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College cost of attendance is an estimate of the total cost of attending college for one year that includes the cost of one year of tuition, books, supplies, room and board, transportation, loan fees, and other personal expenses.

Here’s how to calculate the cost of attendance, why it matters, and how it can inform financing an education.

The Cost of Attendance for College

The cost of attendance (COA) for college is an estimate of the total cost of attending a college for one year. The expenses included in COA are outlined by federal law . As briefly mentioned, this estimate includes expenses such as the tuition and fees for one year of school, room and board, books and supplies, transportation costs, loan fees, and other personal expenses. This number is used to help colleges determine the amount of financial aid a student is eligible for, including grants, scholarships, and federal student loans.

The Difference Between Cost of Attendance and Tuition

Tuition covers the actual cost of academic instruction. COA on the other hand includes other expenses the student will likely incur in order to live. COA includes things like room and board, books and supplies, and transportation costs.

Schools are required to publish the COA on their website, so the information is readily accessible to students. Schools also generally publish more than one COA. For example, state universities may list a COA for in-state vs. out-of-state students. Most colleges will provide multiple COAs based on different student scenarios, such as:

•   Part-time student

•   Full-time student

•   Off-campus living

•   On-campus living

•   Attending school with a dependent

The COA is an estimated average based on previous student spending and estimates, so your actual costs may be different than the COA.

What Is the Average College Cost of Attendance?

Simply put, the cost of attendance is the estimated amount it will cost for a student to attend a school. If a school doesn’t run on a traditional fall/spring semester schedule, the COA may not be calculated to reflect a calendar year.

Think of COA as a rough budget for the year. It includes tuition and expenses outside the classroom like food, transportation, and supplies.

According to The College Board, the average published cost for tuition and fees for the 2022-2023 school year was $10,950 for students at public four-year institutions with in-state tuition and was $39,400 for students at private nonprofit four-year universities.

Recommended: What is the Average Cost of College Tuition?

What Does Cost of Attendance Include?

As mentioned, what’s included in a COA is defined by federal law. A college or university’s COA will include:

•   Tuition and fees. This includes additional expenses that could be required for a specific field of study, and fees associated with loans.

•   Books and Supplies. This might sound like a silly line item, but students spend $1,240 on average on books and supplies, a College Board survey shows. (That may include the cost of a computer used for study.)

•   Transportation. This estimate includes how much it would cost to travel back and forth from school, and in some cases, can include the cost of keeping a car on campus (parking permits, etc).

•   Room and board. This estimates housing and food expenses. It will take into account if the student is living at home, on campus, or off campus.

•   Additionally, this line in the COA estimates how much a student may spend on dining, often using the campus meal plan as a guide.

•   Personal expenses. While the university doesn’t include this on its official bill, the school will estimate the cost of personal care, such as clothing, entertainment, and haircuts.

Cost of attendance can include more specifics based on a student’s need. The COA should reflect a student’s planned education, whether that be part time, full time, or even correspondence based. COA estimates come both directly from the school and from market research and data, meaning the trends change each year.

Recommended: Ways to Cut Costs on College Textbooks

Finding a School’s Cost of Attendance

Hunting down a university’s COA is an important first step in calculating the expenses around college and how to pay for it. Since legislation passed in 2011, it’s mandatory for U.S. two-year and four-year institutes to share the COA on their websites. That doesn’t mean it’s always easy to find.

One way to look for the COA online is to simply put “[NAME OF SCHOOL] + COST OF ATTENDANCE” into a search engine.

Or anyone can go the old-school route and call a college’s financial aid office to get the information over the phone.

A school will also include its cost of attendance on a student’s financial award letter.

College Cost Attendance List

The COA for colleges can vary quite dramatically depending on a school’s location, whether it is private or public, among other factors. Some programs may have additional fees and costs (like lab fees) which could increase the cost of attendance for certain majors or programs.

The following table provides an overview of the published COA for undergraduate students living on-campus at several schools around the country during the 2023-2024 school year (unless noted with an asterisk, in which case it is the 2022-2023 school year).

School	Type	Cost of Attendance
Cornell University (Ithaca, NY)	Private	$88,150
Dartmouth College (Hanover, NH)	Private	$87,793
Rice University (Houston, TX)	Private	$78,278
Vanderbilt (Nashville, TN)	Private	$84,412*
University of Chicago (Chicago, IL)	Private	$85,536*
California Institute of Technology (Pasadena, CA)	Private	$86,886
Gonzaga University (Spokane, WA)	Private	$74,249
University of California (Los Angeles)	Public	In-state: $38,517 Out-of-state: $71,091
University of North Carolina (Chapel Hill)	Public	In-state: $26,118 Out-of-state: $57,370
University of Massachusetts (Amherst)	Public	In-state: $35,765 Out-of-state: $57,701
University of Oregon (Eugene)	Public	In-state: $35,721 Out-of-state: $64,302
Oklahoma State University (Stillwater)	Public	In-state: $31,920 Out-of-state: $47,440
University of Alabama (Tuscaloosa)	Public	In-state: $32,054* Out-of-state: $53,364*
University of Michigan (Ann Arbor)	Public	In-state: $33,555* Out-of-state: $72,153*

*2022-2023 school year COA.

Can I Borrow More Than the Cost of Attendance?

It is generally not possible to borrow more than the cost of attendance for a school. Federal student loans are limited by law to the cost of attendance less than the amount of aid received. Often, private student loans have similar lending restrictions, though these are set by the lender.

Cost of Attendance and Net Price

Figuring out a school’s COA matters because it can help students figure out the net price they’ll pay for school. The net price is what a student will pay out of pocket to attend an institution. How does a student get from cost of attendance to net cost? Expected family contribution.

Expected family contribution is a number that a college or university uses to calculate a student’s expected amount of financial aid. The formula to calculate the expected family contribution is established by law and includes not only information provided on the Free Application for Federal Student Aid (FAFSA®) but also:

•   Taxed and untaxed income

•   Assets

•   Benefits (e.g. Social Security, unemployment compensation)

•   Family size

•   Number of family members expected to attend higher education that year

Expected family contribution is neither the final amount a family or individual is expected to pay nor the exact amount of federal aid a student will get. It’s simply a calculation or estimate to help arrive at net cost.

Once a school has a student’s expected family contribution, it can determine net cost through these steps:

•   The school looks at a student’s individual COA, taking into account if they’ll attend classes full or part time and whether or not they’ll live on campus.

•   With financial information in hand, the school subtracts a student’s expected family contribution from the COA. The difference is the student’s financial need.

•   That financial need can be filled by merit aid, such as scholarships or grants, in addition to loans and other financial aid.

After aid, the amount left is a student’s net price. This is what would be paid out of pocket. Depending on a student’s finances and aid, net cost can be fuzzy. The Consumer Financial Protection Bureau has a free net price calculator to make the formula easier. Net price calculators can also be found on many college financial aid sites. These calculators generally take the COA and subtract scholarships or merit aid a student is eligible for.

Having that rough idea of net cost through the help of COA and expected family contribution can help students compare aid packages across schools. For instance, one college’s COA may be higher than another, but based on how generous the aid is, the net price could be lower at the school with the more expensive COA.

How COA Affects Student Loans

A school’s COA will influence a financial aid package an individual receives. Once a student selects a college to attend, the school will let federal and private lenders know how large a loan is needed.

In addition, regardless of a school’s COA, there are annual lending limits for federal student loans. For example, federal student loans for undergraduate programs are limited to $5,500 for first year dependent students. No more than $3,500 of this amount may be in subsidized loans.

Making the Right Choices

Understanding a school’s COA can help cover your aspirations. It’s essential to know when crunching numbers to fund an education.

But even after merit and need-based aid are applied, there still might not be enough to account for all expenses.

Paying for College

Students often rely on a variety of financing options when paying for college. Often the first step for students is filling out the FAFSA, which is how students can apply for all forms of federal aid including federal grants, scholarships, work-study, and federal student loans. There are a lot of options so it’s important to understand the difference between grants vs. scholarships vs. student loan from a private lender. Here are a few other strategies and options that can help students pay for college.

Private Student Loan

Private student loans from lenders are available. Interested applicants will need to file individual applications with private lenders. Interest rates and loan terms are generally determined by an applicant’s personal financial factors such as credit score and income. Consider shopping around at a few different lenders to find the best rate and terms for your personal situation. Some lenders may offer private student loan discounts, for things like setting up autopay or a customer appreciation discount.

Applicants without an extensive credit history or a relatively low credit score may find that adding a cosigner to their application can help them qualify for a loan or qualify for more competitive rates and terms.

Additionally, an important note when comparing student loans from private lenders vs. federal student loans is that federal loans offer borrower protections that private loans do not. For this reason, private loans are generally borrowed as a last-resort option after other financing options have been exhausted.

For those interested in pursuing a graduate degree, there are student loans for graduate programs available too.

Credit Card

Schools may allow students to pay for their tuition with a credit card. Most schools do charge a fee (often between 2% to 3%) for this convenience, which can offset any rewards you may be earning on your credit card. In addition, credit cards have fairly substantial interest rates. Therefore, paying for tuition with a credit card may not make the most financial sense.

On the other hand, when credit cards are used responsibly they can be helpful tools to help students establish and build their credit history. Students could use credit cards to pay for books, food, gas, or other transportation costs. Be sure to pay attention to interest rates and pay off your credit card each month to avoid credit card debt.

Personal Savings

If you have been saving for college, using those funds to pay for tuition or other college costs can help you avoid borrowing for college. When you borrow student loans to pay for college, you’ll end up paying interest, which increases the total amount you spend over the life of the loan. By paying for some expenses with savings, you may be able to reduce the overall bill.

Grants

Generally, grants, which are often awarded based on financial need, don’t need to be repaid. Grants are available from the federal government, individual schools, and even some nonprofit organizations.

Scholarships

Scholarships are another type of aid that doesn’t require repayment. Often awarded based on merit or other personal criteria (like gender, ethnicity, hobbies, or academic interest), scholarships are available from a variety of sources such as the school, state or local governments, corporations, or nonprofit organizations. Review your school’s financial aid website and conduct an online search to find scholarships you may be eligible for.

Recommended: The Differences Between Grants, Scholarships, and Loans

The Takeaway

Cost of attendance (COA) is an estimate that includes the cost of tuition in addition to other expenses such as room and board, books, transportation, food and meals. The requirements for COA are outlined by federal law and each school is required to publish its COA on their website so this information can be easily accessed.

Students won’t necessarily be required to pay the full COA — things like scholarships, grants, and other forms of financial aid can reduce the actual net price a student ends up paying. That’s why it’s important to compare not only the cost of each school, but the financial aid package each school offers.

To pay for college, students likely have to rely on a few different funding sources. If you’re looking to fill in gaps in funding, private student loans could be an option to consider. SoFi® private student loans have a simple online application, flexible repayment plans, and no fees.

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 does cost of attendance mean for college?

The cost of attendance (COA) is an estimate for the total cost of attending a college for a single year. The COA includes not only tuition, but costs like room and board, food and meals, books and supplies, transportation, and other miscellaneous personal costs. The items required for inclusion in the COA are outlined by federal law and each college or university is required to publish the details for the college’s COA on the school website.

What is the difference between cost of attendance and tuition?

A school’s tuition is the price for academic instruction. The cost of attendance includes the cost of tuition in addition to other expenses including room and board, books and supplies, transportation, and more.

How much does college cost per year?

The cost of college can vary based on many factors including your location, whether you attend a private or public university, if you receive in-state vs. out-of-state tuition, and the type of program you are enrolled in. According to The College Board the average cost of attending a four year nonprofit private institution was $39,400 during the 2022-2023 school year. During the same time period, the average cost for tuition and fees at public four-year institutions with in-state tuition was $10,950.

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A cash management account or CMA provides an alternative solution for storing a large sum of money. Instead of using a checking or savings account from a traditional bank or credit union, you can park your money with non-financial institutions such as robo-advisors, online investment companies, or trading apps. While CMAs provide some of the features you receive from traditional banking, they also make managing your money more convenient since you can keep your banking and investing under one roof.

Here’s your complete guide to cash management accounts to discover if this type of account is right for you. We’ll share details on:

•   What is a cash management account?

•   How do cash management accounts work?

•   What are the benefits and considerations of cash management accounts?

•   Is a cash management account right for you?

What Are Cash Management Accounts?

Let’s explore what a cash management account is exactly. A CMA or cash management account provides a solution for managing your cash flow and your money. The cash inside the account usually earns interest, so your money can grow over time. You also may have checking writing capabilities, debit card access, or a combination of both. These non-banking institutions usually have no fees, another attractive aspect of using a cash management account. However, they typically make their money by charging fees for other services such as investing, retirement planning, or financial planning services.

While traditional banking accounts have similar benefits, the biggest draw to a cash management account is that you can bank and invest with one company. This way, you’re not toggling back and forth between several companies or platforms to manage your money.

How Do Cash Management Accounts Work?

Now that you know what a CMA is in big-picture terms, let’s drill down on how they work. Cash management accounts are interest-earning accounts that offer a safe place for cash. Since investment firms and robo-advisors are not banks, they don’t keep your money at their financial institution. Instead, they partner with several banks and spread your deposit out among them.

Like traditional banking accounts, account holders can deposit funds, withdraw funds, transfer money, set up direct deposits, write checks, and use a debit card. You can manage your personal cash flow statement by checking on your CMA regularly.

In addition, some CMAs earn interest like savings accounts and have checking account capabilities. Therefore, they can act as a way to merge these accounts into one. However, some CMAs may not have features of both accounts, so check with the institution to determine what features are available.

What Are the Pros of Cash Management Accounts?

Understanding the benefits of using a cash management account can help you determine if this is the right banking solution for your needs. With that in mind, here are several advantages of using a cash management account.

Convenience

The most significant pull for consumers to open a cash management account is that they can keep their investments and banking under one umbrella. Keeping everything in one place can simplify your money management efforts.

Traditional Banking Features

When you open a cash management account, you typically have access to tradition banking features like:

•   Direct deposit

•   Complementary ATM networks

•   Electronic bill pay

•   Third-party payment site access

But, before you open an account, make sure you check with the institution about their banking services. This way you can ensure they have everything you need.

FDIC Insured

The Federal Deposit Insurance Corporation (FDIC) protects your banking deposits from losses up to $250,000. Worth noting: Some banks participate in programs that extend the FDIC insurance to cover millions¹.

So, if your bank fails for any reason, you can recover your funds. While non-banking firms are prohibited from offering FDIC insurance directly, their partner banks can extend coverage. Since nonbanks spread funds across several partner banks, each can offer $250,000 of FDIC insurance per depositor.

What Are the Cons of a Cash Management Account?

Now that we’ve considered the advantages of a cash management account, it’s only fair to review the potential downsides of these financial vehicles. Here are some points to keep in mind as you decide whether a CMA is right for you.

Lower Interest Rates

While these accounts do offer some earnings, you will often find better rates at online banks. Yes, it may as if low-interest checking accounts are the norm and that CMAs are in their ballpark, but dig a bit deeper. If you are planning on parking a large sum of cash in an account, it can literally pay to explore your options elsewhere and see what APY’s are available in high-interest accounts. You may find that a short-term savings account works better for your needs.

Recommended: APY vs. Interest Rate: What’s the Difference?

Fewer Features

Cash management accounts may not offer the conveniences of checking accounts, like bill pay and other ways of making your financial life simpler.

No Physical Branches

Many cash management accounts are offered by online banks, which means you won’t have bricks and mortar locations to visit. Nor will you have a team of bankers to support you as you do at a traditional bank. If you are the kind of person who prefers personal interaction, this may be a significant issue for you.

Cash Management Accounts vs Checking Accounts

While cash management accounts offer similar services and features to traditional bank accounts, you might wonder what the differences are. If we break down CMAs compared to checking accounts further, these features are worth noting.

•   Maintenance fees. There are usually no maintenance fees for CMAs. However, you may have to meet a minimum balance to keep your account active. On the other hand, depending on the bank, some high-yield checking accounts come with maintenance fees. It may be possible to get these fees waived if you meet specific bank stipulations, but it’s worthwhile to consider this point.

•   Interest earning. Many cash management accounts earn interest, like what you find with high-interest online savings accounts. While it’s possible to earn interest on a savings account, it’s usually less than the interest cash management accounts earn.

•   Account integration. Investment firms and robo-advisors usually offer cash management accounts and investments. You can usually link your CMA with your investments, making it easy to move money and automate contributions. Traditional banks may also offer retirement and investment services. However, that’s not their primary business. Also, if you have investments and banking accounts separate, there may be a time lag for transactions, which usually doesn’t happen with CMAs.

Considerations When Comparing Cash Management Accounts

Before you enroll in a cash management account, it’s wise to compare all of your options. You may also want to assess the pros and cons of each banking solution. So, when comparing your solutions, here are some things worth considering when determining if a CMA is suitable for your needs.

Customer Service

When you need an issue resolved with your money, it’s nice to know customer service is there to help. So, you will want to make sure that the company you’re considering offers a robust customer service solution to assist you with all of your questions or concerns. For online banks, check out the hours that support is available and find out if you’ll be interacting with a human or an automated assistant.

Minimum Balance Requirement

As we noted above, CMAs can have minimum balance requirements to keep the account active. Therefore, you’ll want to determine these requirements in advance to see if you have the appropriate sum of cash to deposit.

Investment Management

Most of the institutions that offer cash management accounts offer investment services. So, if you’re looking to use their investment service, make sure you select a company you trust and feel comfortable with. You’ll also want to ensure the investments offered are suitable for your needs.

Is a Cash Management Account a Good Fit for You?

A CMA is ideal for folks who like to manage their investments and bank accounts under the same umbrella. It may make managing your money somewhat simpler and smoother.

But, for those who feel a bit uncertain about using online banks or mobile apps to complete their daily transactions, a bank account may be a more viable solution. Also, if you would prefer to separate your investments and banking needs, a high-interest checking or savings account may make more sense that stashing your funds in a CMA.

The Takeaway

CMAs are interest-earning alternative solutions to traditional banking accounts like checking and saving accounts. Since investment firms usually offer CMAs, you can keep your investments and banking needs in one place, streamlining your money management efforts. As with most services, there are pros and cons to these accounts. Determining whether one is right for you will depend upon your reviewing all the features and seeing what is the best fit for your money management style and goals.

If you feel more comfortable with traditional banking, SoFi offers a smart, money-savvy solution. Our online bank accounts, when opened with direct deposit, are fee-free and earn a competitive APY. Also, you can access your paycheck up to two days earlier. We think it’s a great combination of convenience and money-growing features that you’ll love.

Ready to bank better? Come see what SoFi offers.

FAQ

What is the purpose of a cash management account?

Cash management accounts give consumers a way to complete everyday banking transactions like bill pay or direct deposit while managing investments, all under one roof.

What type of account is cash management?

A cash management account is like a traditional bank account, except it’s offered by non-banking firms, like online investment firms or robo-advisors. You can complete transactions (direct deposit, withdrawals, check writing, etc.) the same way with a traditional checking or savings account.

Is a cash management account the same as a money market account?

While cash management accounts and money market accounts have similar features (earning interest, withdrawals, deposits, etc.), they are not the same. Banks offer money market accounts, while nonbanks like robo-advisors offer cash management accounts.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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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.

Recommended: Types of Federal Student Loans

What are Private Student Loans?

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.

Recommended: How Do Student Loans Work? Guide to Student Loans

The Benefits of Private Student Loans

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.

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.

Recommended: Can You Get A Student Loan With No Credit History?

Should You Consider Private Student Loans?

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.

Recommended: A Guide to Student Loan Interest Rates for the 2022 School Year

Repayment Plans

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.

Recommended: What is Student Loan Forbearance?

Loan Forgiveness

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.

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^*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.

CLICK HERE for more information.

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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