Yes, you can refinance student loans with a private lender more than once in the quest for a lower interest rate and different repayment term.
How Many Times Can You Refinance Student Loans?
If you’re a graduate who has the credit score and income to qualify, you can refinance your student loans as many times as you want to. In fact, some folks refinance multiple times.
But before you get too refi happy, it’s important to know the advantages and disadvantages of this strategy.
What Are Some Advantages of Refinancing Multiple Times?
As with a first refinance, the biggest advantage of refinancing multiple times is that you may be able to find a lower interest rate. A reduced rate may help you save money in the long run.
Let’s say your parent or grad PLUS loan balance is $80,000 at 6.28%, extended to a 20-year repayment term. You qualify for a refinance rate of 4.28% and shorten the term to 15 years. Your monthly payment would be slightly higher, but you’d save over $32,000 over the life of the loan.
A while later you might qualify for a lower fixed rate or an even lower variable rate, and so on.
Or you might find it handy to refinance to a longer term, with lower monthly payments. That will likely mean paying more in interest over the life of the loan, but lower monthly payments may put you in a better position to accomplish your short-term financial goals.
Reputable lenders charge no application or origination fees, so refinancing each time will not cost you anything.
What Are Some Disadvantages of Refinancing Multiple Times?
One disadvantage of refinancing your student loans is that your credit score could temporarily drop by a few points, thanks to the hard credit inquiry. Merely shopping for rates usually does not affect your credit at all since it only involves a soft credit pull.
Another factor to consider is your time. Though you can refinance as many times as you want, it helps to make sure it’s worth the effort. That means researching reputable lenders and the rates and terms they offer.
It’s important to point out that refinancing federal student loans even once will remove those loans from federal student loan forgiveness programs and government deferment and forbearance.
How Is Student Loan Refinancing Different Than Consolidation?
It’s important to make a distinction between refinancing and consolidation. When you refinance your student loans with a private lender, you are combining all your student loans into one new loan with a new, hopefully lower, interest rate and sometimes a new repayment term.
When combining federal student loans into a Direct Consolidation Loan, the term may be drawn out to up to 30 years, but the interest rate will be the weighted average of the original loans’ rates, rounded up to the nearest eighth of a percentage point. Because of that, your new rate may actually be higher than the rate of your previous lowest-interest loan.
Things to Look for When Refinancing
Whether you refinance your student loans for the first or sixth time, it would be smart to check that your new rate and term make sense for you.
You’ll encounter fixed-rate and variable-rate loans. Fixed-rate loans have one interest rate over the life of the loan. The rates are typically higher than the initial rates of variable-rate loans, but because they don’t change, they can make budgeting easier.
Variable-rate loans have interest rates that change based on the prime rate or another index. Rates can climb if the rate or index they are tied to goes up (and vice versa, of course).
Variable-rate loans might be a good choice for a shorter term. The longer the loan term, the bigger the chance of a rate hike.
Also, beware of qualifying for a low interest rate that’s attached to a longer-term loan. Though monthly payments might be low, a longer term might mean you’ll end up paying much more over the life of the loan. If you can afford the higher monthly payment, loans with shorter terms can be a good cost-saving option.
Consider looking for a refinance lender that offers competitive rates and flexibility in choosing the repayment term. And if you want to refinance both federal and private student loans into one new loan, look for a lender that does that.
Serious savings. You could save thousands of dollars.
We offer flexible terms and low fixed or variable rates.
Refinancing Your Student Loans More Than Once
It’s all about the great rate chase.
Having a certain debt-to-income ratio can help you qualify for a lower interest rate. So if you have a higher salary, get a big bonus, or pay off other debts, your debt-to-income ratio might improve.
Similarly, if your credit score increases, you typically become more attractive to lenders. This could happen if you are using a small amount of your available credit, or if you find and correct a mistake on one of your credit reports. (Do student loans affect your credit score? Continuous on-time payments may have a positive effect.)
Married couples may want to consider refinancing student loans together to put the power of two earners to use. A solid cosigner could also be brought aboard.
If you’re thinking about a refinance, it could help to keep an eye on the federal funds rate, the rate banks charge one another for overnight loans. When the Federal Reserve raises or lowers short-term interest rates, private lenders respond in turn. (This does not apply to federal student loans, whose interest rates have been set by Congress once a year since 2006.)
Even if interest rates rise now, they could still be considered low by historical standards.
Refinancing Your Student Loans With SoFi
Is it bad to refinance multiple times? If it saves you money, that’s nothing but a good thing. Refinancing won’t be the right move for all people, but everyone should know the rates they’re paying, their total student debt load, and their repayment strategy.
SoFi is a leader in refinancing student loans, with low fixed or variable rates and flexible loan terms.
You can find your rate in two minutes.
FAQ
Can I consolidate student loans more than once?
You can consolidate federal student loans into a Direct Consolidation Loan more than once only if you have federal loans that were not included in a previous consolidation, or if you previously consolidated loans under the Federal Family Education Loan consolidation program. Remember that consolidation does not lower your loan rate.
How many times can you refinance a loan?
As many times as you qualify to do so.
How many times can you take out student loans?
When it comes to federal student loans, there is no time limit on how long a borrower can receive Direct Unsubsidized Loans or Direct PLUS loans, but annual and aggregate limits for Direct Unsubsidized Loans apply.
Private student loans, for which you must qualify or have a cosigner, usually have an annual limit equal to an institution’s cost of attendance minus other financial aid. Most have aggregate loan limits for undergraduate and graduate students.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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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Whether you’ve been turned down for a private student loan or you’re applying for the first time, it’s important to understand how a cosigner can impact your loan application.
Having a cosigner on a student loan is a bit like a letter of recommendation to get into college. A cosigner can reassure the bank or lender that you are capable of repaying the loan. A cosigner is not always required for student loans, such as with most federal student loans. Depending on a student’s financial history, employment, and what type of loans they’re applying for, the likelihood of requiring a cosigner will vary.
Read on to learn more about what a cosigner is and when it may make sense to add one to your student loan application. This article will also discuss some of the risks involved with being a cosigner, and some tips on how to ask someone to be a cosigner on a student loan.
What Is a Student Loan Cosigner?
A cosigner is a person who agrees to repay the loan if a borrower defaults or is otherwise unable to pay their debt. Adding a cosigner to a student loan application could help the primary borrower secure a lower interest rate, depending on the cosigner’s financial and credit history.
When a cosigner takes on a student loan with the borrower, they’re assuming equal responsibility to repay the loan. Any negative actions on the loan, such as a late payment or defaulting, could harm the cosigner’s credit.
How to Decide If You Need a Cosigner on a Private Student Loan
Before deciding whether you need a cosigner on a private student loan, you’ll want to fill out the Free Application for Federal Student Aid (FAFSA®). This will determine how much aid you’ll receive, and help you and your family determine how much of a gap you’ll need to fill with other sources of funding.
Once all other options are exhausted, students could look into private student loans and consider a cosigner. When considering a cosigner, there are several factors to evaluate, including the type of loan you’ll be applying for, your credit history, credit score, income, and any history of missed payments. Continue reading for a more in-depth discussion of these factors.
1. What Type of Student Loans Are Being Considered?
The type of loans you’re applying for may affect your need for a cosigner.
Federal Student Loans
For the most part, federal loans do not require a credit check or a cosigner. The federal loan types that do not require a cosigner include:
• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct Consolidation Loans
The exception is a Direct PLUS Loan, which does require a credit check. Borrowers interested in a Direct PLUS Loan may need an “endorser” for the same reasons they may need a cosigner for a private student loan: if their credit history and other financial factors are lacking.
A Direct PLUS Loan can help graduate students and parents of undergraduate students pay for the entire cost of school attendance, minus any other financial aid. Direct PLUS Loans are the only federal student loans that look at an applicant’s credit history, thus the potential need for an endorser.
An endorser is the equivalent of a cosigner — they agree to repay the Direct PLUS Loan if the borrower defaults or is delinquent on payments.
Private Student Loans
If an applicant doesn’t meet the lending requirements on their own, they might need a cosigner to obtain any private student loan. To qualify for a private student loan, you typically have to check more boxes regarding financial history than you would for a federal student loan.
According to a report by MeasureOne, 92% of private undergraduate student loans and nearly 66% of private graduate student loans originated in the 2021-2022 school year had a cosigner. Based on this, it is more likely than not that a student will add a cosigner on their private student loan application.
Both Federal and Private Student Loans
Once a student has a full understanding of the financial aid they qualify for after submitting their FAFSA, they can determine if federal student loans and other federal aid like scholarships and grants will cover the cost of their education or if they need to supplement the amount with a private student loan. While the borrower might not need a cosigner for federal loans, they might require one for private student loans they might take out.
2. Are You an Undergraduate or Graduate Student?
The necessity of a cosigner may vary depending on whether a person is applying for graduate or undergraduate private student loans.
Undergraduate Student
Undergraduates are generally more likely to need a cosigner on their private student loans. That’s because undergraduates typically haven’t established a lengthy credit history. Without an established credit history, there is no track record for lenders to evaluate. In addition, undergrads might not have a steady income, which can also affect whether they are approved for a loan without a cosigner.
Graduate Student
The type of schooling a person is pursuing won’t have an impact on the need for a cosigner. However, a person’s credit history and income will still factor into the decision.
3. How Does Your Credit Score Factor into the Decision?
Most private lenders will look at an applicant’s credit score (among other factors) to determine eligibility. Having a lower credit score may make it more challenging to get a loan without a cosigner.
FICO® Scores (the most common credit scores used by lenders and financial institutions) range between 300 and 850. If a person wants to check their score, many websites offer free credit scores or credit score monitoring (just be sure to read terms and conditions carefully).
It’s possible to get a free credit report annually from AnnualCreditReport.com. It is important to note that this is not the only site where someone can request a free credit report. For example, they can get their credit report directly through the credit bureaus or on other online sites.
Ultimately, it’s up to each individual lender to consider the credit score and other financial factors before approving a loan, and every lender has different criteria.
4. How Long Is Your Credit History?
A person’s credit history gives lenders a sense of their ability to pay on time, or ability to pay off debt in full. The length of a person’s credit history makes up about 15% of their FICO® Score.
Length of credit history is determined by Average Age of Accounts (AAoA). Lenders take the lifespan of a person’s accounts and divide by the number of accounts that person holds. A potential borrower can determine this number by figuring out how long they’ve had each account in their credit history, then dividing by the number of accounts.
The real sweet spot for credit history comes at the seven-year mark. From that point, early negative marks on accounts might have faded away. It shows lenders that a borrower can pay loans and maintain accounts over time.
There are a number of factors at play in lending decisions, but a short credit history could mean that adding a cosigner is beneficial.
Repay your way. Find the monthly student loan
payment and rate that fits your budget.
5. What Is Your Employment Status?
Lenders want to be sure that you can repay your debts, so they’ll generally also evaluate an applicant’s income.
Employed Full-Time
Generally, if a person is employed full time at a salaried job, it shows lenders they have the capability to repay the loan they’re borrowing. Lending requirements vary based on the lender, but having an established income history may help an applicant avoid needing a cosigner.
Employed Part-Time
While part-time employment can still be beneficial for a loan application, it’s possible that a cosigner might help boost the application. The applicant’s debt-to-income ratio will come into play — that is, how much debt a person owes (credit cards, rent, other bills) divided by the income they earn before taxes and other deductions.
Of course, all lender requirements vary, but significant, consistent income can factor into whether the applicant will still need a cosigner.
Only a Student (Not Employed)
If an applicant is not employed, lenders may be more inclined to approve a loan if there’s a cosigner who is able to show stable income.
6. Have You Ever Declared Bankruptcy?
Lenders can and do consider all aspects of a person’s financial history before granting a loan, bankruptcy included. Declaring bankruptcy negatively affects a person’s credit score, which private lenders pay close attention to with a loan application. A bankruptcy filing can stay on a person’s credit history for a decade.
Bankruptcy filings can affect a credit score in a number of ways, and depending on how long ago it took place, the effects on a person’s score will vary.
7. Have You Defaulted on a Loan?
The terms of each loan are different, but after a period of nonpayment, the loan enters default. Defaulting on a loan stays with a person’s credit history for at least seven years and typically negatively affects their credit score.
If a person has defaulted on a previous loan, they’ll likely need a cosigner on their student loan to potentially bolster their lendability.
8. Have You Ever Missed a Payment?
On-time payments each month can help show lenders that a person is a responsible borrower. Missing payments or consistently making late payments can have a negative impact on a person’s credit score. Payment history accounts for approximately 35% of an individual’s FICO® Score.
Consistently missing payments that have affected a person’s FICO® Score might cause a potential lender to require a cosigner. It could also cause concern for a potential cosigner, so students might want to keep that in mind.
A solid history of on-time payments shows a lender that a person is a responsible candidate for a loan and might not need a cosigner.
Choosing a Cosigner
As stated near the beginning of this post, the majority of private student loan borrowers have a cosigner. But not all cosigners are built the same, and choosing the right person to cosign a loan could be as important as the terms of the loan itself.
A cosigner should not only have a strong financial history, but also a strong relationship with the applicant. A cosigner might be a parent or blood relation, but they don’t have to be. A cosigner ideally has a stable financial history and a relationship to the applicant where they feel comfortable discussing money.
Asking Someone to Be a Cosigner
There’s a common misconception that cosigning on a loan is as easy as signing a contract, but it actually means more than that. When a person asks someone to be their cosigner, they shouldn’t shy away from discussing the challenging topic.
It may make sense to talk about worst-case scenarios with a cosigner, and make it clear it would be their responsibility to take on the payments if you default. Discuss how you could repay the cosigner in the event that you can’t make payments.
Risks of Cosigning
Beyond the worst-case-scenario discussion, cosigners should know the additional risks they take on when cosigning a student loan:
• Credit score. Cosigning a loan will affect a person’s credit score, since they’re taking on the debt as well. Even if the borrower makes on-time payments and doesn’t default, the cosigner will see a change in their credit score by taking on the additional debt. It could potentially benefit their score.
• Liability. If the borrower defaults on the loan, it becomes the cosigner’s responsibility to pay for it. A lender can come to collect from the cosigner, seizing assets and garnishing paychecks to cover missed payments.
However, the cosigner doesn’t need to stay tied to the loan forever. Private student loans may have a cosigner release policy in place. After a duration of on-time payments and additional paperwork, a lender may release the cosigner from the loan, leaving the borrower on their own.
It might sound easy, but a cosigner release isn’t a guarantee and not all private loans will offer this option. Read the terms of your loan carefully to understand the requirements for cosigner release.
The Takeaway
Like every college application, each loan application is a little different. Certain aspects of a person’s credit history or employment might make them more compelling to a lender. Other elements, like late payments or a limited credit history, might make a person less compelling to lend to.
Adding a cosigner to a private student loan is common and can improve your chance of approval, sometimes even with a lower interest rate than if you applied on your own.
If a student has exhausted all of their federal student loan options, private student loans could be an option worth considering.
SoFi offers private student loans with no origination fees, no late fees, and no insufficient fund fees. Plus, SoFi offers flexible repayment options to help students find the loan that fits their budget.
Learn more about private student loans with SoFi.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. SoFi 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. Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit. Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website . External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. SOSL19030
Understanding the average salary of a profession can help you make a variety of important decisions, from what field you want to enter to where you want to live and work. In California, the average physician makes more than $200,000 per year. Knowing that, medical students have a better idea of what they could make when they get out of school. Likewise, physicians looking to relocate to a new state have a better sense of how their salary can change based on where they decide to move.
Here’s a closer look at how much medical doctors make a year in California, regional differences in salary, and the top-paying medical specialities in the state.
What Is the Average Salary for a Medical Doctor in California?
The average salary of a physician in the state of California is $229,420 per year, according to data from the U.S. Bureau of Labor Statistics (BLS). This figure doesn’t account for a physician sign on bonus, which some doctors receive. Interestingly, California is squarely in the middle when it comes to average physicians’ salaries, along with Oregon, Texas, Maryland, and New York. The average salary in California lags more than half of states, including Arizona, Florida, Wyoming, Kentucky, and South Carolina.
Though many consider anything more than $100,000 a good salary, California’s relatively low pay may come as a surprise to some. However, there are some possible explanations. For one, California spends the most on Medicaid among U.S. states. Medicaid — and Medicare, for that matter — both reimburse physicians at rates lower than their usual fees. Doctors who are seeing a lot of elderly or low-income individuals may see their incomes reduced.
Note that early in your career as a doctor, while you’re in your residency or fellowship, you’ll likely make considerably less than you will later in your career. Explore ways to get by on a medical resident’s salary.
You may also want to consider using a spending app, which can help you set financial goals and a budget and track where your money goes.
Doctors are health care professionals who are charged with meeting with patients, diagnosing their conditions, and managing their care plans. They perform tests and prescribe medications. And they must coordinate with a range of other health care professionals, including other doctors, nurses, and emergency medical technicians.
That’s a lot of responsibility, and as a result, it takes a lot of training to become a doctor.
First, you’ll need to complete a bachelor’s degree in a field that relates to medicine, such as pre medicine, biology, or biochemistry.
Next, you’ll need to go to medical school, where you will receive classroom and practical training to advance your knowledge in the medical field. Medical school is typically a four-year program. While in school, you’ll complete the first and second parts of the U.S. Medical Licensing Examination (USMLE). The average cost of medical school can be high, running more than $50,000 a year at private institutions.
When you graduate from medical school, you’ll enter a residency program that helps you choose a medical specialty. These programs usually last three years, and under the supervision of an experienced physician, you’ll work full time as a resident doctor. You’ll complete your residency by passing the third and final part of the USMLE.
After your residency, you can choose to complete a fellowship that gives you further training in the specialty you’ve chosen. Though fellows tend to make more than residents, their salary isn’t as high as new doctors. The good news is, there are ways to budget on a medical fellowship salary.
Finally, you’ll need to obtain a California medical license from the Medical Board of California. You can renew your license every two years, which requires 50 hours of continuing medical education.
Becoming a doctor can involve a lot of challenges, but it can also be immensely rewarding work. Here are a few reasons you might become a doctor:
• To help others: Doctors diagnose and treat medical conditions, helping to save and improve patients’ lives. They are often involved in ongoing treatment, ushering patients down the path to recovery. Being a physician is a people-centric profession that involves working closely with patients and their families to explain medical conditions and treatment options.
• To work in the sciences: If you’re interested in a variety of scientific fields, from biology to chemistry to anatomy to pharmacology, being a doctor is a way to explore these subjects while also helping others.
• To find purpose: The responsibility toward patients and coworkers and the ability to better people’s health and well-being often provide doctors with a sense of satisfaction and meaning in their work.
• To become a teacher: Becoming a doctor requires a lot of schooling and ongoing training. Doctors may pass on this knowledge by educating patients on how to lead healthier lives, educating medical students in teaching hospitals, and supervising residents.
• To have job security: The job outlook for physicians is relatively low, with the field expected to grow 3% through 2031. That said, there are still 23,800 openings for physicians projected each year, according to BLS data.
• To make a good salary: The annual average wage for all workers in the United States is $58,260, according to the BLS — quite a bit lower than the $229,420 average annual pay for physicians in California.
Best-Paying Medical Doctor Jobs in California
The medical speciality you pursue in California will have a big impact on your salary. According to BLS data, here are some of the highest-paid physicians in California:
Psychiatrist
Psychiatrists help diagnose and treat mental disorders. Unlike psychologists, they are allowed to prescribe drugs for medical treatment.
Average salary: $305,290
Obstetricians and Gynecologists
OBGYNs provide medical care related to childbirth and diagnose and treat diseases of the female reproductive organs. They also specialize in women’s health issues like hormone problems, infertility, and menopause.
Average salary: $309,610
Anesthesiologist
Before, during, or after surgery, anesthesiologists administer anesthetics (which reduce sensitivity to pain) and analgesics (which act as pain relievers).
Average salary: $318,030
Cardiologists
Cardiologists diagnose and treat conditions of the cardiovascular system.
Average salary: $343,370
Radiologists
Radiologists use medical imaging techniques, such as x-rays, MRIs, and ultrasounds to diagnose and treat diseases and injuries.
Average salary: $345,100
Pathologists
A pathologist helps diagnose diseases by running tests on organs, tissue, and bodily fluids, such as blood.
Average salary: $350,980
Surgeons
Surgeons are medical doctors that may have to perform surgery, a procedure that physically changes a patient’s body.
Being a doctor can be fulfilling, as it allows you to help people through work in the medical sciences. It can also be monetarily rewarding, and understanding average salaries can help you make decisions about where you want to live and what you want to specialize in. Though income varies by speciality, the average salary for physicians in California is $229,420 per year.
As you build your practice and earn a salary, a money tracker app can help you get your financial house in order. The SoFi Insights app connects all of your accounts in one convenient dashboard. From there, you can see all of your balances, spending breakdowns, and credit score monitoring, plus you can get other valuable financial insights.
Stay up to date on your finances by seeing exactly how your money comes and goes.
FAQ
What is a doctor’s yearly salary in California?
In California, a doctor can expect to make $229,420 per year on average, according to data from the U.S. Bureau of Labor Statistics.
What is the highest-paying medical specialty?
Among the highest-paid doctors in California are pathologists, surgeons, and radiologists.
Who earns more: a dentist or a doctor?
In California, doctors tend to make more than dentists, who earn $165,950 per year on average.
Photo credit: iStock/Drazen Zigic
SoFi’s Insights tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data. 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.
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College financial aid includes grants, scholarships, work-study and federal student loans. Scholarships and grants are forms of aid that generally don’t need to be repaid. Students who qualify for work-study are able to find part-time employment that can help them pay for college costs. Federal student loans are also considered financial aid, but unlike scholarships or grants, generally need to be repaid, typically with interest. Because you’ll be responsible for repaying student loans, it’s essential that you fully understand the terms of borrowing.
After applying for federal aid by filling out the Free Application for Federal Student Aid (FAFSA®), students can expect to receive a financial aid award that details the type and amount of aid for which they qualify. Financial aid can be incredibly helpful when trying to finance your college education, but it’s possible that you may not receive enough to fully foot your tuition bill. If that’s the case, there are other options available to help you pay for your education. Continue reading for more information on understanding your financial aid package and the options to consider should you find yourself in need of additional funding.
The Steps to Getting a Financial Aid Package
In order to get any financial aid package for college, the first step is generally to fill out a Free Application for Federal Student Aid , commonly known as FAFSA®.
The FAFSA for the 2023-24 school year became available Oct. 1, 2022, and the application cycle ends on June 30, 2024. Some states and colleges have separate deadlines for the FAFSA to determine aid. Consider contacting your school’s financial aid office for questions on the deadline required by your state or school.
Filling out the FAFSA requires some basic financial and income information. If you’re a dependent student, then you’ll need your parents’ financial info as well. For higher income families or those in unique financial situations, this can be a little tricky.
All federal loans, both subsidized and unsubsidized, require a FAFSA in order to determine eligibility. Colleges may also use the FAFSA to determine their own financial aid awards and packages, based on things like expected family contribution and financial need.
After you fill out the FAFSA, the Office of Federal Student Aid at the U.S. Department of Education will process your FAFSA and send you a Student Aid Report (SAR), which is essentially a summary of your information. It’s usually worth reviewing this information in detail to confirm that all of the information is accurate. If you find a mistake after reviewing your SAR, you’ll likely need to update or correct your FAFSA .
The SAR will include the calculated Expected Family Contribution (EFC), which is how much you and/or your family can be expected to contribute personally towards your education. (Next year, the EFC will be replaced by the Student Aid Index.)
Then, colleges use this information to determine eligibility for university, local, state, and federal financial aid. Sometimes schools may also ask for additional information, particularly if you are applying for school-specific scholarships.
The schools will then assemble a financial aid package that could be made up of grants, loans, work-study, and other waivers, and send you an “award letter.” Reviewing your award letter carefully can help you choose the financial aid mix that is right for you. Often these financial aid award letters come shortly after admissions decisions, though this may vary. Students typically have a deadline (often May 1, which is National College Decision Day) to make their decisions by.
It’s important to understand and compare the financial aid packages you’ve gotten from different colleges — even if that can be a little confusing. The key is to break down the jargon in order to help make an informed decision.
Understanding What’s in the Average Financial Aid Package
The format of an award letter can vary from college to college. That, in combination with financial aid jargon can make it difficult to decipher, but at its heart a financial aid package is a list of different amounts of money in different forms of loans, grants, work-study, or other tuition waivers that should add up to cover the cost of the college, minus your expected family contribution.
Yet, you may have to decode the language and research each of the line items. Sometimes, for example, instead of clearly identifying loans as such, they might be simply denoted with abbreviations like “L” or “LN” in the award letter. Here are the different types of financial aid you may see in your financial aid package:
Grants and Scholarships
These don’t have to be repaid, so they are sometimes referred to as “gift aid.” These could be school, state, or federal scholarships and grants you qualified for and were awarded.
Work-Study
This is part-time work you will do and be paid for. You’ll be paid at least the federal minimum wage, but depending on the job, you could earn more. Being granted work-study in your aid package does not always guarantee a job. Depending on the school you attend, you may be matched with a job or you may have to apply for and secure your own job.
Federal Student Loans
Federal loans can be either subsidized or unsubsidized, and usually have lower interest rates than private loans. There is also typically a cap on how much you can borrow.
Subsidized loans are for undergrads and are awarded based on financial need; additionally, the government pays the interest on them while you’re in school at least half-time, during your grace period, or during periods of deferment.
Unsubsidized loans are available to undergraduate and graduate students and are not awarded based on financial need. This type of loan accrues interest while a student is enrolled at least half-time, during the loan’s grace period, or during other periods of deferment.
Borrowers have the option to make interest-only payments during this time, but are not required to do so. If the interest on the student loan accrues, at the end of the deferment period it will be capitalized or added to the principal value of the loan.
There are also PLUS loans for parents and graduate students, which are also unsubsidized.
Beyond Federal Financial Aid: Private Student Loans
Private student loans are not part of a federal financial aid package. Private student loans can be borrowed from a private lender, which typically have more stringent financial qualifications and, like federal loans, must be paid back with interest. Typically, that interest also accrues while you’re in school.
Check the terms of any private student loans you’re considering and the interest rate being offered to get a sense of how they stack up to federal loans. Federal loans also offer benefits that private student loans do not, such as income-driven repayment plans, deferment options, or the
In order to make the decision that’s best for you, you’ll want to compare the total cost of attendance, how much gift aid is being awarded, and the loans you’ve received and their terms. This should give you a better idea of how much any federal loans will cost you, and whether there is a gap in funding.
The total cost of college may change over a student’s enrollment, so it generally needs to be calculated each year. Consider things like fluctuation in tuition rates, federal interest rates, and your financial aid award which, among other factors, have the potential to change.
Tips on How to Compare Financial Aid Packages
One of the most important things to look at when comparing financial aid packages for college is the net price. What that means is the actual cost to you, minus all awards. To find the net price you need to figure out the total cost for each college and then subtract the amount of grants and gift aid (e.g., not loans).
Factor in how much you can borrow in loans, and carefully consider the loan terms. And then you can calculate how much each college will cost you additionally out-of-pocket.
Just because one school is giving you more in financial aid doesn’t mean it’s necessarily the best financial option. For example, if it will ultimately cost you more because the college is more expensive and, perhaps, you’re going to need to borrow a private student loan with a comparatively high interest rate to cover what your federal aid doesn’t cover.
However, a financial aid package won’t always list the net price and many of the financial aid award letters don’t even necessarily tell you how much a specific college costs in total.
Some letters only outline the direct cost to the school — e.g., tuition and fees — but don’t include room and board or other expenses.
It can be helpful to make your own spreadsheet to ensure you’re comparing apples-to-apples. Figure out the total cost of attendance for each school you’re considering. Include tuition, fees, room and board, and you can even estimate expenses like books, supplies, and living expenses.
Note how much is being awarded in gift aid (grants and scholarships), how much you’re offered federal student loans, and how much it’ll cost you out-of-pocket. If needed, consider private student loans, carefully evaluating their loan terms.
Also understand whether the scholarships or grants in your aid package are a recurring award that will be given to you each year, or whether they are a one-time award.
It’s also worth noting that you are not required to accept all of the loans offered in your financial aid package. You can choose to borrow a lesser amount, which could help save you money in the long run by reducing the money you owe in interest.
If Your Financial Aid Package for College Isn’t Enough
Sometimes you do the math, compare all the costs, and feel like your financial aid package for college just isn’t adding up.
Appeal the Financial Aid Decision
It is possible to appeal a financial aid package, particularly if you’ve had changed circumstances or if there was a gap between the cost and the award. While writing an appeal letter might be a first step if your financial aid package isn’t enough to cover the cost of college, it doesn’t guarantee your award will change.
It also might be the case that circumstances change and you lose your financial aid or portions of your award package. In these situations, there are options in addition to or besides appealing.
Apply for Private Scholarships
You can look into private scholarships, of course. These are different from the scholarships and grants awarded by the state or school. However, private scholarships are considered non-need-based aid and will factor into the cost of attendance — and each school deals with that differently.
Get a Part-Time Job
Even if you don’t qualify for the work-study program, you could look for a part-time job. There may be on-campus jobs available, like working as a teaching assistant, or tour guide. Another option is to look off-campus for a job. There may be local restaurants, coffee shops, or stores that are looking for part-time associates.
Consider a Private Student Loan
Private student loans are another tool that could help students fill in financial gaps. Keep in mind, that, as mentioned, private student loans may lack borrower benefits afforded to federal student loan borrowers. If you think a private student loan is something that could work for you, get quotes from a few different lenders to compare the terms and conditions, so you can find the best loan for you. Some student borrowers may also consider applying with a cosigner, who could potentially help them qualify for more competitive loan terms.
The Takeaway
Your financial aid package will state the amount and types of aid you receive. Financial aid includes scholarships, grants, work-study, and federal student loans. Carefully compare your financial aid awards at each college when you are making your college decision.
If you don’t get enough financial aid, you might consider getting a part-time job, applying for private scholarships, or borrowing a private student loan. Keep in mind that, as mentioned, private student loans are generally only considered an option after all other financing has been exhausted. If you’re interested in a private student loan, consider SoFi. SoFi offers private student loans with no origination fees and no late fees.
Find out what rate and terms you may prequalify for in just a few minutes.
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. Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit. External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. SOPS19053
College is expensive. That means that even if you saved up your pennies since you were five, are currently working two part-time jobs, with a clutch of scholarships in tow, you might still need a little extra student loan cash to help you pay for your degree.
There are a number of ways to finance your college education, but the two most common options are federal and private student loans. Federal student loans are fairly straightforward, but private loans can get a bit murky.
After all, there are a lot of options when it comes to things like private student loan interest rates, term lengths, and approval criteria. It can be hard to understand what makes one lender or type of private student loan better than another.
That’s why it’s important to learn as much as you can about private student loans so that you’re better able to decide if they’re right for you, and find the private student loans that work best for your situation.
Often when people talk about student loans, they’re referring to federal student loans which are given out by the government and have a common set of criteria around things like interest rates, repayment plans, and forgiveness programs.
When it comes to federal student loans, you apply for them by filling out the FAFSA® (Free Application for Federal Student Aid) form which allows the government to determine your financial need in relation to your family’s income and the school you’ll be attending.
In contrast, private student loans are student loans that are offered by banks or private lenders to help people pay for school. To apply for them, you have to fill out a loan application as you would for any other loan, like a mortgage or an auto loan.
How much you can borrow won’t just depend on the costs of your degree, but typically depends primarily on personal financial factors like your credit score and income and the credit score and income of your cosigner (should you need or opt to have one).
How Do Private Student Loans Work
Private student lenders set their own terms in regard to term lengths, private student loan interest rates, repayment plans, and underwriting criteria. For that reason, one private student loan lender can offer options that are very different from another private student loan lender. That’s why it’s so important to seek out private student loans that are right for you — there can be a huge difference between one lender and another.
To apply for a private student loan, potential borrowers will file an application directly with their lender of choice. Based on the information submitted, the lender will determine whether or not the applicant is approved for the loan, and the rates and terms for which the applicant qualifies.
There are a lot of benefits when it comes to private student loans. For many students, they can mean the difference between paying tuition and fees in full or not being able to. One key benefit of private student loans is that you can apply for them at any time of the year — unlike federal student loans.
For that reason, they can potentially help you with those end-of-term funding shortfalls. Just be sure to plan ahead since it may take a while for the private loans to clear your account depending on the lender.
Private student loans are often used to make up the difference between what a student is able to borrow in federal student loans and their remaining need after things like scholarships, federal or state grants, work-study, or part-time jobs are factored in.
The maximum amount that you can borrow through federal government student loan programs depends on things such as whether you’re an undergraduate or a graduate or professional student and whether you’re a dependent or an independent student.
With federal student loans, the maximum amount first-year dependent undergraduates can borrow in subsidized and unsubsidized student loans is $5,500 for the year. Graduate or professional students can borrow up to $20,500 per year.
The lifetime maximum for a dependent undergrad is $31,000, and the lifetime cap for graduate students is $138,500 in federal student loans, including undergraduate study. When students need more than these caps, they often turn to private loans.
Another benefit of private student loans is that you have more control over things like private student loan interest rates. There are private student loans that offer you the option of either fixed or variable interest rates.
Private student loans may also have more choices in regard to loan terms. Many allow you to choose between 5-, 10-, and 20-year term lengths on your loans.
Some private student loans do not charge origination fees, though you should check the fine print on your award to make sure.
Private student loans can even be used to pay off an outstanding tuition balance. Each lender determines how far in the past a loan can be used to pay an overdue balance, but many will allow loans to cover past-due balances that are 6-12 months outstanding. Also, keep in mind that you can apply for a private student loan at any time, and paying before the bill is due is preferable so you don’t have any interruptions in enrollment or class scheduling.
When we say no fees we mean it.
No origination fees, late fees, & insufficient fund
fees when you take out a student loan with SoFi.
The Downsides of Private Student Loans
Despite the fact that private student loans could be the difference between going to your first-choice school and having to settle for your safety school, there are some downsides.
One big downside is that they often require a cosigner. After all, most high school and college students don’t make enough income or have a strong credit history (among other personal financial factors that can take years to build) to qualify for private student loans on their own.
According to the MeasureOne Private Student Loan Report, 90.78% of undergraduate private student loans given out for the academic year of 2022-2023 have a cosigner. Plus, 65.88% of graduate private student loans are cosigned.
The good news is that some private student loans allow for something called “cosigner release.” That means that after you make a certain number of on-time payments, you can apply to have the cosigner removed from the loan.
Another change in the industry is that more lenders are shifting their lending criteria away from simply looking at things like student’s income and credit score to also looking at things like your grades and income potential. That means that hopefully more students may be able to qualify for private student loans without having to get a cosigner.
(Although, we should note here that federal student loans for undergraduates don’t require cosigners at all, and don’t take a student’s income or credit history into account.)
Since private student loan interest rates are set based in part on how big of a credit risk applicants represent, you might also find yourself paying more than you would for federal student loans.
Federal student loans offer different types of income-driven repayment programs and things like loan forgiveness for public service employment and deferment protections that aren’t available with private student loans.
For example, you could apply for an income-driven repayment plan with federal student loans that, if you qualified, would allow you to pay just 10% to 20% of your income toward your student loans and then could forgive those loans after 20 to 25 years. In contrast, when you lock in your term length on your private loans, you can’t typically change your repayment term unless you refinance your student loans.
Other people express concern that private student loans lead students to borrow more than they will be able to afford to repay or to borrow amounts that will make repayment much more difficult. Responsible borrowing is critically important, especially when it comes to student loan debt, and only you and your family will know what’s right for you.
Another downside of private student loans is that they are generally not dischargeable in bankruptcy unless the borrower files an adversary complaint and meets an undue hardship test. This is unlike other types of unsecured consumer loans, like lines of credit or credit cards.
When it comes to whether or not to take out private student loans, what matters is what’s right for you. Maybe you weren’t able to qualify for enough funding in the form of federal student aid and need a little bit in private student loans to top you off. Or maybe you experience an emergency midway through the term and need more money than you expected.
Whatever the reason, it’s important that you look into your options to find a private student loan that works for you. There are a number of different kinds of companies that offer competitive interest rates and flexible term lengths to choose from. You could also look for loans that don’t have origination fees and offer extra services like cosigner release and deferment.
Federal vs Private Student Loans
There are a few major distinctions when comparing federal vs. private student loans. Importantly, federal student loans are made by the government and are subject to a specified set of rules and regulations. Private lenders are not subject to the same requirements. Here’s an overview of the important differences between federal and private student loans.
The Application Process
Federal student loans are awarded as a part of a student’s financial aid package. In order to apply for federal student loans, students must fill out the FAFSA® each year.
To apply for private student loans, students will need to fill out an application directly with their preferred lender. The application requirements may vary depending on the lender.
Interest Rates
For the 2022-2023 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 4.99%, the rate on Direct Unsubsidized loans for graduate and professional students is 6.54%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 7.54%. The interest rates on federal student loans are fixed and are set annually by Congress.
The interest rates on private student loans may be fixed or variable and are determined by the lender based on factors included in the application, such as the borrower’s credit history.
Borrowers with federal student loans can select from the federal repayment plans , including income-driven repayment plans.
Repayment plans are set by the individual lender. Review the terms and conditions directly with the lender.
Grace Period
Most federal student loans have a six-month grace period after a student graduates or drops below part-time enrollment. During this time, borrowers are not required to make payments on their loan, but depending on the type of loan they have, the loan may accrue interest during the grace period.
Private lenders may offer a grace period, while others may require payments as soon as the loan is paid out (or disbursed). Again, review the loan’s terms and conditions closely before borrowing.
Options for Deferment or Forbearance
Federal student loan borrowers can apply for deferment or forbearance if they encounter financial difficulties while they are repaying their loans. These options allow borrowers to pause their loan payments. Note that interest may continue to accrue during periods of deferment or forbearance, depending on the type of federal loan the borrower holds.
Some private lenders may offer options for borrowers who are facing financial difficulties, however, this will vary by lender. For example, SoFi has unemployment protection, which allows qualifying borrowers who have lost their job through no fault of their own, to modify payments on their student loans.
Borrowers with federal student loans might be able to pursue loan forgiveness through federal programs such as Public Service Loan Forgiveness or Teacher Loan Forgiveness.
Private student loans are not eligible for federal loan forgiveness programs.
How to Apply for Private Student Loans
To apply for a private student loan, you’ll have to file an application directly with the lender of your choice. Some schools may provide a preferred lender list, but you aren’t necessarily required to borrow from a lender on this list.
If you’re interested in applying for a private student loan, it’s generally worth shopping around at a few different lenders so you can get a sense of the terms, conditions, and interest rates you may qualify for. Lenders will often allow borrowers to get a quote by filling out a pre-qualification application. This generally involves a soft credit inquiry, which won’t impact the applicant’s credit score.*
The application process may vary by lender, but you’ll generally need to provide basic financial and personal information. Depending on your personal financial circumstances, you may consider applying with a cosigner which could potentially help you qualify for more competitive terms.
When evaluating a private lender, consider factors like the interest rate you may qualify for, the repayment plans available, and any fees.
Applying for Private Student Loans with SoFi
If you have exhausted your federal loan options and still need to cover tuition fees, private student loans with SoFi may be a great option for you.
SoFi offers competitive rate private student loans with flexible repayment options. There are absolutely no fees (no origination fees, no late fees, and no insufficient fund fees). Plus, it only takes minutes to check your rate.
SoFi Private Student Loans can also be used to pay off an outstanding tuition balance. As long as you are enrolled the next semester or have recently graduated, you may apply a SoFi Private Student Loan to a past-due balance up to 12 months after term.
If you are looking to borrow for school, SoFi can help.
See your interest rate in just a few minutes — with no pressure to sign up.
*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit. SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website . External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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