned, you may be required to fill out additional paperwork for federal financial aid if you are studying abroad, so check in with your financial aid office to determine any requirements.

Determine How Much Your Study Abroad Will Cost

To determine how much you’ll need to borrow to pay for your study abroad experience, you’ll need to figure out how much the experience will cost in comparison to a typical semester. Continue reading for some of the study abroad costs to consider.

Tuition

Tuition costs may vary depending on the program type and location. Some schools may offer affiliate programs for study abroad, which may have similar tuition costs to attending the university in-person.

Other programs may offer direct enrollment at a local institution in the destination country. Enrolling directly in a local school may allow you to secure a more affordable tuition, but you may be responsible for additional costs like health insurance or rent.

Living Expenses

Consider the living accommodations available in the program you have selected. If you are working with your school or another third-party provider, they may have living accommodations set up for you. If you are enrolling directly with a local university, you may need to find an apartment to rent or live in on-campus housing (if available). Review the options at your destination closely. This guide has more information on college money management that could help you build out your study abroad living expenses budget.

Travel Expenses

Factor in not only the expense to travel to your initial destination, but also any additional travel costs you may incur during your semester abroad. For example, if you are living in Paris for a semester, will you be taking any weekend trips elsewhere in Europe? Map out your other travel plans and estimated prices for flights, trains, hostels, and food. You could consider setting up a dedicated travel fund to save for your semester abroad.

Graduate Study Abroad Loans

If you’re in search of how to get money to study abroad, when you go can be just as important as where you go. Undergraduate degrees are usually less expensive than graduate ones (though this may depend on the field of study), which means studying abroad during undergrad may also be less expensive. Graduate student loans are a bit different from undergrad ones in a few ways, including:

•   Higher interest rates, higher limits. Since graduate degrees are more expensive than undergraduate ones, you can borrow more money with graduate loans. Unfortunately, graduate loans also tend to have higher interest rates.

•   Unsubsidized loans. Undergraduate students may qualify for Direct Subsidized Loans, or loans where the federal government pays your interest rate while you’re in school. Direct Unsubsidized Loans for graduate studies start accruing interest while you’re in school. This could be costly once you graduate.

Do your research on the different student loan options, and if you have flexibility in your timing, you may wish to consider going abroad sooner, as an undergraduate, rather than as a graduate student. You could potentially save some money in the long run.

Private Student Loan From SoFi

Both federal and private student loans can be used to pay for costs associated with qualifying study abroad programs. The requirements for federal loans may vary depending on the program you are enrolling in, so check in with the financial aid office at your school.

If financial aid isn’t enough to make your dreams of studying internationally a reality, private student loans may help. SoFi offers both private student loans to help pay your way through school. SoFi loans have no fees and qualifying borrowers can secure a competitive interest rate.

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

Can you get a federal student loan to study abroad?

Yes, federal student loans can be used to pay for study abroad expenses. There may be some additional requirements so check in directly with your college’s financial aid office.

However, if your school does not participate in the federal aid program, you likely will not be able to secure financial aid to study abroad either.

Are there special loans for studying abroad?

Both the federal and private student loans can be used to pay for study abroad expenses. It’s possible to apply for a private student loan specifically to study abroad, but these loans are generally the same as student loans used to pay for classes at your American school.

What are other ways to finance studying abroad aside from loans?

Students may also be able to use savings, scholarships, or grants to pay for study abroad costs.

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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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Many students rely on student loans to help them pay for college. In addition to charging interest, student loans may also have additional fees associated with them. Fees charged may include origination fees — a fee charged by the lender for processing the loan — or late payment fees.

When students sign up for loans or are in the midst of repayment, they may not even be aware of fees that accompany many private and federal student loans. But by learning about these fees, they can better prepare themselves financially and avoid headaches.

What Are Student Loan Fees?

As briefly mentioned, student loan fees are charged to borrowers and are not the same as the interest rate. Interest rates on student loans are fixed or variable, and will increase the cost of the loan over time.

Student loan fees may include:

•   Origination fees

•   Late payment fees

•   Returned-check fees (aka insufficient-funds or non-sufficient-funds fees)

•   Loan collection fees

•   Forbearance and deferment fees

Can a Student Loan Fee Be Waived?

For the most part, student loan fees cannot be waived. In some instances, lenders may be willing to waive late payment fees for borrowers who have not previously made a late payment. Fees and policies may vary by loan type and lender, so contact your lender with specific questions. Continue reading for an explanation of different types of fees that may be associated with a student loan.

Origination Fees

Origination fees cover the cost of processing the loan. They are typically a small percentage of the loan amount.

What Is an Origination Fee on a Student Loan?

An origination fee on a student loan functions similarly to origination fees on other types of loans. Origination fees are generally charged as a percentage of the loan.

How Are Student Loan Origination Fees Assessed?

Student loan origination fees are charged as a percentage of the loan amount. Federal student loans do have an origination fee, and the information will be included in the master promissory note. For federal student loans, the origination fee is deducted from the amount borrowed, so when you receive the loan it will actually be for less than the amount you borrowed.

Private student loans may or may not charge an origination fee, the policy will depend on the lender.

How Much Are Student Loan Origination Fee?

For federal student loans, the origination fee (also known as disbursement fee) is dependent on the loan type. Direct Subsidized and Unsubsidized loans disbursed between October 1, 2020 and October 1, 2024 have a 1.057% origination fee. During the same timeframe, Direct PLUS Loans have a ​​4.228% origination fee. Direct Unsubsidized and Subsidized Loans are types of student loans for undergraduate programs. Unsubsidized loans and Direct PLUS Loans are student loans for graduate programs.

The origination fee on private student loans will vary based on the lender, and not all private lenders charge an origination fee. Review the terms and conditions closely and contact your lender with any questions.

Late Payment Fees

Making a loan payment past the due date for a federal student loan can result in a late fee. After 30 days, the late fee may be up to 6% of the loan amount due. Review your Master Promissory Note or contact your loan servicer with questions.

The late fee for a private student loan depends on the lender and loan program. Some private student loan lenders do not charge late fees.

Returned-Check Fees

If a borrower pays using a check that bounces, the student loan servicer could charge a returned-check fee.

Loan Collection Fees

If a borrower defaults on a loan by not making payments for a certain amount of time (270 days for most federal student loans), the loan may be placed with a collection agency and be subject to loan collection fees. Any fees incurred will be in addition to the outstanding principal balance, interest, and fees.

Private student loan companies may charge even higher loan collection fees. Generally private student loans also enter default sooner than federal student loans. The default period is described in the loan contract.

Forbearance and Deferment Fees

Borrowers who cannot make payments temporarily can request student loan forbearance or deferment. Typically, loan holders can avoid a fee, but they will need to contact their loan provider.

Forbearance and deferment are available for most federal student loans. Private lenders are not obligated to offer either program, but may offer some forms of deferment. If you are struggling to make payments on a private student loan, contact your lender to evaluate the options available to you.

Federal Student Loan Fees

When students want to apply for a loan, they can do it through the federal government or a private company, depending on their circumstances. The loan providers charge different types of fees.

Students will pay an origination fee for a federal student loan. As mentioned previously, for Direct Subsidized and Unsubsidized Loans, the fee is about 1.057% of the loan amount. For Direct PLUS Loans (including Grad PLUS and Parent PLUS Loans), the fee is about 4.228% of the loan amount.

A late payment fee will typically be charged within 30 days after the payment is due. The late fee could be up to 6%. At that rate, if your monthly minimum payment is $250, your fee would be $15.

Private Student Loan Fees

Loans for students from private lenders may not charge origination fees, though there may be an origination fee for a specialty loan, like a loan for medical school.

Some lenders charge late fees — generally a percentage of the late payment amount or a flat fee. They also typically charge for returned checks.

Additionally, most private student loan companies charge a fee for forbearance, a flat fee determined by the lender.

Collection fees will vary from lender to lender. If there is a collection fee on a private student loan, it will typically be included in your loan agreement.

A lender like SoFi® has staked its reputation on no fees: no late fees, insufficient-funds fees, or origination fees for private student loans.

Avoiding Student Loan Fees

If students need to take out private or federal student loans, they can at least avoid some of the fees.

Federal student loan origination fees are pretty unavoidable. With other loans, even if a student can persuade a company to take off the origination fee, that could mean a higher interest rate, which is usually not worth it.

Paying on time is always recommended, not only to avoid late fees but to keep a credit report healthy. To avoid late fees, returned-check fees, and collection fees, borrowers can set up automated payments from a bank account. Otherwise, they can set up reminders on their phones and calendars that go off when their payments are about to come due.

In terms of deferment fees, borrowers having trouble making payments on time can call their student loan servicer and ask for extensions or other options so that they don’t go into default.

Going into default can cause a credit score to drop significantly and hurt the chances of getting a mortgage, other loan, or credit card in the future. (Student loan deferment or forbearance do not hurt an overall credit score.)

Students shouldn’t be afraid to reach out to their loan servicer as soon as they can’t make a payment.

Plenty of borrowers end up in a tough spot financially and need a little help. Even if borrowers have to pay more interest over time by extending the loan term, that is almost always better than defaulting.

Some student loan companies don’t charge fees. Signing up for a loan with one of these companies could put money back into your pocket that could go toward repaying the loan.

Fee-Free Student Loans

Undergraduate and graduate school loans. Law school and MBA loans. Parent loans. SoFi offers all of those private student loans with no fees — no origination fees, returned-check fees, or late fees.

A loan comes with a fixed or variable rate and a flexible term. And there is no prepayment penalty.

As a bonus, SoFi members can access perks like financial advice, career coaching, and Edmit Plus, a tool that helps estimate financial aid, compare cost of attendance, and highlight merit aid and scholarships available.

Paying for College

Paying for college may require a combination of resources. One of the first places for students to start their financial aid journey is by filling out the Free Application for Federal Student Aid (FAFSA®) every year. This application allows students to find out if they are eligible for federal financial aid, including federal private loans, grants, scholarships, and work-study.

When comparing your options, it’s important to understand the difference between grants vs. scholarships vs. student loans from a private lender. Continue reading for information on these three categories of aid and additional strategies for paying for college in addition to federal student loans.

Private Student Loans

Private student loans, as mentioned, are offered by private lenders such as banks, credit unions, and other financial institutions. To apply, potential borrowers will need to file applications with individual lenders.The interest rate and loan terms are generally determined based on the applicant’s personal information such as their income and credit score, among other factors. It’s generally worth shopping around to find the best rate and loan terms for your personal situation.

Private student loans can be helpful tools to pay for college. However, when comparing private student loans vs. federal student loans, it’s important to note that private student loans lack the borrower protections afforded to federal student loans – things like income-driven repayment plans or deferment options. For this reason they are generally considered an option after all other financial resources have been depleted.

Credit Card

It can be possible to pay for college tuition using a credit card. While schools may accept payment by credit card, there is generally a fee associated. This fee can be between 2.5% to 3% depending on the school, which likely offsets the rewards you may be earning on your credit card.

Credit cards could be helpful for students while they are paying for other college related expenses, like textbooks, food, or other living expenses. Credit cards, when used responsibly, can be tools to help individuals build or establish their credit history. If you plan on using a credit card to pay for expenses, aim to pay off the card each month to avoid accruing interest. Credit card interest rates can be very high — the average interest rate for new credit cards was 22.45% as of July 2023, according to WalletHub.

Personal Savings

Some students may have the money saved to go to college, or someone in their family might be able to finance their education. For instance, perhaps their parents or grandparents opened a 529 savings plan for them when they were younger and funded it with money to put toward college.

Grants

Grants are a type of funding for school that typically don’t need to be repaid. Grants are generally awarded based on financial need and can be found from sources such as the federal or local government, college, or even nonprofit organizations.

Each grant application may have different application and eligibility requirements so be sure to read the instructions closely.

Scholarships

Scholarships are another type of aid that recipients are not required to repay. Often, they are awarded based on merit though can be awarded based on other criteria as well.

Students can look for scholarships in a variety of places, schools, nonprofit and community organizations, companies, and more all offer scholarships.

Take a look at your school’s financial aid website to see what scholarships are available at your school. There are also online databases like Scholarships.com that aggregate information on available scholarships, including basic eligibility criteria. Some scholarships can be quite competitive, so it may be worth applying to a variety of scholarships.

The Takeaway

Student loan fees like an origination fee or late payment fees can increase the total cost of borrowing the loan. The types of fees on student loans will vary based on the loan type. For example, federal student loans do charge an origination fee which varies based on the type of federal loan and there are late payment fees associated with payments that are 30 or more days late.

Private loans may or may not have an origination fee or late payment penalties. The policies will vary by lender. If you’re interested in a private student loan, be sure to shop around and compare fees in addition to interest rate and loan terms to fully understand the cost of the loan.

Private student loans with SoFi have no fees, including no origination fees or late payment penalties. Qualifying borrowers can secure a competitive interest rate and SoFi members are eligible for other benefits like career coaching and member events.

Check your rate on a SoFi private student loan in a few clicks.

FAQ

How much is the origination fee for student loans?

The origination fee on a student loan will likely vary depending on the loan type and lender. For federal student loans, the origination fee from October 1, 2020 through October 1, 2024 is 1.057% for Direct Subsidized and Unsubsidized Loans and ​​4.228% for Direct PLUS Loans.

The origination fee on a private student loan will vary by lender.

Do unsubsidized student loans have an origination fee?

Yes, unsubsidized loans through the federal government’s Direct Loan Program do have an origination fee of 1.057% for loans disbursed between October 1, 2020 and October 1, 2024.

Can a student loan origination fee be waived?

Federal student loans have an origination fee and it’s unlikely to have this fee waived. Some private student loans may not charge an origination fee and lenders that do may be willing to negotiate with borrowers.

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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 .

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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Sending your child off to college is a major milestone towards their independence. But if your kid decides to get a private student loan, they will most likely need to have a cosigner. Typically, that means mom and dad step up to the plate.

Should parents cosign on student loans? The answer will depend on such factors as your risk tolerance, your child’s probable ability to repay the loan, and if it makes sense for your family and your finances.

Cosigning for a student loan has benefits and disadvantages. There are also other options that can help bridge the gap between the cost of higher education and what you’re able to pay.

This guide will provide important facts to know about being the cosigner on a private student loan.

Why Are Student Loans Cosigned So Often?

It’s no secret that the cost of college education has skyrocketed. Consider these statistics:

•   The average cost of college has doubled since year 2000.

•   The current average cost for one year of college at a public institution is $26,027, including living expenses, with tuition and fees costing $9,678 in-state and $27,091 on average out-of-state.

•   For a private, nonprofit university, that number rises to $55,840 on average, with tuition and fees accounting for $38,768 of that sum.

There are many kinds of funding and different types of student loans to contemplate when budgeting for college. When savings, federal student loans, federal work-study, and scholarships or grants can’t fill the gap, students may look to private lenders to help them cover the rest.

Unfortunately, students just starting out usually don’t have the credit history needed to get a loan from a private lender, so cosigners sometimes step in.

But do students have to have a cosigner for a private student loan? Almost always. Since many lenders won’t lend money to young adults with no or little credit history, they typically require cosigners. Roughly 92% of all private undergraduate student loans have a cosigner.

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

What Are the Downsides to Cosigning My Child’s Loan?

If you’re looking to privately fund your child’s education costs, it means they likely need the help to pay for college, just like many Americans do. But cosigning for your child’s private student loan is not without potential repercussions. Think over the following:

•   When wondering “Should I cosign a student loan?” do consider your relationship with your child. If something goes wrong — missed payments, extended unemployment, or worse, default — the potential for financial stress could create the possibility of misunderstandings and hurt feelings. If your relationship with your child is already tenuous, bringing financial stress into it will likely not help.

•   Cosigning could put your own finances at risk. You may have the most responsible young adult in the whole state, but if something goes awry and the loan goes into default, the lender may sue you or hire a collection agency to try to recoup the debt.

A student loan default might also tarnish your credit score. Simply signing the loan also affects your score. Even if you’re not the one making payments, you’re still responsible for the loan, according to the major credit bureaus.

Recommended: What Is a Credit Bureau?

What Are Alternatives to Cosigned Loans?

Do parents have to cosign student loans? Not necessarily. And so you may wonder what options you have to cosigning a loan for your child’s education. Here, a few to know about:

The First Step for Federal Aid: FAFSA®

Do parents have to cosign a private student loan? The answer in the previous section was “almost always.” The “almost” part of that answer is “not if they can find other sources of funding.” Scholarships and grants, which don’t have to be repaid, are a good place to start, but they often don’t cover the entire cost of an entire college education. The first source of funding that should be exhausted before any others is federal student aid.

Filling out the Free Application for Federal Student Aid (FAFSA®) is the first step to figuring out how much federal (and frequently state) financial assistance your child is eligible for. You’ll add your financial information that will determine the amount of federal assistance, which includes Direct Subsidized Loan, Direct Unsubsidized Loans, and other student aid from the federal government, like grants and work-study.

Some states and colleges also base merit aid on FAFSA information, so the application is an important one for all types of financial aid, not just federal.

Establishing Their Credit Score

There are also some other pathways to consider when trying to find loans without a cosigner. One good idea is to have your child start building their credit history. A credit score is typically enhanced over time as the record of their successful payments grows, along with other factors like their outstanding debt, credit mix, and more. A couple of pointers:

•   Your student might start by either getting a secured credit card at a credit union or other financial institution, then showing they can make timely monthly payments on a purchase.

•   If your student is trustworthy and mature, you could also consider adding them as an authorized user to a credit card you already have. You’ll be responsible for making the monthly payments, but they could benefit from your financial behavior.

Scholarships

Loans and scholarships can go hand-in-hand to make college affordable. Like the real estate mantra concerning location, the college payment mantra might be, “Scholarships, scholarships, scholarships!” Money you don’t have to pay back? Yes, please.

The FAFSA will help colleges determine what federal student aid, scholarships, and grants your child might qualify for, but don’t let your student stop there.

Merit scholarships come in all sizes and from diverse sources, including local and national organizations, heritage associations, and various writing and other contests sponsored by nonprofits and other organizations. It might help to look at groups that your family might be closely associated with, such as unions, professional associations, or alumni organizations.

Keep in mind that your child can apply for scholarships while they are still in college, because some are tied to college majors, and your student is likely to have settled on a major after the first year or two. This could open up scholarship options that couldn’t be considered before they declared a major.

Recommended: Pennsylvania Student Loan and Scholarship Information

Budgeting

You might also be able to forego cosigning a student loan by making strategic decisions about education costs. Can your student reduce the overall cost of college by ditching the meal plan, living off campus, or even attending a significantly less expensive college?

Or, instead of paring down expenses, maybe your student could consider boosting their income to avoid the need for a cosigner on a student loan. One idea might be to start a low-cost side hustle. Another could be to take a year off to work — this may be enough to close the gap, avoiding the need for a loan altogether.

Loans for Parents

Parents who don’t mind shouldering more of the cost can also take out their own federal student loans with the Direct PLUS Loan , sometimes referred to as a “parent PLUS loan.”

Even though your student benefits from the loan, they are not the borrower, and you’ll be solely responsible for paying it back. Some parents may consider working out a repayment arrangement between themselves and their student. If this will be the expectation, however, it’s a good idea to discuss the arrangement with your student before taking out this type of loan.

Direct PLUS Loans can also be taken out by graduate or professional students. Whether a parent or a graduate student, there is a downside for the borrower. The interest rate for Direct PLUS Loans is often higher when compared to other federal student loans — 8.05% for the 2023-2024 school year versus 5.50% for Direct Subsidized Loans and Direct Unsubsidized Loans.

However, in this scenario, you won’t be asking yourself, “Should a parent cosign a student loan?” because you’re helping fill the gap without depending on your student to pay the loan back.

💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

The Takeaway

There are options available to eligible students before considering a private student loan. However, if all other options have been exhausted, a private student loan can be a good choice to help your child complete their college education.

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.

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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.

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.

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.

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 .

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.

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It can sometimes seem like there are an endless amount of student loans, but there are borrowing caps in place. Students face both annual and lifetime borrowing limits for federal student loans. The lifetime aggregate limit for undergraduate students is $57,500, of which no more than $23,000 can be in subsidized loans. For graduate students, the lifetime borrowing limit is $138,500, of which, no more than $65,500 can be in subsidized loans.

Private lenders may also have lifetime and annual borrowing limits, though those limits will be set by the lender. It’s possible to hit the maximum amount of loans allowed before finishing school, so it’s helpful to understand how much you may be eligible to borrow.

What Is the Lifetime Limit for Student Loans?

Students have the option to borrow federal student loans, private student loans, or both. Depending on factors like your year in school, there are aggregate and lifetime limits for borrowing.

Federal Student Loan Lifetime Limits

Federal loans have both annual and lifetime limits. The limits can vary by student, depending on three factors, including:

•   Your year in school

•   The type of loan you are eligible to borrow choose (subsidized vs. unsubsidized)

•   Your dependency status

Independent students, who the U.S. Department of Education considers to be on their own financially, can borrow more than dependent students who can typically get help from their parents.

Even if you’re financially independent of your parents, the definition of an independent student is fairly strict, and if you are under the age of 24, you’ll need to confirm you qualify as an independent student. If you’re not sure what you qualify as, see your guidance counselor or an admissions counselor who may be able to help.

If you’re not sure what you qualify as, see your guidance counselor or an admissions counselor who may be able to help. Here’s how the loan limits shake out depending on your status and year in school, straight from the U.S. Department of Education:

Year In School	Dependent Students*	Independent Students**
First-year undergraduate	$5,500 — no more than $3,500 can be subsidized	$9,500 — no more than $3,500 can be subsidized
Second-year undergraduate	$6,500 — no more than $4,500 can be subsidized	$10,500 — no more than $4,500 can be subsidized
Third-year and beyond undergraduate	$7,500 — no more than $5,500 can be subsidized	$12,500 — no more than $5,500 can be subsidized
Graduate and professional student annual limit	N/A (all graduate and professional degree students are considered independent)	$20,500 — none can be subsidized
Lifetime limit	$31,000 — no more than $23,000 can be subsidized	$57,000 for undergraduates — no more than $23,000 can be subsidized $138,500 for graduate and professional students — no more than $65,500 can be subsidized

^*Except students whose parents are unable to obtain PLUS Loans.

^**And dependent undergraduate students whose parents are unable to obtain PLUS Loans.

Note that the lifetime limit for graduate and professional students includes the amount in federal loans you borrowed during your undergraduate studies.

Private Student Loan Lifetime Limits

If you choose to borrow private student loans, know that the annual and lifetime limit may vary by lender. That said, the annual limits typically cannot exceed the cost of attendance at your school, less any financial aid you have already received.

The total cost of attendance is a number determined by your school and typically includes tuition and fees, on-campus room and board, books, supplies, transportation, and dependent care.

As for lifetime limits, it may depend on whether you’re an undergraduate student or a graduate student. Some private lenders may offer higher limits if you’re doing an MBA or going to law or medical school, for example.

Some lenders have just one limit for all loans. But in some cases, you may even see two-lifetime limits: one for loans through the private lender and one for total federal and private loans.

So, if you’re considering borrowing from a private lender, ask about their loan limits before applying to make sure you get the funding you need.

What to Do If You’ve Hit the Maximum Federal Student Loan Amount

If you’ve reached your lifetime limit for federal student loans or you’re close to it, it’s probably time to start thinking about how you’re going to repay your student loans. Here are some options if you’ve maxed out your options for federal loans.

Consider Student Loan Refinancing

One way to make progress toward paying off your student loans and potentially save money along the way is to refinance them with a private lender (provided you haven’t reached your limit with these loans, too). Student loan refinancing can allow you to replace your current loans with a new one.

In some cases, you may qualify for a lower fixed or variable interest rate than what you’re currently paying. You could also adjust your repayment schedule to pay off your student loans faster or take some more time to fit your budget better.

With a lower interest rate, you could reduce the amount of money you spend on interest over the life of the loan. If you lengthen the term of your loan you’d decrease your monthly payments but will pay more in interest over the life of the loan.

In other words, if you refinance your student loans, you may get more flexibility with your payments as you eliminate your debt. However, it is important to note that if you refinance your student loans with a private lender, you may forfeit eligibility for federal benefits, such as student loan forgiveness.

Check Out Federal Assistance Programs

If you’ve maxed out your federal student loans because your income isn’t where you’d like it to be, you may want to take a look at federal programs like income-driven repayment plans, deferment, or forbearance instead — all of which you’d give up access to if you refinance with a private lender.

Consider a Private Student Loan

If you’ve reached your limit on federal student loans but still need some assistance paying for your tuition, you might consider taking out a new private student loan. There are options for fixed or variable private student loans, and some lenders like SoFi offer flexible repayment options. Partial, deferred, or interest-only payments put a bit less strain on your budget.

The Takeaway

There are both annual and lifetime borrowing limits for federal student loans, the lifetime limit for undergraduate students is $57,550, of which no more than $23,000 can be in subsidized loans. Private lenders may also have borrowing limits, but they will be set by the lender. Generally speaking, private student loans are limited to the cost of attendance.

SoFi is one of the leading private student loan lenders and offers fee-free private student loans with competitive interest rates for qualifying borrowers. The simple application can be completed entirely online.

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

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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.

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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