Don’t sacrifice your financial future to pay for an education. Borrow smart to save money.
Starting school can feel like dunking your head in ice water. Aside from culture shock, there’s adjusting to a new way of living. The last thing you need when you’re adjusting to everything is to struggle with paying tuition.
Likewise, getting out of school brings a whole other set of alien experiences. When you’ve got a fresh career and another shift in how you live, you may find that how you’ve borrowed needs an adjustment. Refinancing or consolidating are two ways that you can make those adjustments. Whether you’re starting school or post-graduation, here’s what you need to know to manage your student debt.
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- Recommended Credit Range: Good to excellent
- Minimum Loan Amount: $5,000
- Maximum Loan Amount: $100,000
- Loan Term: 5 to 20 years
- Turnaround Time:
- Total Costs: Depends on your credit score.
I’m paying for school. What are my student loan options?
There are two subsections of student loans that you need to be aware of when you’re dealing with education financing. The first we’ll discuss is private loans. The other is public loans.
- Private student loans are generally sought out after you’ve maxed out public loans. Among the most well-known private lenders is Sallie Mae, which started as a federal entity. You can obtain a private student loan from a bank, a state agency, a school or even a credit union. When considering which type of loan to take, note that private student loans can cover postgraduate expenses such as those that come with studying for the bar or residency. Federal loans can’t be used to cover these types of costs.
- Public loans are federal loans funded by the federal government. These loans come in direct subsidized and direct unsubsidized, direct PLUS loans for graduate and professional students or parents, and Federal Perkins Loans. Direct loans are generally put toward your tuition and other education expenses. After all your education expenses are paid for, any remaining money typically comes to you. Federal loans offer the added benefit of a grace period before you’re required to begin repayment.
Compare lenders for student loans and refinancing options
Could a personal loan for students help me with larger expenses?
If you’re having a hard time qualifying for a federal loan or your federal loan has run out, you may want to consider a personal loan. Personal loan amounts can range from $1,000 to $100,000 based on your eligibility and creditworthiness.
A private student loan may not cover all of the expenses you have while in school, because they’re limited to education costs (with the possible exception of housing). By getting a personal loan, you would be able to use the funds as you need.
Pros and cons of personal loans for education expenses
- Loans of up to $100,000 are available for qualified applicants.
- Interest rates are comparable to private student loans.
- You can use the funds for any legitimate purpose.
- No grace period before payments start.
- A better credit history may be required.
Compare your personal loan options
How do I compare my personal loan options as a student?
|Federal student loan||Private student loan||Personal loan|
|Purpose||Education-related expenses||Education costs, includes postgraduate expenses||Any legitimate costs|
|Funds disbursement||Sent to the school; any remaining funds are sent to you later||Sent to the school; any remaining funds are sent to you later||Sent directly to you|
|Interest rates||3.76% to 6.31% fixed APR, depending on loan and borrower type||Varies but can reach over 12%, depending on the lender||Varies but can go up to 36%, depending on the lender|
Consolidating multiple loans
In this section, we’ll talk about federal loans. If you’ve only got private student loans, you can skip down to refinancing (unless you’d like to learn a bit more).
Not everyone is lucky enough to get out of school with just one loan, much less no loans. If you’ve got multiple federal loans you’re trying to pay off from various agencies, you may have a hard time keeping track of all of them.
Consolidation is the process of taking one or more of your federal loans and combining them into one. You can apply for a direct consolidation loan through the Federal Student Aid (FSA) website. The application requires you to sign in with an FSA user name or email address.
Pros and cons of student loan consolidation
- Repayment plans are available, including income-based plans.
- You have a 60-day window before your first repayment due date is set.
- You can be approved for lower monthly payments and potentially extend your repayment term.
- An extended loan term could result in paying more interest over time, increasing the overall cost of your loan.
- Benefits from your initial funding — such as discounts or rebates — may be cancelled.
Refinancing loans for a lower interest rate
Whether nearing the end of school or already out, you may be looking for a way to lower the overall cost of your debt. Refinancing could be just what you need if you have private student loans.
Refinancing involves replacing your open debts with a different loan, hopefully one with better terms. To refinance, you apply through a private lender that offers student loan refinancing services.
When considering a loan, compare the interest rate, loan term, risk and overall monthly payments. Done right, you could potentially get all of your loans under one payment with terms that better suit your needs.
Pros and cons of student loan refinancing
- Potentially lower your monthly payments.
- Reduce the number of debts you have to manage.
- Possibly benefit from a reduced interest rate.
- A higher credit score may be necessary.
- You won’t be eligible for federal repayment or forgiveness programs.
- You may pay fees associated with refinancing.
No matter where you are in your schooling, there’s a loan to fit your needs. Federal loans are good for those who qualify. If you don’t qualify or you’ve run out, personal loans and private student loans may be valid options.
Your schooling is in your hands. Before making any big financial decisions, consider your specific personal and financial situation. Go over all of your options, compare loans and seek advice or research anything that’s not perfectly clear.
Frequently asked questions about student loans
What are typical federal loan terms and grace periods?
The standard repayment plan involves fixed payments and a term up to 10 years (or 30 years for consolidation loans). Direct subsidized and unsubsidized loans offer a grace period of six months, whereas PLUS loans do not offer a grace period but may be eligible for deferment. Federal Perkins Loans offer varying grace periods based on the school you’re attending.
What are the types of federal loans?
- Direct subsidized loans. Designed for undergraduate students and requires a demonstration of financial need.
- Direct unsubsidized loans. Designed for undergraduate, graduate and professional students and does not require a demonstration of financial need.
- Direct PLUS loans. Designed for graduate and professional students, or parents of dependent undergraduate students. These loans pay for expenses not covered by other financial aid.
- Direct consolidation loans. Used to combine all eligible federal student loans.
- Federal Perkins Loan Program. Designed for undergraduate and graduate students with significant financial need. Funding is loaned by the school itself.
What’s the maximum amount of funding I can receive from a federal loan?
- Direct subsidized loans. Annual limit is $5,500, depending on grade level and dependency status.
- Direct unsubsidized loans. Annual limit is $20,500, depending on grade level and dependency status.
- Direct PLUS loans. Maximum annual amount is your tuition and other school fees, minus any other aid received.
- Federal Perkins Loan Program. Annual limits are $5,000 for undergraduate students and $8,000 for professional degree and graduate students.
Will I need a cosigner for my private student loan?
Unless you have an established credit history, you’ll most likely need a cosigner.
How do I get a large personal loan?
Each lender will offer a different maximum loan amount. Check out different personal loan lenders to see which ones can offer a loan in the amount you’re looking for.
Can I cancel a loan?
For federal student loans, if you notify your school you can cancel all or part of your loan before the money is disbursed. If the money is already disbursed, there are certain time frames in which you can cancel all or part of your loan.
Private loans and personal loans have varying protocols. Contact any lenders you’re interested in working with to find out their cancellation policy.
Are there circumstances in which my loan can be forgiven?
Federal student loans have the possibility of being forgiven under certain conditions. Private and personal loans don’t have come with this arrangement.