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The chance to study abroad offers unique opportunities and experiences you simply can’t get at home. Taking some time to attend a college or university in another country can be personally and professionally enriching, and even life-changing. These factors can make studying abroad absolutely worth it.

But going to school in a foreign country isn’t for everyone. Being away from home and loved ones can lead to homesickness and the feeling you’re missing out (FOMO) on important family or college events back on your home turf. Depending on where you study, there could be a language barrier that can be frustrating and the cost could be higher than staying at your home university.

If you’re thinking of attending school in another country, there are numerous factors to consider. Read on to learn about how studying abroad works, its benefits and costs, and how to decide whether or not it’s worth it.

What Does It Mean to Study Abroad?

College study abroad programs allow a student to pursue undergraduate or graduate study in another country. Each year, more than 300,000 American students study, engage in internships, or volunteer abroad for academic credits, according to the U.S. Department of State. Study abroad college programs typically last one semester or a full year, but can be as short as a couple of weeks.

You may be able to study abroad through your home university’s study abroad program. This is often the most straightforward route, since it will be easy to earn credits that will directly apply to your degree requirements.

However, there are other ways you can spend a semester or year attending college in a foreign country. One is by directly enrolling at a foreign university where you may be able to use those course credits towards your degree at your home college or university. Another option is to go through a third-party study abroad provider such as Academic Programs International (API), the Council on International Education Exchange (CIEE), or the American Institute for Foreign Study.

💡 Quick Tip: You can fund your education with a competitive-rate, no-fees-required private student loan that covers up to 100% of school-certified costs.

Why Study Abroad Is Worth It

Going to school in another part of the world can be an incredible opportunity. Here’s a look at some of the benefits of studying abroad.

It Can Change the Way You See the World

Studying in another country allows you to become a more well-rounded and worldly individual. Immersing yourself in a different culture, set of customs, and traditions can broaden your horizons and expand your worldview. Meeting and interacting with an international mix of people can help you gain other perspectives and a deeper understanding of global issues. It also helps foster tolerance, empathy, and more open-mindedness.

Learn a Foreign Language

There’s only so much of a second language you can learn in a classroom. A great way to gain fluency in a foreign language is by living in that country and conversing with the locals. Even if your abroad program offers classes in English, living in a foreign country can help you become proficient or fluent in another language. This, in turn, can expand your employment possibilities and attractiveness to employers, and might allow you to work abroad after college.

Broaden Your Social Network

Even if you participate in a study abroad program run by your home university, you’ll have an opportunity to meet new people — both from the U.S. and abroad. The connections you make can turn into life-long friendships and provide social contacts who may be helpful for networking after graduation.

Increase Your Self-Confidence

Living on your own in a foreign country, where you don’t have a built-in safety net, can foster more independence and self-reliance. Navigating everyday life somewhere unfamiliar gets you out of your comfort zone and you’ll most likely have to learn to problem-solve and make decisions on your own. Choosing to study abroad can result in more self-confidence than if you had stayed at your home school all four years.

Recommended: Guide to Student Loans for Studying Abroad

Costs Could Be The Same Or Lower

Depending on the type of program and location you choose, the cost of study abroad could be comparable to your home university. If you choose your school’s study abroad program, the tuition may be the same as if you stayed stateside. If the cost of living is lower (or the exchange rate is favorable to the U.S.dollar) where you travel to, you could potentially end up spending less.

Generally, directly enrolling in a foreign institution is cheaper than study abroad programs run by American universities or third-party providers. In many cases, you can also use your financial aid package to study abroad.

When Study Abroad Isn’t Worth It

While studying abroad offers numerous perks, there are also some drawbacks. When mulling over whether or not you should study abroad, here’s some potential cons to keep in mind.

Risk of Homesickness

Living and studying in another part of the world can result in feeling intensely homesick. Even though you might have new friends and be surrounded by others, being far from your loved ones and long-time friends may cause you to feel lonely and depressed. If you’re especially close to your family, you may experience FOMO because you’re not able to get home for events, like birthdays, weddings, or family gatherings that occur while you’re abroad.

Language and Culture Barriers

In a foreign country, everything will likely be different — the food, the language, the architecture. Even the local customs and social norms may be different. While this can be a positive (and a reason to go), you might find it hard to acclimate and constantly feel like a stranger in a strange land.

Costs May Be High

While studying abroad may seem like a priceless opportunity, it can come with a hefty price tag. Semester abroad programs through a third-party provider can run between $15,000 and $22,000 depending on location. These programs usually include housing and sometimes meals.

Aside from tuition, you will need to budget for other expenses like housing (if it’s not included), meals, airfare, transportation, entertainment, and books and supplies.

If your financial aid package, including federal student loans, isn’t enough to cover the tab, some private student loans can help fill in funding gaps. However, private loans don’t offer the same borrower protections (like income-driven repayment and forgiveness programs) as their federal counterparts.

💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too.

International Credits May Not Transfer

If you go on a study abroad program run by your college or a major third-party provider, you likely won’t have any issues transferring credits, but this could be a problem if you enroll directly in a foreign university. Non-transferring credits could make it harder to graduate on time.

What to Know About Academics When Studying Abroad

Academically, studying alongside international students can offer a more diverse educational experience by exposing you to new insights, viewpoints, and ideas.

Studying abroad also gives you the opportunity to learn from professors who may use different teaching methods than American professors, such as greater use of group discussions or project-based learning. Plus, you may have the chance to take field trips to historical sights and museums as part of the curriculum.

Studying abroad also comes with some academic limitations. All majors may not be available as part of a study abroad program, even if your home school has an affiliation with a foreign university. For some students (particularly those with STEM majors), studying abroad could make it harder to complete all of their degree requirements within four years, leading to higher education costs.

The Takeaway

There’s a lot to take into consideration when thinking about whether or not you should study abroad, including cost, whether or not course credits are transferable, and how it will feel to be far from home for an extended period of time.

For many students, studying abroad is definitely worth it. Plus, there are scholarships, grants, and other financial aid options available to help offset the expenses. Ultimately, whether study abroad is worth the cost depends on your individual circumstances, goals, and priorities.

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

FAQ

Is it a good idea to study abroad?

Studying abroad can be a great opportunity for personal, academic, and professional growth. It allows you to immerse yourself in a new culture, gain a broader perspective, and develop valuable skills, such as independence and adaptability. It can also enhance your resume, making you more competitive in the job market.

However, it’s important to consider language barriers, cultural differences, and potential homesickness. Overall, if you’re open to new experiences and willing to step out of your comfort zone, studying abroad can be a life-changing experience.

Is study abroad worth the cost?

Studying abroad can be worth the cost if you carefully research programs and choose one that aligns with your financial situation and academic goals.

Costs can vary widely; some programs may be comparable to or even cheaper than staying at your home university, especially if you directly enroll in a foreign institution with lower tuition or a favorable exchange rate. However, third-party programs can be expensive, and you must also factor in expenses like airfare, housing (if not included), and daily living costs.

To help cover the expense, look into scholarships, grants, and federal or private student loans. Ultimately, the value often extends beyond dollars to include personal growth, enhanced career prospects, and a broader worldview.

What are the pros and cons of studying abroad?

Studying abroad offers numerous advantages, such as experiencing a new culture, gaining independence, expanding your network, and improving language skills. It can also enhance your academic and career prospects, as employers often value the skills and experiences gained from studying abroad.

But there are challenges as well, including language barriers, cultural differences, homesickness, and the financial cost. It’s essential to weigh these pros and cons carefully and consider how studying abroad aligns with your personal and academic goals.

Photo credit: iStock/AlexSecret

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

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

SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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.

SOISL-Q425-036

Deciding whether community college is worth it is a major choice for many students looking to balance education, cost, and long-term goals. Community colleges offer an affordable, flexible path to higher education, but the value depends on your career aspirations, financial situation, and personal priorities.

Understanding the pros, cons, and outcomes can help you make a confident, informed decision. Keep reading to learn more on whether attending community college is worth it for you.

What Is Community College?

Community colleges typically offer two-year degrees known as an associate degree. Students often attend community colleges for two years before transferring to a four-year university to gain their bachelor’s degree.

Working with a counselor can help you solidify your academic goals and work towards them, from choosing a major to earning the right credits that can be transferred to your bachelor’s degree.

How Community Colleges Differ from Four-Year Institutions

Community colleges differ from four-year institutions in several key ways. While both types of schools provide valuable education, their structure, cost, and academic offerings tend to serve different needs. The main differences between community colleges and four-year institutions include:

•   Degree types: Community colleges offer certificates and associate degrees, while four-year institutions award bachelor’s degrees and beyond.

•   Cost: Tuition at community colleges is typically much lower.

•   Admission: Community colleges often have open-enrollment policies, making them more accessible.

•   Class size: Community college classes are often smaller and more personalized.

•   Flexibility: Community colleges provide more part-time and nontraditional scheduling options.

Pros and Cons of Community College

Attending community college can have some upsides, but like anything, it may not be the right option for everyone. Just remember — your own experience is going to be unique and what might be best for you might not be the same case for your classmates or friends. Let’s take a look at the pros and cons of community college.

Pros of Going to Community College

Some benefits of attending a community college include affordability, increased flexibility in classes, the opportunity to stay local, and smaller class sizes.

Affordability

Because community college can be less expensive than their four-year counterparts, attending a community college before a university could help you cut tuition costs significantly. According to Education Data Initiative, the average cost of tuition at a two-year public college in 2025 was $3,598, as compared to $9,750 at a four-year public institution with in-state tuition.

Students attending community college may also be able to live at home, which can cut down on living expenses, too. Living at home while taking community college classes can also offer you some transitional time to get accustomed to a new schedule and new academic expectations before committing to a four-year university.

Easier Admissions Requirements

It’s also relatively easy to gain admission into community college. Some community colleges even have open admission policies, which generally means that there are limited academic requirements needed for admission, so most students who apply are accepted.

Note that even if a community college has an open admission policy, certain more competitive programs, like a nursing program, might have more stringent academic requirements.

Flexibility with Classes

Another major benefit of community college is that students have flexibility with classes and the opportunity to explore a variety of academic interests before committing to a major at a four-year university. Class times also may be more suitable for students that work full-time or have other commitments outside of school.

Smaller Class Sizes and Personalized Attention

Community colleges also offer smaller class sizes, which often lead to more personalized attention from instructors. With fewer students per class, professors can offer individualized guidance, answer questions more thoroughly, and provide support tailored to each student’s learning needs.

Cons of Going to Community College

While there are many pros to attending a community college before transferring to a four-year university, there are some cons to consider, as well.

Possibly Limited Academic Offerings

While community college can offer the opportunity to explore courses, the academic offerings may be more limited at a community college than at a four-year institution. Consider finding out which classes are available at each community college you are interested in so you can make sure they have exactly what you need. Not all community colleges might include the classes you are interested in taking.

Missing Out on Social Benefits

Another potential downside to attending community college is that students may miss out on some of the social benefits of attending a four-year college, including friendships, extracurriculars, and enjoying campus life. While you can experience all of these things if you transfer, it can be challenging to make friends as a transfer student.

Limited On-Campus Housing and Activities

Most community colleges are commuter schools, meaning students live off-campus and typically come to campus only for classes. This can make it harder to build a traditional college experience with dorm life, social events, or extensive extracurricular involvement. As a result, students may find fewer opportunities for social connection, networking, and campus engagement compared to what they might experience at a four-year university.

Choosing Which College to Go to

If you know for sure that you want to attend community college, now it’s time to see what options are available near you. According to The Princeton Review, 90% of the U.S. population is within commuting distance of a community college.

Due to one life situation or another, many students attend colleges as commuter students, trading a fully on-campus experience for greater flexibility. As a commuter student, you can choose to live somewhere more affordable and create a schedule that works with your work hours.

Commuter student life can also include a mix of on-campus classes and online work. Taking advantage of these resources can help if you find yourself with a complicated schedule, or if you just want more flexibility.

Transferring from Community College to a Four-Year School

If your end goal is to get a bachelor’s degree, you’ll need to transfer colleges from your community college to a four-year school. Studies show 80% of community college students intend to get a bachelor’s degree, but in reality only one-third of students transfer to a four-year school and only 16% of those students earn their bachelor’s degree.

Evaluating Accreditation and Program Quality

Evaluating accreditation and program quality is one of the most important steps when choosing a community college. Accreditation not only ensures the school meets established academic and institutional standards, it also determines whether your credits will transfer to a four-year university.

Program quality and the strength of the specific programs you’re interested in is also important. Review graduation and job placement rates, faculty qualifications, available certifications, and whether the college has industry partnerships or hands-on learning opportunities.

Recommended: Community College vs Trade School: How They Compare

Other Factors to Consider When Choosing a College

Your academic goals will guide which college you choose. As you evaluate colleges, take a look at which colleges offer the major you want to pursue. You could talk to current students or professors and evaluate whether it seems like a good school for your interests.

If you are applying for a mix of community colleges and public universities, creating a list of all your potential applications can be helpful. You can organize this list by “match,” “reach,” and “safety” schools in order to help you consider all your options.

Career Goals and Desired Career Path

When choosing a college, it’s essential to consider how well each school aligns with your long-term career goals and desired career path. Look for colleges that offer strong programs, specialized courses, or hands-on learning opportunities in your intended field. Research job placement rates, internships, faculty expertise, and industry connections.

A school that provides clear pathways — from coursework to real-world experience — can significantly improve your readiness for the workforce and help you build the skills and network needed to succeed in your chosen career.

Thinking About the Cost of Community College

While there are many financial benefits of community college, it’s still an expense that should not be taken lightly. You might consider a combination of scholarships, grants, and loans to help offset the total costs of college.

To start, students can fill out the Free Application for Federal Student Aid (FAFSA®) each year. This application is used to determine aid including work-study, federal student loans, scholarships, and grants.

There may also be state-specific financial aid available, and it’s recommended to use a scholarship search tool to find scholarships you may qualify for.

If these resources aren’t enough, it is possible to borrow private student loans for community college. While private loans can be helpful, they’re generally considered after other options have been exhausted. That’s because they don’t have to offer the same benefits to borrowers as federal student loans do — things like income-driven repayment plans and student loan forgiveness. Note: SoFi student loans may not be used for community college; however, they can be used if you transfer to a four-year college to pursue your bachelor’s degree.

Comparing Total Cost of Attendance with Other Options

When evaluating the cost of community college, it’s important to compare the total cost of attendance with other education pathways, such as four-year universities or online programs. Beyond tuition, consider expenses like transportation, books, supplies, and lost income from commuting or scheduling limitations. Community colleges often offer significantly lower tuition and more flexible schedules, but weighing the full financial picture helps ensure the most cost-effective choice for your goals.

Recommended: Quiz: What College Should I Go To?

The Takeaway

Community college can be a highly valuable option for many students, offering affordable tuition, flexible learning paths, and a strong foundation for transferring to a four-year university. While it may lack some on-campus amenities, its lower costs and accessible programs make it a practical choice for those seeking quality education without unnecessary financial strain.

Whether you decide to attend a community college first or head straight to a four-year institution, you’ll need to find a way to pay for your education. A few options may include federal student loans, scholarships, grants, and some private student loans. Note: SoFi student loans may not be used for community college; however, they can be used if you transfer to a four-year college to pursue your bachelor’s degree.

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

FAQ

Does community college look bad on a resume?

No, community college does not look bad on a résumé. Employers care more about your skills, experience, and the degree you ultimately earn. Community college can even show motivation, financial responsibility, and perseverance. What matters most is how you present your accomplishments and what you’ve achieved during your education.

Is it hard to get a job after community college?

The ease of finding employment after community college may be influenced by the field you studied. For example, students graduating with a certificate in a high-demand field such as nursing or dental hygiene may find it is relatively easy to secure employment.

Can you transfer to a university after community college?

Yes, you can transfer to a university after community college, and many students do. Community colleges often have transfer agreements with four-year schools to make the process smoother. By completing required courses and maintaining a strong GPA, you can transition into a bachelor’s program and finish your degree.

How long does it take to complete a degree at community college?

Most community college degrees, such as associate degrees, take about two years of full-time study to complete. However, the timeline can vary depending on your course load, program requirements, and whether you attend part-time. Some students finish sooner, while others take longer to balance school, work, or family responsibilities.

Is it more cost effective to go to community college first?

Yes, starting at a community college is often more cost-effective because tuition is significantly lower than at four-year universities. Many students complete general education requirements cheaply, then transfer to finish their bachelor’s degree. This approach can reduce total college costs and help minimize student loan debt.

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

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

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

SOISL-Q425-042

While in school, most student loans accrue interest. The main exception to this rule is for those who hold federal Direct Subsidized Loans. While a student is taking classes, the interest on these loans is covered by the U.S. government.

It can be important to understand exactly what type of student loan you have to make sure you understand the terms of the loan and when interest accrues. This, as you might guess, impacts how much you will be paying back.

Read on for a guide to how student loan interest works while you are still in school.

Understanding How Federal Student Loan Interest Works

Some federal student loans accrue interest while you’re in school, but others do not. To understand how your interest works, it’s essential to know exactly what type of student loan you have. Each loan type follows its own rules for when interest begins accruing and how it’s handled during enrollment.

Subsidized vs. Unsubsidized Loans

Federal student loans may be subsidized or unsubsidized. The accrued interest on Direct Subsidized Loans is covered by the government while a student is enrolled at least half-time. Direct Subsidized Loans are only available to undergraduate students.

For Direct Unsubsidized Loans, students are responsible for paying the interest that accrues on their student loans. Interest begins accruing as soon as the loan is disbursed, or paid out to the borrower.

You won’t be required to make payments while in-school, but be aware that if you don’t, you may graduate with a higher balance than when you started. That’s because the accrued interest is capitalized on the original balance of the loan. Direct Unsubsidized Loans are available to undergraduate and graduate students.

Direct PLUS Loans are available for graduate students (Grad PLUS Loans) or their parents (Parent PLUS Loans). The interest on these loans begins accruing when the loan is disbursed and continues accruing while the student is enrolled in school. Keep in mind that as of July 1, 2026, Grad PLUS Loans will no longer be available (Parent PLUS Loans will still be available, however).

How Does the Grace Period Impact Interest Accrual?

Both Direct Unsubsidized and Subsidized Loans have a six-month grace period after the borrower graduates. On subsidized loans, the borrower is not responsible for paying interest during the grace period. On an unsubsidized loan, interest continues to accrue during the six-month grace period.

Direct PLUS Loans do not have a grace period. Graduate students do receive an automatic deferment after graduation and interest does accrue during this time period.

How Does Capitalized Interest Work?

While payments are not required on most federal student loans while the student is enrolled in school, students with Direct Unsubsidized or PLUS Loans have the option of making interest-only payments. This can be helpful because, as mentioned previously, after the grace period and at the end of periods of deferment or forbearance, the accrued interest is capitalized on the loan.

Capitalized interest on student loans occurs when the accrued interest is added to the principal balance of the loan (the amount that was originally borrowed). This becomes the new balance of the loan, and interest will continue to accrue based on that new balance.

Think of all that accumulating interest like a snowball rolling down a mountain. You might be able to stay ahead of it for a while, but it also might catch up with you.

Interest Accrual During Deferment and Forbearance

During student loan deferment, interest accrual depends on the type of student loan you hold. Federal Direct Subsidized Loans typically do not accrue interest during approved deferment periods, as the government covers these costs. However, unsubsidized loans, PLUS Loans, and most private loans continue accruing interest even while payments are paused. If this unpaid interest is not addressed, it may capitalize once deferment ends, increasing your overall loan balance and the amount you’ll pay over time.

Forbearance, on the other hand, almost always results in interest accruing regardless of loan type. Whether you have subsidized, unsubsidized, or private loans, interest continues to build during a forbearance period. Interest typically does not capitalize at the end of a forbearance, though.

Recommended: What’s the Average Student Loan Interest Rate?

Understanding How Private Student Loan Interest Works

When thinking about private vs. federal student loans, know that private loans are not subject to the same rules as federal student loans. They’re offered by private companies, and each lender will likely have its own terms and conditions.

The majority of private student loans will start to accrue interest while the student is enrolled in school. Some lenders may allow borrowers to defer payments until after they graduate. In this case, the accrued interest from when the borrower was in school will likely be capitalized on the loan. To be sure of the terms on your loan, review the loan agreement or check in with the lender directly.

Keep in mind that, as mentioned, private student loans don’t always offer the same benefits or borrower protections (things like income-driven repayment options) that federal loans do. Because of this, they are generally considered after all other sources of financing, including federal student loans, have been exhausted.

This table provides an overview of how interest accrues on the various types of loans discussed in this article.

Recommended: How to Calculate Student Loan Interest

Can You Minimize Student Loan Interest Accrual While in School?

One way to limit accrued interest is to limit what you borrow in the first place. When it comes to student loans, aim to borrow only what you really need. Perhaps get a part-time job to help cover some of your expenses, make interest-only payments on your loans, and/or consider refinancing your loans after you graduate.

Work-Study or a Part-Time Job

Work-study, for those eligible, or a part-time job can help you take out less in student loans. You can use the money earned to help pay for tuition, books, and living expenses. Minimizing your total student loan amount is one of the best ways to minimize student loan interest accrual. The less you owe in loans, the less you’ll pay in interest.

Make Interest Only Payments

Making student loan payments while in school isn’t likely to be a requirement, but as mentioned earlier, many loans allow borrowers to make interest-only payments while they’re in school. While this won’t eliminate accrued interest, it can reduce the total amount you pay over the life of the loan because the interest won’t capitalize if you’re paying it as it accrues.

Compare and Refinance Loans with Better Terms

Once you begin repaying your student loans, refinancing your student loans can be an effective way to manage interest accrual and reduce overall costs. By comparing lenders and securing a lower interest rate, you may be able to decrease both your monthly payments and the total amount of interest you’ll pay over the life of the loan.

You may also choose to extend the term of your loan, which can decrease your monthly payment. Keep in mind, though, that extending the term will most likely mean you’ll pay more in interest over the life of the loan.

And remember that refinancing federal loans means giving up federal protections and benefits, such as income-driven repayment plans and student loan forgiveness. It can still be a valuable strategy, though, for lowering long-term expenses if the new terms align with your financial goals.

Recommended: Applying for No Interest Student Loans

The Takeaway

Interest on many types of student loans accrues while the student is in school. Federal Direct Subsidized Loans are an exception, as the accrued interest is paid for by the government while the student is enrolled in school and during the grace period.

Generally speaking, interest on other types of student loans, including Direct Unsubsidized and PLUS Loans, begins accruing interest when they are disbursed, and continue accruing interest while the student is enrolled. For private student loans, each lender will likely have its own terms and conditions.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

When does student loan interest start accruing?

Student loan interest typically begins accruing as soon as the loan is disbursed. For federal subsidized loans, the government covers the interest while you’re in school and during certain periods. For unsubsidized federal and most private loans, interest starts accruing immediately, even while you’re still enrolled.

Is it better to pay interest while still in school?

Yes, it’s better to pay interest while still in school because it can save you money in the long run. Paying interest while still in school prevents that interest from capitalizing and adding to your loan balance. Even small payments can reduce overall costs.

How is capitalized interest different from regular interest?

Regular interest accrues on your current loan balance, increasing what you owe over time. Capitalized interest, however, is unpaid interest that gets added to your principal balance. Once it capitalizes, future interest is charged on this higher principal, making your total loan cost grow more quickly.

Do private student loans always accrue interest while in school?

Yes, private student loans almost always accrue interest while you’re in school, regardless of your enrollment status. Unlike some federal loans, private lenders rarely offer subsidized options. Interest typically starts accruing at disbursement, and if you don’t make in-school payments, it will continue to grow and may capitalize later.

What’s the difference between subsidized and unsubsidized interest?

Subsidized loans don’t accrue interest while you’re in school or during deferment — the government pays it for you. Unsubsidized loans accrue interest from the moment they’re disbursed, and you’re responsible for all of it. If unpaid, that interest may capitalize, increasing your total loan balance and long-term cost.

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

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