Jun
22
2022
Title IV Financial Aid: What It Is and How It Works

Title IV Financial Aid: What It Is and How It Works

By | Debt Payoff, Going to College, Student Loans, student_loan | Comments Off on Title IV Financial Aid: What It Is and How It Works

Federal financial aid funds are generally referred to as Title IV under the Higher Education Act of 1965 (HEA) and are administered by the U.S. Department of Education. Title IV funds may come from grants, work-study, or student loans. It’s important that students understand all of their options when it comes to paying for college.

Here are some more details about Title IV financial aid, how it works and how these funds can help pay for school-related expenses.

What Is Title IV?

Under the HEA, Title IV refers to federal financial aid funds. Title IV of the HEA authorizes student financial aid programs of the federal government, which are the primary source of direct federal support to students attending certain institutions of higher education (IHEs). These institutions include public, private nonprofit, and proprietary institutions, which must meet a variety of criteria to participate in Title IV programs.

Federal aid awarded to students can be used to pay for tuition and fees, room and board, books and supplies, and transportation. Federal financial aid is mainly distributed to students through federal student loans, grants, and work-study.

In 2021, Federal Student Aid (FSA) processed more than 17.6 million FAFSA® forms — otherwise known as the Free Application for Federal Student Aid. In 2021, $112 billion was delivered via Title IV financial aid to more than 10.1 million postsecondary students and their families. These students attended 5,600 active institutions of postsecondary education that participate in federal student aid programs.

Different Types of Title IV Funds

Title IV doesn’t include all forms of financial aid that can be used to help pay for college. Here is what Title IV does cover.

•   Direct Subsidized Loans are a type of federal student loan available to undergraduates where a borrower isn’t generally responsible for paying interest while in school. Direct Subsidized Loans are only available to students who demonstrate financial need.

•   Direct Unsubsidized Loans are loans available to undergraduates and graduates where a borrower is fully responsible for paying the interest regardless of the loan status. Interest accrues from the date of disbursement and continues throughout the life of the loan.

•   Direct PLUS Loans are federal loans available to graduates or professional students and parents of dependent undergraduate students to help pay for college or career school.

•   Direct Consolidation Loans are federal loans that allow the borrower to combine multiple federal student loans into a single new loan.

•   Federal Grant Programs offer eligible students financial assistance by the U.S. government out of the general federal revenue. Title IV covers several federal grant programs, including Federal Pell Grants, the Federal Supplemental Educational Opportunity Grant Program, the Teacher Education Assistance for College and Higher Education (TEACH) Grant Program and the Iraq and Afghanistan Service Grant Program.

•   Federal Work-Study Program is a federally-funded program that offers part-time employment to students in financial need, allowing them to earn money to help pay for school-related expenses.

Who Is Eligible for Title IV?

To be eligible for federal student aid, you must meet basic eligibility requirements . Students must:

•   Demonstrate financial need for most programs.

•   Be a U.S. citizen or an eligible non-citizen.

•   Have a valid Social Security number.

•   Be enrolled or accepted for enrollment as a regular student in an eligible degree or certification program.

•   Enrolled at least half-time for Direct Loan Program funds.

•   Maintain satisfactory academic progress.

•   Sign the certification statement on the FAFSA stating that you are not in default on a federal student loan, you do not owe money on a federal student grant, and you will only use federal student aid for educational purposes.

•   Show you’re qualified to obtain a college or career school education by having a high school diploma or its equivalent or enrolling in an eligible career pathway program and meeting one of the “ability-to-benefit” alternatives.

Some Title IV programs have additional eligibility criteria specific to the program. Check with your school’s financial aid office for more information or questions on a particular program.

Recommended: FAFSA Guide

What Can Title IV Loans Be Used For?

Title IV loans can be used for tuition and fees, room and board, books and classroom supplies, transportation and even some eligible living expenses. Tuition is typically the largest expense. According to the College
Board , the average college tuition including fees for a private four-year nonprofit institution in 2021-2022 is $38,070 while the average for a public, out-of-state four-year institution is $27,560 and $10,740 for a public four-year institution with in-state tuition.

Beyond tuition, Title IV loans can also be used to purchase books and school supplies, like a backpack, laptop, and notebooks. To help reduce costs, you can purchase used textbooks or rent them through your school or other services. Title IV loans can also help cover housing expenses and food costs, even if you live off-campus, and pay for the maintenance of your car, fuel, or bus and taxi fares.

If Title IV loans are used inappropriately, the school can report it to the Department of Education via a hotline and you may be held liable for those funds.

Recommended: Using Student Loans for Living Expenses and Housing

Title IV Payments

As mentioned, grants, scholarships, and work-study attained through Title IV generally don’t need to be repaid. However, as mentioned, student loans do need to be repaid.

Once you graduate, drop below half-time enrollment, or leave school, your federal student loan goes into repayment and you must make Title IV payments. However, if you have a Direct Subsidized Loan or a Direct Unsubsidized Loan, there is a six-month grace period before you are required to start making regular payments. Graduate and professional student PLUS borrowers will be placed on an automatic deferment while in school and for six months after graduating, leaving school, or dropping below half-time enrollment.

When your loan enters repayment, your loan servicer will automatically enroll you on the Standard Repayment Plan, which spreads monthly payments over a 10-year period. This can be changed at any time for free. You can also make prepayments on your loan while you are in school or during your grace period.

Your loan servicer will provide you with a repayment schedule with the due date of your first payment, the number and frequency of payments and the amount of each payment. Your monthly payment depends on your chosen repayment plan. Most Title IV loan services will send out an email when your billing statement is ready to be viewed online.

What to Do if Your Title IV Loans Aren’t Enough

If your Title IV loans aren’t enough to cover all costs, there are other options.

You can apply for scholarships or grants, which are a form of gift aid that typically do not need to be repaid. Scholarships are awarded based upon various criteria, such as academic or athletic achievement, community involvement, job experience, field of study, financial need and more. Most grants for college are need-based.

Another option is a part-time job. Your school may have job boards that list on-campus jobs for students or you could check external job sites for part-time opportunities.

Once you’ve exhausted every other option, private student loans are another possibility to consider. Private student loans can be used to cover college costs, but they are issued by banks, credit unions, and online lenders rather than the federal government. Private student loans are also credit-based and the lender will have their own eligibility criteria. The lender will typically review factors including your credit history, income, debt, and whether you’re enrolled in a qualified educational program. If you don’t have enough credit history or enough proof of income, you may choose to apply with a cosigner. Adding a cosigner with an established credit history can help improve your application and potentially allow you to qualify for a more competitive loan.

If you take out student loans, you can refinance them after you graduate to save money when it’s time to repay. Refinancing involves taking out a new loan and using it to repay all your existing loans, which can include federal loans and private loans. Refinancing student loans with a private lender also means forfeiting federal loan benefits like deferment, forbearance or income-driven repayment plans.

Recommended: I Didn’t Get Enough Financial Aid: Now What?

The Takeaway

Title IV financial aid has given millions of students the means to afford and attend college, university and trade school. And if you don’t receive enough Title IV aid, it doesn’t mean you’re out of luck when it comes to funding your college education. By applying for scholarships, taking on part-time jobs, applying for private student loans or refinancing, you can make your dreams a reality.

If refinancing seems like an option for you, consider SoFi. It only takes minutes to apply, even with a cosigner, and there are no fees, period.

Check out student loan refinancing with SoFi and find what works for you.

FAQ

What is the purpose of Title IV?

Federal Student Aid is responsible for managing the student financial assistance programs under Title IV of the HEA. The FSA’s mission is to ensure that all eligible students benefit from federal financial assistance throughout postsecondary education.

What is included in Title IV?

Title IV provides grant, work-study, and loan funds to students attending college or career school.

Is Title IV a loan?

Title IV does include federal student loans such as Direct Unsubsidized and Subsidized loans. However, Title IV funds are also distributed to students through federal grants and work-study programs.

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
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 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).

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.

Photo credit: iStock/martin-dm
SOSL0222012

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Jun
03
2022
Grad Plus Loan: What is it & How it Works?

Grad PLUS Loan: What Is It and How Does It Work?

By | Going to College, Student Loans, student_loan | Comments Off on Grad PLUS Loan: What Is It and How Does It Work?

When a federal Direct PLUS Loan is made to a graduate or professional student, it’s commonly called a grad PLUS loan. A grad PLUS loan can help you pay for graduate school costs that aren’t covered by other types of financial aid.

Grad PLUS loans allow you to borrow up to the full cost of attendance from the U.S. Department of Education as long as you’re enrolled at least half-time at a school that participates in the Direct Loan Program, you don’t have an adverse credit history, and you meet the eligibility requirements for federal financial aid.

Here’s what to know about grad PLUS loans as well as other options that can help you pay for graduate or professional school.

What Is a Graduate PLUS Loan?

A graduate PLUS loan is a federal Direct PLUS Loan that’s made to a graduate or professional student. When a Direct PLUS Loan is made to a parent of an undergraduate student, it’s called a parent PLUS loan.

Unlike other types of federal student loans, Direct PLUS Loans take your credit history into account. You may still be able to qualify for a grad PLUS loan if you have an adverse credit history, but you’ll have to meet additional eligibility requirements, such as having an endorser on your loan.

Another way PLUS Loans differ from other federal loans: You can borrow up to the full cost of school attendance and use the money to pay for tuition, room, board, and fees. Grad PLUS loans are not based on financial need (the way Direct Subsidized Loans for undergraduate student loans are), which means students can apply for one regardless of income level.

Keep in mind that PLUS Loans have some of the highest interest rates of all federal loans. For this reason, it’s a good idea to start by considering a Direct Unsubsidized Loan, another federal student loan.

You can borrow up to $20,500 per year with a Direct Unsubsidized Loan and the interest rate for graduate students is 5.28% for loans disbursed on or after July 1, 2021, and before July 1, 2022. You’ll pay more in interest for a Direct PLUS Loan — a fixed 6.28% interest rate for loans disbursed on or after July 1, 2021, and before July 1, 2022).

How Do Grad PLUS Loans Work?

If you’re approved for a grad PLUS loan, the maximum amount of your student loan will be the cost of attendance minus any other financial aid you receive, such as scholarships, grants, or fellowships. Your school will apply the funds to cover fees such as tuition, room and board, and any other school charges. If there are funds left over, you can use them for other educational expenses, such as books for classes.

You’ll also pay an origination fee with graduate PLUS loan, which covers the U.S. Department of Education’s cost of issuing your loan. The loan fee for the 2021 to 2022 academic year is 4.228% (higher than the 1.057% origination fee on a federal Direct Unsubsidized Loan); this amount will be deducted from the funds you receive.

With a federal grad PLUS loan, you won’t have to make any loan payments if you are enrolled at least half-time in school and for six months after graduation, but interest will begin to accrue as soon as the loan is issued.

You can opt to pay the interest while you’re in school or allow the interest to be capitalized and added to the principal balance of your loan. You’ll likely have between 10 and 25 years to repay your loan, depending on the loan repayment plan that you choose.

Requirements for a Direct Grad PLUS Loan

In order to get a grad PLUS loan you must be enrolled at least half-time at an eligible university or program that participates in the federal student loan program (known as the William D. Ford Direct Loan Program), have a good credit history, and meet the general eligibility requirements for federal student aid.

Again, to be eligible for a Direct PLUS Loan, you must not have an adverse credit history. If you do, you may still be able to receive a grad PLUS loan if you have an endorser on your loan (someone who agrees to be responsible for your loan and pay it if you’re not able to) who doesn’t have an adverse credit history. Another option is to explain the extenuating circumstances for your adverse credit history to the U.S. Department of Education. Both of these options require PLUS credit counseling.

Applying for a Federal Grad PLUS Loan

Before applying for a grad PLUS loan, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA) form on the Federal Student Aid website. And while most schools require you to fill out the grad PLUS loan application on the Student Aid site, some schools have different application processes, so check with your school’s financial aid office before you begin.

You’ll undergo a credit check to verify that you don’t have an adverse credit history. You may also need to undergo credit counseling if this is your first PLUS loan. If approved, you’ll sign a Master Promissory Note (MPN) agreeing to repay the loan according to its terms, along with interest and fees.

What Does a Graduate PLUS Loan Cover?

While a graduate PLUS loan can only be used to cover education expenses, those expenses can include:

•   Tuition

•   Room and board (including off-campus housing)

•   Fees

•   Other expenses required by the school

As mentioned earlier, the maximum amount of a graduate PLUS loan amount is based on the costs of your school for that academic year.

Pros and Cons of Graduate PLUS Loans

Grad PLUS loans are not for everyone. Here are some of the pros and cons to consider as you decide whether this type of loan is right for you.

Pros of the Graduate PLUS Loan

 Cons of the Graduate PLUS Loan
The interest rate is fixed and stays the same for the life of the loan. You may not receive the loan if you have a negative credit history.
You can take advantage of Public Service Loan Forgiveness (PSLF) by working at a nonprofit, in a government role, or at another qualifying organization. Grad PLUS loans are not easily forgiven, except in the event of death.
You can borrow up to the full cost of school attendance (minus any other financial aid you receive). Grad PLUS loans generally have higher interest rates than other types of federal loans.

Alternative Financing Options

Before taking out a grad PLUS loan, it’s helpful to consider other ways to finance the cost of graduate or professional school. Alternative options include the Federal Work-Study program, getting a job or teaching fellowship, applying for grants and scholarships, and looking into other types of federal or private loans.

Work-Study

The Federal Work-Study Program provides part-time employment to help undergraduate and graduate students with financial need pay for the cost of school. To qualify for Work-Study, you must file the FAFSA (which opens on October 1 each year), and it’s a good idea to apply early because each school has limited funds.

The amount you can earn depends on the type of work you get, how much your school can offer, as well as your application date, level of financial need, and FAFSA application date. And you cannot earn over the amount of money awarded to you in your financial aid award.

Assistantship Positions

Many universities offer teaching- or research-based assistantships. In return for doing work or research for the school, the school may offer you free or reduced tuition, a monthly stipend, and/or health insurance.

Through an assistantship, you are often considered an employee of the school and you may do a range of work from teaching undergraduate classes or proctoring exams to helping with research projects or collaborating on publishing scholarly articles.

Fellowships

While the terms of a graduate fellowship can vary depending on your school or field, they are often merit-based awards of financial aid to support students pursuing advanced study.

Your school may offer them internally or they may come from an external source.

Fellowships may include a stipend or cost-of-education allowance in addition to support for other educational expenses. Types of fellowships include predoctoral fellowships, dissertation fellowships, and traineeships. Check with your school for more details about these opportunities and to learn more about how to apply.

Job Opportunities

Even if you don’t qualify for any of the above employment options, getting a job can help offset the amount you have to borrow for graduate school. Some companies may even offer tuition reimbursement.

While you’ll have to balance a job with your class schedule and workload, getting a job while you attend graduate school can offer benefits beyond just a paycheck including: gaining real-world skills, employee benefits, and the ability to add some professional experience to your resume.

Scholarships and Grants

There are a range of graduate school scholarships and grants you can apply for to help finance the cost of advanced studies. Scholarships are typically merit-based and grants are often need-based.

This type of funding is ideal because you don’t need to pay it back. You can find both federal and state grants as well as scholarships from schools or independent organizations, such as nonprofits or companies. The key is to do your research (one place to start: the U.S. Department of Labor’s scholarship search tool ) to track down opportunities and apply to a range of options.

Direct Unsubsidized Loans

As mentioned earlier, PLUS Loans have some of the highest interest rates of all federal loans. So it’s worth applying for a federal Direct Unsubsidized Loan before opting for a PLUS loan since it has a lower interest rate.

You can borrow up to $20,500 per year with a Direct Unsubsidized Loan, up to the aggregate federal loan limit of $138,500. Keep in mind that any outstanding undergraduate federal loans that you have will count toward this total amount.

Private Loans

A private student loan — from a bank, online lender, college, credit union, or other private institution — can help make up the difference between what a student can borrow in federal loans for the cost of graduate school and the remaining education expenses after other sources of income from grants, scholarships, work-study, or jobs are taken into account.

Keep in mind that private loans differ from federal loans and they don’t offer the same benefits and protections, such as income-driven repayment, deferment and forbearance and forgiveness programs like Public Service Loan Forgiveness (PSLF).

It’s important to do your research, shop around, and find the best loan options for your personal financial situation. You’ll also need to have strong credit (or have a cosigner who does) and meet eligibility criteria to qualify with a private lender.

If you’re considering a private loan, SoFi offers graduate school loans for with flexible terms, no fees, and no prepayment penalties.

The Takeaway

A grad PLUS loan is a federal Direct PLUS Loan made to a graduate or professional student to help cover the cost of graduate school. Unlike other federal student loans, grad PLUS loans take your credit history into account so if you have an adverse credit history, you’ll need to meet additional eligibility requirements to qualify.

Grad PLUS loans allow you to borrow up to the full cost of attendance for graduate school minus the amount of financial aid you receive from other sources. These loans have some of the highest interest rates of all federal loans and a higher origination fee, so you will likely want to pursue a federal Direct Unsubsidized Loan first.

It’s also a good idea to explore alternative financing options to help cover the cost of graduate school, such as federal Work-Study opportunities, assistantships and fellowships, scholarships and grants, getting a job, as well as federal and private loans.

If you have a high interest rate on existing loans or need to lower your monthly payment before grad school or after you graduate, student loan refinancing is one option to consider. SoFi offers flexible terms, no fees, no prepayment penalties — and you can view your rate in two minutes.

Learn more about a SoFi student loan refinance today.

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

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

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

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.

Photo credit: iStock/nirat
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May
20
2022
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Guide to Student Loan Interest Rates for the 2022 School Year

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

Once a year, usually in June, the government announces interest rates for federal student loans that will be first disbursed after July 1. Whether you’re a freshman or, say, a junior, these rates apply to the loans you get for the academic year that starts in the fall.

Federal student loan interest rates are determined differently than private student loan interest rates. Here’s what you should know about federal and private student loan interest rates in 2022 and 2023.

Federal Student Loan Interest Rates for 2022

As just noted, interest rates on federal student loans for the upcoming academic year are set by the government. By federal law, they’re based on the 10-year Treasury note auction in May. The rates set for the 2022 to 2023 school year are for loans first disbursed from July 1, 2022 to June 30, 2023.

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

How Federal Student Loan Interest Rates Work

Interest rates on federal student loans are fixed for the life of the loan. That means that if you borrowed a Direct Subsidized Loan for the 2020 – 2021 school year, and your interest rate was 2.75%, that interest rate is locked in at 2.75% for the life of that loan.

But, if you borrowed another Direct Subsidized Loan to pay for the 2021 – 2022 school year, your new loan will be disbursed with the 3.73% interest rate offered during that school year.

Since 2006, interest rates on federal student loans have fluctuated from anywhere between 2.75 to 8.50%, depending on the type of loan.

Difference Between Federal and Private Student Loan Interest Rates

Unlike federal student loans, interest rates for private student loans are set based on economic factors and underwriting unique to each lender that issues them. Lenders typically take into account a borrower’s credit history, earning potential, and other personal financial factors.

If you borrowed a private student loan, you may have applied with a cosigner to secure a more competitive interest rate. That’s likely because most college students don’t have much credit history or employment history, so interest rates on private student loans can be higher than those on federal student loans without a well-qualified cosigner.

While federal student loans have a fixed-interest rate, private student loans can have either a fixed or variable interest rate. Borrowing a variable rate loan means that the interest rate can change periodically.

How Private Student Loan Interest Rates Work

The frequency of changes in the interest rate will depend on the terms of the loan and on market factors; typically, private lenders adjust the interest on variable-rate loans monthly, quarterly, or annually. Interest rates on private student loans are typically tied to the London Interbank Offered Rate (LIBOR) or the 10-year Treasury yield.

So as the LIBOR changes, for example, interest rates on variable-rate student loans can change as well. Typically, lenders will add a margin to the LIBOR, which is determined based on credit score (and, the credit score of your co-signer if applicable).

Generally, the LIBOR tracks the federal funds rate closely. In June 2020, the Federal Reserve announced that it plans to keep the federal funds rate close to zero, likely through 2022.

This means that, so long as the federal funds rate remains low, the interest rates on private student loans are not likely to increase during that time period. However, it’s important to pay attention to interest rates, especially for borrowers with private student loans with a variable-interest rate, since these changes could cause fluctuations to the interest rate of the loan.

And given that LIBOR is scheduled to be discontinued around the end of 2021 , rates could change in other ways as new indices are chosen by lenders.

Lowering the Interest Rate on a Private Variable-Rate Loan

If you have a private variable-rate loan and are worried about interest-rate volatility, there are options available to protect against an interest-rate hike. One option is switching to a fixed-rate loan via student loan refinancing.

When you refinance your student loans, you take out a new loan (typically with a new lender).

The new loan effectively pays off your existing loans, and gives you a new loan with new terms, including a new interest rate. Private lenders, like SoFi, review personal financial factors like your credit and employment history, among other factors, to determine a new interest rate.

If you qualify to refinance, you’re then able to choose between a fixed or variable rate loan, so if you’re worried about rising interest rates in the future, you may have a chance to qualify to lock in a new (hopefully lower) fixed interest rate.

Monthly Payments and Private Loans

You should also have the opportunity to set a new repayment plan, either extending or shortening the term of the loan. If you extend your student loan repayment term, you’ll likely have lower monthly payments, but will pay more in interest over the life of the loan.

Shortening your repayment plan typically has the opposite effect. You may owe more each month, but will most likely spend less on interest over the life of the loan.

To get a general idea of how much refinancing your student loans could impact your repayment, take a look at SoFi’s student loan refinance calculator, where you can compare your current loan to current SoFi refinance student loan rates.

Refinancing Federal Student Loans

Federal student loans can be refinanced, too. Typically, a student wouldn’t do this while still in school, since the government is paying the interest on certain federal loans during this time. Also, federal student loan interest rates are generally lower than rates for private loans disbursed in the same time period.

It should be noted, however, that refinancing a federal student loan with a private lender means you’ll no longer be eligible for federal programs and protections like income-driven repayment, forbearance, or Public Service Loan Forgiveness (PSLF).

The Takeaway

Interest rates for federal student loans reset every year in June for the upcoming school year. For the 2022 school year, rates are up roughly 1% compared to the previous year, which saw the lowest rates in years.

If you refinance your student loans with SoFi, there are no origination fees or prepayment penalties. The application process can be completed online, and you can find out if you prequalify for a loan, and at what interest rate, in just a few minutes.

Ready to take control of your student loans in 2022 and beyond? See how refinancing with SoFi can help.



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).

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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. 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).

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Refinancing Student Loans After Marriage

Guide to Refinancing Your Student Loans After Marriage

By | Family Finances, Student Loans, student_loan | Comments Off on Guide to Refinancing Your Student Loans After Marriage

After getting married, you’ll start to merge your life, your home, and possibly your finances with your partner. As you plan for the future, it’s helpful to consider the implications of student loans and marriage—which can affect your credit, your ability to get a home mortgage, and even the repayment of your student debt.

Consolidating your federal loans or refinancing student loans after marriage may be options to consider as you begin handling finances in your marriage and working together to reach your financial goals

Student Loans and Marriage

There are currently over 45 million borrowers in the U.S. and the total amount of student loan debt is $1.7 trillion. So the odds are high that either you or your partner may have student loans. As you begin planning for your financial future together, it’s helpful to look at how marriage can affect student loan payments.

Recommended: What is the Average Student Loan Debt?

What Happens to Student Loans When You Get Married?

If you haven’t already had a conversation about student loans and marriage before tying the knot, you and your partner should sit down and discuss your individual student loan debt: how much you have, whether you have federal or private student loans, as well as what your balances, payment status, and monthly payments are. It’s important to share this information since getting married may change your debt repayment plans.

If someone has federal student loans and is on an income-based repayment (IBR) plan when they get married, for example, their monthly payments may increase post-marriage as income-based repayment plans are determined by household income and size. Depending on how a couple chooses to file their taxes, the government may take a new spouse’s salary into account when determining what the borrower’s monthly payments should be.

Because federal student loan borrowers on an income-based repayment plan have to recertify each year, the current year’s income is taken into account which may be higher after marriage if both spouses work. If the borrower’s new spouse doesn’t earn income then they may actually see their monthly payment requirements drop as their household size went up, but their household income remained the same.

Household income also affects how much student loan interest a borrower can deduct on their federal taxes. It’s worth consulting an accountant if a newly married couple needs help figuring out where they stand financially post-marriage.

It’s also important to be aware of how marriage affects your credit score as how someone manages their student loan debt is a factor. Since spouses don’t share credit reports, marrying someone with bad credit won’t hurt your credit score. That said, when it comes time to apply for a loan together, a bad credit score can make getting approved harder—which is another reason it’s key to get on the same page about repaying any debt on time.

Recommended: Types of Federal Student Loans

Refinancing Student Loans After Marriage

Refinancing student loans gives borrowers the chance to take out a new student loan with ideally better interest rates and terms than their original student loan or loans. Some borrowers may choose to consolidate multiple student loans into one newly refinanced loan to streamline their debt repayment process.

The result? One convenient monthly payment to make with the same interest rate and the same loan servicer instead of multiple ones.

As tempting as it may be to combine debt with a spouse and work toward paying it off together, married couples typically cannot refinance their loans together and each spouse would need to refinance their student loans separately. But even though a couple can’t refinance their student loan debt together, they’ll still want to be aware of what’s going on with their partner’s student loans.

Recommended: Top 5 Tips for Refinancing Student Loans in 2022

How to Refinance Student Loans After Marriage

Refinancing student loans after marriage looks the same as it does before marriage and is pretty straightforward. The student loan borrower will take out a new loan, which is used to repay the original student loan.

Ideally, this results in a better interest rate which will help borrowers save money on interest payments, but this isn’t a guarantee. Before refinancing, it’s important that borrowers shop around to find the best rates possible as factors like their credit score and income can qualify them for different rates.

Borrowers have the option of refinancing both federal and private student loans, but it’s worth noting that refinancing a federal student loan into a private one removes access to valuable federal benefits like income-driven repayment plans and loan forgiveness for public service employees.

Refinancing vs. Consolidating Student Loans After Marriage

Borrowers can choose to refinance or consolidate their student loans before or after marriage.

If a borrower has multiple federal student loans, then they can choose to consolidate their different loans into one Direct Consolidation Loan. This type of loan only applies to federal student loans and is offered through the U.S. Department of Education.

This type of loan takes a weighted average of all of the loans consolidated to determine the new interest rate, so generally this is an option designed to simplify debt repayment, not to save money. If a borrower chooses to consolidate through a private lender, they will be issued new rates and terms, which may be more financially beneficial.

Consolidating through a private lender is a form of refinancing that allows borrowers to take out one new loan that covers all of their different sources of student loan debt. While some private lenders will only refinance private student loans, there are plenty of private lenders that refinance both private and federal loans. As mentioned earlier, refinancing a federal loan means losing access to federal protections and benefits.

Refinancing can be advantageous if the borrower is in a better financial place than they were when they originally took out private student loans. If they’ve improved their credit score, paid down debt, and taken other steps to improve their financial picture, they may qualify for a better interest rate that can save them a lot of money over the life of their loan.

Another option in refinancing student loans after marriage is co-signing a partner’s loan. Doing so may mean that you can leverage greater earning power and possibly better credit, but it also means both partners are responsible for the loan, and can put one partner at risk in the event of death or divorce.

Student Loan Refinancing With SoFi

SoFi refinances both federal and private student loans, which can help borrowers save because of our flexible terms and low fixed or variable rates. Borrowers won’t ever have to worry about any fees and can apply quickly online today.

Learn more about refinancing student loans with SoFi.

FAQ

What happens when you marry someone with student loan debt?

If someone’s new spouse has student loan debt, this indirectly affects them. While the debt won’t be under their name or affect their credit score when it comes time to apply for credit products with their spouse (such as a mortgage loan) their credit score and current sources of debt will likely be taken into account.

Is one spouse responsible for the other’s student loans?

No one spouse is directly responsible for their spouse’s student loans, but it’s important to work together to pay off student loan debt. Again, once it comes time to apply for a joint loan, any student loan debt can have an effect on eligibility.

Does getting married affect student loan repayment?

Getting married can affect student loan repayment if a borrower is on an income-based repayment plan for their federal student loans. This type of repayment plan takes household size and income into account when determining what the borrower’s monthly payment should be. If their spouse brings in an income they may find their monthly payments are higher, but if their spouse doesn’t have an income their payments may become smaller.

Photo credit: iStock/South_agency

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.


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.

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Apr
14
2022
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Can You Roll Your Student Loans Into Your Mortgage?

By | Debt Payoff, Home Ownership, Student Loans, student_loan | No Comments

It’s possible to roll student loans into a mortgage using a cash-out refinance. In order to to do this, you’ll already need to have enough equity in your home. While this could potentially help you secure a lower interest rate, it’s not the right choice for everyone. Read on for more information on situations when it may make sense to roll your student loan into a mortgage and other strategies to pay off student loan debt.

Key Points

•   You can roll student loans into a mortgage through a cash-out refinance, but it requires sufficient home equity.

•   Benefits may include lower interest rates, reduced monthly payments, and simplified finances with one payment.

•   Risks include losing federal student loan protections, paying more interest long-term, and incurring closing costs.

•   Alternatives include refinancing student loans separately, seeking employer repayment assistance, or pursuing forgiveness programs.

•   Buying a home with student loans is possible, but lenders closely evaluate debt-to-income ratios, typically preferring below 36–43%.

Paying Your Student Loans

Paying off one loan with another is a standard form of debt reshuffling or consolidation. When it comes to student loans, though, your options may seem limited. It is, however, possible to roll student loan debt into a new mortgage through a cash-out refinance loan — as long as you have sufficient equity in your home.

But just because you can, it doesn’t mean you should. Here are some tips on how to consolidate student loans into a mortgage — and whether it may be the right move for you.

Rolling Student Loans Into a Mortgage

A cash-out refinance is a type of mortgage loan that enables you to turn a portion of your home’s equity into cash. Simply refinance your existing mortgage for more than what you currently owe into a new loan with new terms and keep the difference.

Once you have the cash in hand, and as long as there are no loan conditions to pay off specific debt with the cashout, you can do whatever you want with it, including paying off your student loans.

You may need to do the legwork of determining how much you need to add to the new proposed loan and may be responsible for ordering the final payoff. If it is not a condition of the new mortgage loan, the lender would normally not request escrow to order the payoff and pay the loan in full at loan closing. If you would like escrow to perform this service for you, just let them know.

Once you’ve completed the loan consolidation process, you may still have the same amount of debt as you did before (possibly more if you added any applicable closing costs to your new loan). You’ll just be paying it all in one monthly payment, based on your new mortgage terms.

If you want to refinance student loans into a mortgage, it could be beneficial in some situations. However, it’s important to understand the benefits and drawbacks of doing so and also to compare the benefits of this option with other alternatives.

One such drawback is that you may no longer be eligible for federal student loan benefits , such as the ability to pursue federal student loan forgiveness or federal student loan repayment plans. This includes income-driven repayment plans, where your monthly student loan repayment changes according to your income.

Pros and Cons of Rolling Student Loans into a Mortgage

Depending on your debt situation and your credit profile, consolidating student loans and your mortgage into new terms could be a smart idea or a terrible one. Here are some of the pros and cons to consider.

Pros of Rolling Student Loans into Mortgage

•   It could lower your interest rate: If you pay a higher interest rate on your student loans and current mortgage vs. a new Cash-Out Refi, consolidating may help reduce how much you pay in overall interest.

•   It could lower your monthly payment: If you qualify for a lower interest rate and choose a longer repayment period with the new loan, it may significantly lower the total amount you pay each month for your mortgage and student loans combined. Keep in mind that extending the life of the loan may mean you pay more in interest in the long-term.

•   It simplifies your finances: Having a single monthly payment might make your finances easier to manage. The fewer monthly payments you have to keep track of, the better. If you have multiple student loans, rolling them into your mortgage can make your life easier.

Cons of Rolling Student Loans into Mortgage

•   You could end up paying more interest over time: Stretching a 10-year student loan repayment term to up to 30 years could end up costing you more in interest, even if the interest rate is lower. Also, if you have paid down a 30 year mortgage for a few years and originate a new 30 year mortgage, you will be extending your existing loan term and may be paying additional interest over the life of the loan.

•   You may not be eligible: To qualify for a cash-out refinance loan, you typically need to have at least 20% equity left over after the new loan amount on the cash-out refinance. Even if you do have more than 20% equity right now, the difference might not be enough to pay your student loan in full.

•   You may pay closing costs: Depending upon the rate and term you choose, you may have applicable closing costs. FannieMae offers a program for student loan cash-out refinance loans. Consider getting a quote for this program and compare the rate and fees of this program to a standard cash-out refi.

•   You may be reducing the amount of available equity in your home: Taking cash out of your home can reduce the amount of available equity in your home. Market value fluctuations can also impact the amount of available equity.

3 Alternatives to Rolling Student Loans into a Mortgage

Before you seriously consider consolidating student loans into a mortgage, it’s important to know what other options you may have for paying down your debt faster.

1. Refinancing Your Student Loans

Whether you have federal or private student loans, you can refinance your student loans with a private lender like SoFi. Depending on your credit, income, and financial profile, you may qualify for a lower interest rate, monthly payment, or both.

You can also gain some flexibility by choosing a longer or shorter repayment term. Keep in mind that refinancing federal student loans means they’ll no longer be eligible for any federal programs or borrower protections, such as income-driven repayment plans.

2. Seeking Repayment Assistance

Employers are increasingly offering student loan repayment assistance as an employee benefit. Well-known companies that provide this repayment benefit include Aetna, Fidelity, PricewaterhouseCoopers, SoFi, and more. If your current employer doesn’t offer student loan repayment assistance, consider finding a job that does when you are next seeking employment.

3. Apply for Student Loan Forgiveness or Grants

Depending on your career path, you may qualify for student loan forgiveness or grant programs. Examples of these programs include (but are not limited to):

•   Health care

•   Veterinary medicine

•   Law

•   Military

•   STEM

If you’re working in one of these fields or a similar one, check to see if there are forgiveness or grant programs for which you may qualify. As previously mentioned, a cash-out refi may make you ineligible to participate in these programs. Check on any possible loss of benefits before considering a refinance of these loans.

Deciding If Rolling Student Loans into a Mortgage Is Right for You

Using a cash-out refinance to consolidate student loans and a mortgage into one affordable monthly payment sounds appealing, especially if you can get a lower interest rate than what you’re currently paying. But it’s crucial to consider all of the costs involved before you make a decision.

A lower interest rate, for instance, doesn’t necessarily mean you’ll pay less interest over the life of the loan. Work with a mortgage loan officer or run an amortization schedule in order to do the math.

Also, keep closing costs in mind. Closing costs can vary depending upon the loan scenario and is tied to factors such as the interest rate you choose, your credit score, loan type, property type, and more.

And paying closing costs is not a given. For instance, you can choose to take a higher interest rate (if it is still lower than what you currently have) and use the lender rebate money built into that higher rate to cover some or all of your applicable closing costs. When the time comes to lock in your rate, speak with your chosen lender about various loan programs and the estimated closing costs tied to each rate and term option.

Finally, take a look at some of the other options out there and determine whether you could potentially save more money in interest with them. The more time you spend researching, the better your chances of settling on the option that is most affordable overall.

Can You Buy a House With Student Loans?

While existing debt can impact whether you’re approved for a loan, or the interest rate and loan terms if you are approved, it’s still possible to buy a house with student loan debt. When you apply for a mortgage, the lender will review your complete financial picture including your debt obligations, which might include student loans, credit card debt, or a car loan.

Debt-to-income ratio is one important consideration for lenders. This is a measurement of how much debt one has in comparison to how much money you earn and lenders rely on this metric to inform whether or not you’d be able to make the monthly payments on a new loan, considering your existing debt. Generally speaking, lenders are unlikely to approve anyone for a mortgage with a debt-to-income ratio higher than 43%, though lenders may be more inclined to lend to someone with a debt-to-income ratio lower at or less than 36%.

Beyond debt-to-income ratio, lenders will also evaluate factors such as the borrower’s credit score.

Before applying, do some number crunching to see what a mortgage might cost and how it will impact your overall debt-to-income ratio. This might be helpful in understanding the mortgage rates you may be eligible for.

In addition to traditional home loans there are programs available for first-time home buyers that might make buying a home with student loan debt more achievable.

Refinancing Student Loans With SoFi

If you are interested in consolidating your student loan debt at a lower interest rate but don’t want to roll them into your mortgage, you may instead want to consider student loan refinancing. With SoFi student loan refinancing, you can refinance your private or federal loans (or both!) with no application fees, origination fees, or prepayment penalties. And you still get the benefit of consolidating your loans to one payment, with a new (and potentially better) interest rate and loan terms. Keep in mind that refinancing any federal loans will eliminate them from federal programs and borrower protections such as income-driven repayment plans or deferment options.

The Takeaway

When paying down student loan debt faster, there’s no one-size-fits-all solution. The more information you gather about your options, the easier it will be to eliminate your debt as quickly as possible.

If you’re interested in refinancing your student loans, consider SoFi. Student loan refinancing at SoFi has no fees and as a SoFi member, borrowers qualify for perks such as career coaching, community events, and more.

Learn more about SoFi student loan refinancing.

FAQ

Is it a good idea to roll your student loans into a mortgage?

Evaluate all loan details carefully before rolling your student loans into a mortgage. Factors such as closing costs, loan term, any additional fees, and interest rate can all influence how much it will cost to borrow money over the life of a loan. In some cases, it may be possible to qualify for a lower interest rate when borrowing a mortgage. In other cases, extending the repayment of your student loans over a 30-year period with your mortgage may make it more expensive. If you have any questions on your personal financial situation, consider speaking with a qualified financial professional or mortgage loan officer who can offer a personalized assessment.

Can student loans be included in a mortgage?

Student loans can be included in a mortgage if you have enough equity in your home. Rolling student loans into a mortgage generally requires the borrower to take out a cash-out refinance loan, which allows you to turn a portion of your home’s equity into cash. Once you have the cashout in hand, you can pay off your existing student loans.

Terms may vary by lender. There are certain programs, such as Fannie Mae’s Student Loan CashOut Refi that specialize in this type of borrowing.

How much of student loans is counted for a mortgage?

Student loans are evaluated as a part of your overall debt-to-income ratio. In general, lenders avoid lending to borrowers with a debt-to-income ratio greater than 43%.

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
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).

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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