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Are you sick of pouring money into summer rentals or booking vacation houses online, sight unseen? If you’re managing to make the mortgage payments on your primary residence without straining your budget, you could be ready to invest in a second home. Here are some ideas on how to get an additional mortgage loan to potentially purchase another home.

Consider All the Costs

If you already own a house, you understand that the costs of home ownership go beyond mortgage payments. Remember that you’ll now have a second set of costs, including property taxes, insurance, maintenance, utilities, and the cost of travel to the second location.

You may also face some expenses with a vacation property that you wouldn’t face with a primary residence. For example, a house on the beach might need flood insurance to protect it against hurricanes.

All of these costs factor in on top of a second mortgage payment. Before you dive into owning a second home, consider whether or not you can afford them.

💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Determine if You Want a Vacation Home or a Rental Property

Before beginning to shop for a mortgage, you’ll need to decide whether you want to potentially earn rental income on the property. The answer to this question will determine the type of mortgage you qualify for.

However, if you require rental income in order to qualify for the additional home purchase, you may need to document existing rental income derived from the property (if the seller will share that information) or the lender may require a rental appraisal from a local property manager or real estate agent specifying the likely rental income. Keep in mind that the lender may only use a certain percentage (likely 75%) of the lease amount as a credit toward your qualifying income.

To qualify for a loan on a rental property, you will likely need a higher down payment, typically at least 20% or more. Non-owner occupied loans allow you to use the home when it’s not rented. Investment property mortgage rates may be higher than those for a primary residence. Another factor to consider is that a rental property may affect your income tax deductions differently than a vacation home.

Factors to Qualify for a Mortgage

If you’re ready to buy a home, and you’ve decided whether you’re looking for a vacation home or a rental property, you’ll want to consider many of the same factors needed to secure a first mortgage. Utilizing a home affordability calculator can be important when understanding how much home you can afford.

Credit report and FICO® score: Your credit report is essentially a report card that shows lenders how responsible you are about managing your debt, including your existing mortgage. It shows whether you make payments on time and whether you’ve missed payments or defaulted on debt in the past.

Your FICO score is a number that reflects your consumer credit risk. Make sure that you keep your credit score healthy by making on-time payments. Also check your credit report to be sure everything has been reported correctly. Mistakes can drag your score down, so it’s important to alert the credit reporting bureaus immediately if you find incorrect information.

Debt-to-income ratio: Your debt-to-income (DTI) ratio is a measure of how much debt you carry each month compared to your monthly income. If you have $2,000 a month in debt payments and make $6,000 a month in income, your DTI is $2,000/$6,000, or 33%. If your DTI is too high, lenders are less likely to give you a mortgage, or you may not be able to secure a mortgage with favorable terms. The DTI required by your lender can vary based on factors such as your credit score, type of home, and the size of your down payment but most lenders like to see a DTI of no more than 43% for a second home purchase.

One way to get your DTI low is by paying off old debts and avoiding taking on new ones. “It’s important to cut spending as much as you can while you’re tackling your debts,” said Kendall Meade, a Certified Financial Planner at SoFi. You may also consider refinancing loans you already have, including the mortgage on your first house, if you can take advantage of potentially lower interest rates. A lower interest rate could mean paying less over the life of the loan, which could help you lower your DTI sooner than you thought.

If you are purchasing a rental property, and you can show an existing tenant’s fully executed lease agreement and other supporting documentation the lender may require, it is likely that the lender will calculate 75% of the monthly lease amount toward your qualifying income.

Down payment: Required down payments on second homes are typically higher than on primary residences. For a second home purchase, lenders may require a down payment of at least 10% or more. If you put less than 20% down, you may be required to have private mortgage insurance (PMI), which protects the lender if you stop making payments.

The more you can pay upfront with a down payment, the more favorable your mortgage terms are likely to be. Your interest rate and monthly payments may be lower, and if your DTI or credit score is less than ideal, a higher down payment could potentially help you compensate for these factors.

Though making a large down payment can be a financial boon, you may want to make sure that you don’t deplete your savings so much that you no longer have extra cash to cover other expenses like closing costs.

Income and assets: Your lender will typically want to see that you have two years worth of steady and ongoing income to qualify for a mortgage. They also may want to see recent statements from any monetary assets you have such as a checking account, savings account, CD, IRA, 401(k), etc. Lenders may also want to see reserve funds. The amount of required reserves will vary from lender to lender and loan program to loan program, but each month of reserves is equal to one month’s worth of payments on your first and additional mortgage. One month of mortgage payments is defined as principal, interest, taxes, insurance, and other miscellaneous costs (such as flood insurance or HOA dues).

💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

Estimate How Much You Can Afford

This home affordability calculator helps estimate the cost of purchasing a home and what your monthly payment would be — including closing costs, insurance, and property tax.

The Takeaway

It’s usually a good idea to shop around. As you search for an additional mortgage, consider checking out multiple lenders to make sure you’re getting the best deal for you on interest rates, terms, and fees.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

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 Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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A merit scholarship is a type of college financial aid that is awarded based on a student’s merits, which might be academic, athletic, artistic, leadership-related, or pertaining to a special interest. A merit scholarship does not take a student’s financial need into consideration.

Read on for a closer look at exactly what a merit scholarship is, the different types of merit scholarships available, and how to get merit aid to help you pay for college.

What Is a Merit Scholarship?

Merit scholarships, also known as merit aid, are a kind of college funding that is not based on financial need but, instead, on a student’s merits or achievements. Merit aid is often given to students that excel in academics, extracurricular activities, athletics, arts leadership, and other areas.

Merit aid is often funded by colleges and universities themselves, and can typically be redeemed for multiple semesters and years. This type of financial aid is often used as a way to lure top performing students to their school. It might be a few thousand dollars or it could cover a student’s entire tuition. Merit scholarships are also offered by organizations, like the National Merit Scholarship Corporation, and private companies.


💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.

Types of Merit Scholarships

Merit scholarships come from different types of institutions and are awarded for a variety of reasons. Here’s a look at the different kinds of merit scholarships that are available.

Colleges and Universities

Many colleges and universities have merit aid awards that are offered to students. Sometimes referred to as institutional aid, merit aid programs vary from school to school. Some schools may consider all students for a merit award without needing an additional application. In some cases, there may be an additional application required. Select merit aid awards may be designed to cover the full cost of tuition, while others will only cover a portion.

Academic Merit Scholarships

Academic merit scholarships award money to students who demonstrate significant academic achievement in high school. Often, academic merit scholarships may consider a student’s grade point average (GPA), standardized test scores, class rank, or other factors.

Depending on the school, you may not need to submit or do anything extra to be awarded a merit-based scholarship. Instead, the school may decide based on your application alone. Academic merit aid is often redeemable for multiple years if you uphold the scholarship qualifications (such as maintaining a certain GPA each semester).

Recommended: How Much Does GPA Matter When Applying to College?

Athletic Merit Scholarships

Like academic merit aid, athletic merit scholarships are typically funded by the college or university. If you’re interested in an athletic scholarship, keep in mind that getting recruited can be a time-intensive process. Depending on the sport you play, you may need a highlight reel or video that shows off your skills. Typically, schools will also want to see your academic records and SAT or ACT scores.

Athletic scholarships may be offered for each year you attend school, provided you meet certain requirements, such as attending a certain number of practices/games each week while also maintaining a certain GPA.

Arts Merit Scholarships

Many liberal arts colleges offer merit scholarships to students who excel in the arts, such as music, acting, painting, drawing, or graphic design. If you have talent in and have been focusing on any area of the arts, you may be able to get merit money by applying for a degree program in the arts at a particular college or university.

Merit Scholarship Options From Organizations

Some nonprofits and community organizations offer their own merit scholarships to standout students. These scholarships have varying requirements but will typically focus on an eligibility requirement that’s important to the organization, such as a student’s leadership qualities, chosen career path, or involvement in community service during high school.

For example:

•   The Daughters of the American Revolution (DAR) offers the Richard and Elizabeth Dean Scholarship to students who are pursuing an undergraduate degree in American Studies.

•   The Society of Women Engineers (SWE) offers a scholarship to applicants who are studying at an accredited university and pursuing a career path in engineering, engineering technology, or computer science.

•   The National Association of Flavors and Food-Ingredient Systems (NAFFS) offers an annual scholarship to outstanding food science students.

Private Companies

Another source of merit scholarships is private companies. Companies like Coca-Cola, Burger King, Google, and more have annual scholarships. Like many other scholarship opportunities, the application requirements and eligibility criteria will vary based on the company and/or scholarship. Below are a few examples.

Coca-Cola Scholars Program

The Coca-Cola Scholars Program
is an achievement-based scholarship awarded to students in their final year of high school. Students are recognized for their ability to lead and serve, as well as their commitment to making a significant impact on their schools and communities. In 2023, the program provided over 6,750 Coca-Cola Scholars with more than $81 million in educational support.

Burger King Scholars

The Burger King Scholars program provides scholarships ranging from $1,000 to $60,000 to high school students who stand out based on their GPA, work experience, extracurricular activities, and community service.

Generation Google Scholarship

The Generation Google Scholarship program is designed for students pursuing degrees in computer science. The scholarship is awarded based on the strength of each candidate’s commitment to diversity, equity, and inclusion; demonstrated leadership; and academic performance. Selected students can receive $10,000 for college.

National Merit Scholarship Corporation

The National Merit Scholarship Program is an annual academic competition among high school students for recognition and college scholarships run by the nonprofit National Merit Scholarship Corporation (NMSC). To enter the program, you simply need to take the Preliminary SAT/National Merit Scholarship Qualifying Test, generally during your junior year, and meet other program entry requirements. There are three types of awards: National Merit Scholarships of $2,500, corporate-sponsored scholarships, and college-sponsored merit scholarships.

Recommended: Finding Free Money for College

How to Apply for a Merit Scholarship

The process for applying to a merit scholarship can vary significantly from scholarship to scholarship. Merit scholarships offered by colleges and universities typically don’t require students to fill out any additional paperwork beyond their application to the school. However, some schools require that students submit the Free Application for Federal Student Aid (FAFSA) to be eligible. This allows students to maximize their federal and state need-based financial aid before receiving school awards. It’s a good idea to contact the financial aid department for each school and ask what their merit scholarship process is.

Applying for merit aid from a source other than your school can be more time-consuming and will likely vary depending on the organization offering the award. In addition to an application detailing basic personal information, students may be required to write an essay or personal statement, gather letters of recommendation or go through an interview process.

If you’re interested in applying for a private merit scholarship, check in with the organization directly so you can be sure that you understand exactly what the application requirements are.

Recommended: Grants For College — Find Free Money for Students

What Can Merit Scholarships Pay For?

Frequently, if the merit scholarship is offered by the school, the award will go directly to pay your tuition bills. If there is any money left over after tuition is paid for, it can be used to pay for other educational expenses including room and board, books, or other fees. Each school will have its own procedures for how merit aid is awarded to students, so confirm any questions directly with the financial aid office.

Merit Scholarships and Income Taxes

Generally speaking, merit scholarships are not taxed by the Internal Revenue Service (IRS). According to the IRS, scholarships and grants are considered tax-free so long as the following conditions are met:

•   The student is pursuing a degree at an educational institution; and

•   The award money is used to pay for tuition and fees or other expenses related requirements at the educational institution, such as fees, books, and supplies.

There are some situations in which a merit scholarship may be taxed. If a grant or scholarship meets the following criteria, it may be taxable, according to the IRS:

•   The scholarship is used to pay for incidental expenses such as room and board, travel, or optional equipment.

•   The scholarship is awarded as payment for teaching, research, or other services (though there are some exceptions).

If you have any questions about whether or not a scholarship you’ve received is considered taxable income, consider consulting with a tax professional who can provide advice specific to your personal circumstances.

Recommended: Are Scholarships Taxable?

Finding Merit Scholarships

Check in with your college or university to find out if there are any school-specific awards available and determine how to file an application (if an additional application is required). There are numerous online resources and databases that can help you identify merit-based scholarships across the U.S. For students who are pursuing graduate degrees, there are also some scholarships for graduate students.

It can be a good idea to make a running list or spreadsheet of all of the merit-based scholarships that you are interested in, so you can keep the specific due dates and application requirements organized. This can help make the application process feel less overwhelming.

Consider Starting Early

Many merit-based scholarships look for demonstrated excellence over the course of an applicant’s entire four years of high school. Therefore, it could be a good idea to start thinking about what types of merit scholarships you’re interested in applying for as early as possible.

Maintaining Your Scholarship

It is important to note that some merit-based scholarships require the scholarship recipient to maintain a certain GPA and/or require specific campus or community involvement to continue receiving consistent scholarship funding.

If you do decide to apply for a merit-based scholarship, it’s a good idea to be prepared to not only do the hard work to secure the scholarship but also maintain it once you get to campus.

Other Ways to Help Finance College Tuition

If you do not receive any merit aid or enough merit aid to fully cover your college costs, there are still many funding options available to you. Often, the first step for students looking to secure aid is to fill out the FAFSA. Students must fill this out in order to receive any federal aid, including federal grants and scholarships, work-study, and federal student loans.

The federal work-study program sets students up with part-time jobs where they can earn money to put towards their educational costs.

Federal student loans offer low fixed interest rates, flexible repayment options, and possible forgiveness programs. Depending on your level of need, you may qualify for either subsidized or unsubsidized federal student loans. With a subsidized loan (for undergrads only), the federal government pays for any accruing interest on your loans while you’re in school and for six months after you graduate; with an unsubsidized loan, you are responsible for paying all interest that accrues on the loan.

If federal aid and merit-based scholarships aren’t enough to cover the cost of college, you might consider getting a private student loan. These loans are offered by banks, credit unions, and online lenders. Students and their co-signers (if applicable) apply for private student loans as if they were applying for other types of loans, such as auto and home loans.

Private student lenders are able to determine their own term lengths, interest rates, and repayment plans. Because these loans don’t come with the same borrower protections as federal student loans (such as income-based repayment plans and generous forbearance and deferment programs), you generally only want to consider private student loans after you’ve fully tapped federal aid options, including federal student loans.


💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.

The Takeaway

Merit scholarships are awarded to students based on merit alone, which might be academic, athletic, artistic, or in another specialized area. This money typically does not need to be repaid by student recipients. Some sources for merit scholarships include your college or university, nonprofit organizations, private companies, and the National Merit Scholarship Corporation.

Other options for college funding include financial aid (which includes need-based grants and federal student loans) and private student loans.

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.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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.

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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Pell Grants are grants awarded by the federal government to help students pay for college. While there is no specific income limit for a Pell Grant, students generally must demonstrate “exceptional financial need” to qualify.

Here’s more information about how Pell Grants work, the Pell Grant eligibility requirements, and what it takes to qualify.

What Is a Pell Grant?

A Pell Grant is funding from the U.S. Department of Education awarded to undergraduate students who have a high degree of financial need. The amount students can receive with a Pell Grant typically changes annually. For the 2023-24 academic year, the maximum Pell Grant award is $7,395.

Unlike some other types of need-based financial aid, a federal Pell Grant does not need to be repaid.

Because of the rising college tuition, financial aid like Pell Grants could help make school more affordable for students who qualify.

Pell Grant Eligibility Criteria

To see if you meet the Federal Pell Grant eligibility requirements, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA).

FAFSA is one of the important financial aid terms to become familiar with. The FAFSA will help a college or university determine whether you qualify for a Pell Grant and if so, how much you may receive. You’ll have to fill out the FAFSA every year you attend school.

You Pell Grant eligibility will also depend on:

•  Student Aid Index (SAI) Formerly called Expected Family Contribution (EFC), your SAI is a number your school uses to determine the amount of financial aid you qualify for. Your SAI is calculated using a formula that may include your family’s income and assets and the size of your family.

•  Cost of attendance (COA) This is what it will cost for your schooling for the year. Your COA includes tuition, room, board, fees, books, and supplies for your college or particular degree program.

•  Whether you’re attending school full-time or part-time

In addition to all of the above, other Pell Grant eligibility requirements include:

U.S. Citizen or Eligible Noncitizen

To qualify for a Pell Grant, you must be a U.S. citizen or a certain type of noncitizen. An eligible noncitizen includes the following individuals:

•  U.S. nationals

•  U.S. permanent residents with a Permanent Resident Card, Resident Alien Card, or Alien Registration Receipt Card

•  People with T nonimmigrant status (they have a T-visa or their parent has one)

•  Battered immigrant-qualified aliens

•  Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau

Check with your school’s financial aid office to determine if you qualify as an eligible noncitizen.

High School Diploma or Equivalent

To qualify for Pell Grant eligibility, you must be an undergraduate college student. Those who have already earned a bachelor’s, graduate, or professional degree are ineligible. However, in certain cases, students who are in a postbaccalaureate teacher certification program may qualify for a Pell Grant.

Enrollment Status

Your eligibility for a Pell Grant depends on your college enrollment status and whether you’re a full-time or part-time student.

Pell Grants are prorated for part-time students and depend on the number of enrolled credits they plan to take.

No Defaulted Federal Student Loans

If you’ve defaulted on a federal student loan, you’ll be unable to qualify for a Pell Grant until you get out of default. You can get out of default by fully repaying the loan, rehabilitating the loan, or consolidating it.

To rehabilitate a loan, you’ll need to make nine monthly payments on the defaulted loan within 20 days of the due date for 10 consecutive months. With consolidation, you consolidate your defaulted loan into a Direct Consolidation Loan and agree to pay the new loan on an income-driven repayment plan or you must make three consecutive on-time payments in full on the old loan before you consolidate it.

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

Selective Service Registration

To receive money for financial aid, male students used to have to sign up for the Selective Service. However, because of the FAFSA Simplification Act passed by Congress in late 2020, male students no longer have to sign up for Selective Service registration as a prerequisite for financial aid.

However, almost all males between 18 and 25 must register with Selective Service within 30 days of turning 18. If they don’t, they may face a felony charge, a fine of up to $250,000, and jail time of up to five years.

Sexual Offense

The FAFSA Simplification Act also restored Pell Grant eligibility to confined or incarcerated individuals. They must enroll in an eligible prison education program (PEP) to get a Pell Grant.

Individuals convicted of a forcible or nonforcible sexual offense are not eligible to receive a Pell Grant. However, starting July 1, 2023, those who are subject to an involuntary civil commitment for a sexual offense may qualify for a Pell Grant.

Income Limits

There are no Pell Grant eligibility income limits. Federal Pell Grant eligibility is based on SAI, not income.

Age Limit

Nor are there age limits on Pell Grants. Older adult students can apply for a Pell Grant by filling out the FAFSA form and following the requirements for the school they plan to attend.

Time Limit

There is a time limit for a Pell Grant, however. You can receive a Pell Grant for 12 terms, which is roughly six years, and no more.

Pell Grant Income Eligibility Chart

As mentioned, the Pell Grant is not based on income. Instead, it’s based on your SAI and college cost of attendance. You can get an estimated amount of the grant you might receive by checking the Pell Grant eligibility income chart at studentaid.gov.

Pell Grant Lifetime Eligibility

By law, you are limited to six years of Pell Grant funding over your lifetime.

Other Ways to Fund a College Education

Besides qualifying for Pell Grant eligibility, there are a variety of options for paying for your college education. These include:

•  Scholarships: Scholarships are merit-based aid that you don’t have to pay back. You can find scholarships through your college or university, your local community, and certain organizations you or your parents might belong to.

•  Grants: Like scholarships, grants for college usually don’t need to be repaid. They can come from your federal or state government, your college, or a private or nonprofit organization.

•  Student loans: A student loan is a type of financial aid you use to borrow money and then repay it later with interest. There are federal student loans, which come from the federal government, and private student loans from private lenders. Comparing student loans can help you decide the best type of loan for your needs.

If you take out student loans, and you’d like to reduce your payments or get more favorable terms after graduation, student loan refinancing is an option to explore. When you refinance, you replace your old loans with a new loan that ideally has a lower interest rate or better terms that might help you save money.

While borrowers with good credit may find it easier to qualify for refinancing and get a lower rate, there are even options for bad credit refinancing that borrowers with poor credit could explore.

While student loan refinancing has benefits, it’s important to know that refinancing federal student loans makes them ineligible for federal protections and programs like income-driven repayment plans. If you may need access to these programs, refinancing might not be the best option for you.

The Takeaway

A Pell Grant can help cover some of the cost of college for those who qualify, and the money awarded doesn’t have to be repaid. Pell Grant eligibility is based on your SAI and your college’s cost of attendance. Find out if you qualify by filling out the FAFSA.

Another potential way to save money on what you owe for your college education is to refinance your student loans, which might help you get a lower interest rate. When you refinance a student loan with SoFi, you’ll find low fixed or variable rates, flexible terms, and no fees. And you can learn if you prequalify in just two minutes.

Photo credit: iStock/Courtney Hale
SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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Nearly two-thirds of college graduates leave school with debt, which means many couples have to manage outstanding student loans after they get married. If you and your spouse each have multiple student loans, you could potentially end up with a large number of loans to manage in one household. That might make the idea of consolidating student loans with your spouse appealing. So, can you do it? And, if so, is it a good idea?

Yes — and maybe.

The federal government no longer offers spousal consolidation of federal student loans. However, you may be able to combine your federal or private loans by refinancing with a private lender. Whether or not that’s a wise move will depend on a number of factors, including the types of loans you have and your interest rates.

Here’s a look at options available for consolidating your loans as a couple, plus other ways to make student loan payments more manageable after marriage.

Consolidating Federal Loans

Consolidating is the process of combining your loans so you only have to make one payment and keep track of one due date, rather than several. Individual borrowers can consolidate their federal student loans through the federal government.

When you consolidate federal loans, the government pays them off and replaces them with a Direct Consolidation Loan. Your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next one-eighth of 1%.

Previously, married federal student loan borrowers could consolidate their loans together through a joint consolidation loan. However, the government ended that program in 2006 and no longer offers federal loan borrowers a way to consolidate student debt with a spouse.

Currently, the only way to consolidate federal student loans with a spouse is through refinancing with a private lender. This involves taking out a new, larger student loan to pay off all of your existing loans. The lender will base your new loan’s interest rate on your combined income and creditworthiness, and both of you will be listed as primary borrowers on the loan.

It’s important to note that consolidating in this way will convert those federal loans into private loans, which removes all federal benefits and protections, such as income-driven repayment plans and student loan forgiveness programs.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Refinancing Student Loans With Your Spouse as a Cosigner

Another way to commingle student loan repayment responsibility is to apply for refinancing with your spouse as a cosigner (or vice versa). While your loans won’t be consolidated together if you’re approved, you’ll share ownership of the loan with your spouse. This could be a good idea if you would not be able to qualify for a refinancing on your own or could qualify for a better rate if your spouse serves as a cosigner, due to their added income and/or good credit.

An advantage of cosigning versus joint consolidation is that some lenders allow you to eventually remove a cosigner from a loan, which could be useful should you ever part ways. Joint refinancing, on the other hand, generally doesn’t have an “out” clause.

Recommended: Student Loan Consolidation vs Refinancing

How to Combine Student Loans With Your Spouse

If you’re interested in combining student loans with your spouse, here’s a look at the steps involved in a joint refinance.

1.   Find a lender. You’ll need to find a lender that offers joint refinancing (not all do). Ideally, you’ll want to shop around and compare offers from multiple lenders to make sure you find the best deal. Browsing around and receiving prequalified rates won’t affect your credit, since companies will do a “soft” credit check.

2.   Apply for the loan. Once you find a lender you want to work with, you’ll need to choose which loans you want to consolidate (you don’t have to include every loan you have) and officially apply for the loan. Both you and your spouse will need to supply personal and financial information.

3.   Review your documents and sign. Once approved, it’s a good idea to carefully review all the documents you receive and check the fine print before signing anything. Confirm the loan terms you were approved for match the ones you applied for.

4.   Keep paying your individual loans until the refinance is complete. When you refinance a loan, your new lender must then pay off your old lender. It may take a little while for that process to finalize. In the meantime, it’s important for you and your spouse to continue making your payments on your individual loans until you’ve received notice from your new lender that the debt transfer is complete.

Recommended: Pros and Cons of Refinancing Student Loans

Advantages of Consolidating Student Loans With Your Spouse

Combining your student loans with your spouse’s through refinancing comes with certain advantages. Here are some to consider:

•  Simplified repayment Rather than juggling multiple student loan payments and due dates, you and your spouse will only have one payment to make.

•  A potentially lower rate If your spouse has better credit or a higher income than you, refinancing with your spouse may allow you to qualify for a lower interest rate than you’d get on your own. Together, you could potentially save money.

•  You could lower your payment You may be able to lower your monthly payment by getting a lower interest rate and keeping the same repayment term. You can also lower your payment by extending your loan term. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)

•  Fosters teamwork When you combine student loans with your spouse, there’s no longer separate debt. You have one joint goal you’re working towards as a team.

Recommended: Making Important Money Decisions in Marriage

Disadvantages of Consolidating Student Loans With Your Spouse

Although consolidating student loans with your spouse can seem appealing, there are some significant drawbacks to keep in mind:

•  Few lenders offer it Only a small number of lenders offer spousal student loan consolidation. With few options to choose from, you may have trouble getting approved or finding a competitive interest rate.

•  Loss of federal protections If you or your spouse have federal student loans and you refinance them, they become private student loans. You’ll lose federal loan benefits and protections, including the ability to enroll in an income-driven repayment plan and access to federal forbearance or deferment options.

•  Divorce could be messy When you refinance your student loans with your spouse, you are taking on a new loan together. If you end up divorcing, you’ll still be legally obligated for the combined debt and you’ll have to work out payment terms with your former spouse as part of the divorce agreement.

•  You might not lower your rate In most cases, refinancing only makes sense if you can get a lower interest rate. This is especially true if you have federal loans because you give up many protections by refinancing.

Other Ways to Tackle Student Debt as a Couple

A joint refinance isn’t the only way to manage your combined student debt load. Here are some other tips for how to manage student debt as a married couple.

•  Be honest — with yourself and your spouse Having a high student loan balance might feel overwhelming, but avoiding your debt or hiding it from your spouse can affect your relationship. You can start by getting acquainted with exactly how much you each owe, your interest rates, and the loan terms.

•  Know your repayment options If you have federal loans, it can be helpful to read up on the different plans available for student loan repayment and the pros and cons of each. If you’re having trouble making payments, you can look into income-driven repayment plans or other federal loan forgiveness programs. Speak to your loan servicer(s) if you’re concerned with your ability to repay your total loans as a couple.

•  Consider consolidating separately If your or your spouse has multiple federal student loans, consolidating with a Direct Consolidation Loan can help you better manage the loans you have in your name. If you have loans other than Direct Loans, it can also give you access to additional repayment options. Federal consolidation won’t lower your rate, however. It could also extend your loan term, which would increase your overall costs.

•  Look into refinancing separately If you (or your spouse) has higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans, refinancing could help you get a lower rate, a lower payment, or both. Keep in mind that refinancing federal student loans with a private lender means giving up federal benefits. And, if you opt for a longer loan term, you could end up spending more over the life of the loan.

💡 Quick Tip: It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to financial advisors, networking events, and more — at no extra cost.

Figuring Out the Financial Path that’s Right for You

While you and your partner can’t jointly refinance your student loans with the federal government, you may be able to find a private lender that offers a spouse consolidation loan. Other ways to manage student loan repayment after marriage include: listing all of your loans and coming up with a repayment strategy together, re-evaluating your payments plans, and looking into consolidating or refinancing your loans separately.

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.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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If you borrowed money from the government to help pay for college, the time will come when you need to pay your student loans back. That time typically arrives six months after you graduate or drop below half-time status.

While the prospect of paying student debt may seem daunting while you’re a student with little to no income, don’t stress. The U.S. Department of Education offers a number of repayment options, including plans that only require you to pay a small percentage of your monthly salary. Plus, there are steps you can take to make it easier to repay your student loans and potentially save money on interest.

Read on to learn how to start paying off student loans.

Paying Back Your Student Loans

You don’t need to start thinking about paying your loans while you’re enrolled in school at least half-time, and for six months after you graduate (which is called the grace period).

Unless your loans are subsidized by the federal government, however, interest will accrue during that entire period of time. That interest gets added to your loan balance, or capitalized, when repayment begins. As a result, your balance will be larger after you graduate than the amount you initially borrowed. You’ll also be paying interest on that larger balance moving forward.

If you have some income as a student (and have unsubsidized loans), you might choose to make monthly interest payments while you’re in school, or to make a lump-sum interest payment before your grace period ends. This will leave you with a smaller balance to pay off once your repayment period officially begins and can help you save money on interest. However, this is not required.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Types of Student Loans

To determine the right student loan repayment strategy, it’s important to know what type of student loans you have. Here’s a look at the main types of federal student loans.

Direct Subsidized Loans

Direct Subsidized Loans are a type of federal student loan only for undergraduates who have demonstrated financial need. With these loans, the government pays the interest on the loan while you are in school and during the grace period.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are available to eligible undergraduate, graduate, and professional students, and eligibility is not based upon financial need. Borrowers are responsible for all interest that accrues on the loan.

Direct PLUS Loan

Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for education expenses. These loans are unsubsidized, meaning that interest accrues throughout the life of the loan, including while the student is enrolled in school.

When Do You Have to Pay Back Federal Student Loans?

You need to begin paying back most federal student loans six months after you leave college or drop below half-time enrollment.

Direct PLUS loans enter repayment once your loan is fully disbursed. However graduate/professional students who take out PLUS loans get an automatic deferment, which means they don’t have to make payments while they are in school at least half time, and for an additional six months after they graduate.

If you’re a parent PLUS loan borrower, you can request a deferment (it’s not automatic). This deferment means you won’t have to pay while your child is enrolled at least half time, and for an additional six months after your child leaves school or drops below half-time status.

How Do I Pay Back My Federal Student Loans?

When you leave school, you’ll be required to complete exit counseling. This is an online program offered by the government that helps you prepare to repay your federal student loans. You’ll then have the option to pick a repayment plan. If you don’t choose a specific plan, you’ll automatically be placed on the 10-year standard repayment plan. However, you can change plans at any time once you’ve begun paying down your loans.

Your federal loan servicer will provide you with a loan repayment schedule that tells you when your first payment is due, the number and frequency of payments, and the amount of each payment.

Your billing statement will tell you how much you need to pay. If you signed up for electronic communication, you’ll want to pay attention to your email. Most loan servicers send an email when your billing statement is ready for you to access online.

You might also consider signing up for autopay through your loan servicer. Since your payments will be automatically taken from your bank account, you won’t have to worry about missing a payment or getting hit with a late fee. Plus, you’ll receive a 0.25% interest rate deduction on your loan.

Choosing a Loan Repayment Plan

To repay your loan, you’ll need to pick a repayment plan. Here’s a look at your options, plus tips on why you might choose one plan over another.

The Standard Repayment Plan

The Standard Repayment Plan is the default loan repayment plan for federal student loans. Under this plan, you pay a fixed amount every month for up to 10 years (between 10 and 30 years for consolidation loans). This can be a good option for borrowers who want to pay less interest over time.

The Extended Repayment Plan

The Extended Repayment Plan is similar to the Standard Repayment plan, but the term of the loan is longer. Extended Repayment plans generally have terms of up to 25 years. The longer term allows for lower monthly payments, but you may end up paying more over the life of your loan thanks to additional interest charges.

The Graduated Repayment Plan

The Graduated Repayment Plan starts with lower payments that increase every two years. Payments are made for up to 10 years (between 10 and 30 years for consolidation loans). If your income is low now but you expect it to increase steadily over time, this plan might be right for you.

The Income-Driven Repayment Plan

With income-driven repayment plans (IDRs), the amount you pay each month on your student loans is tied to the amount of money you make, so you never need to pay more than you can reasonably afford. Generally, your payment amount under an IDR plan is a percentage of your discretionary income (typically 5% to 10%).

Under all IDR plans, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period (either 20 or 25 years).

There are currently two IDR plans accepting new enrollments:

•   Saving on a Valuable Education (SAVE) Plan—formerly the REPAYE Plan

•   Income-Based Repayment (IBR) Plan

IDR can be a good option if you’re having difficulty meeting your monthly payment and need something more manageable.

Consolidating Your Loans

If you have multiple federal student loans, you have the option of consolidating them into a single Direct Consolidation Loan. This might simplify repayment if you are currently making separate loan payments to different loan servicers, since you’ll only have one monthly payment to make. In addition, a Direct Consolidation Loan could make you eligible for more repayment plans than your current loans are eligible for.

Federal loan consolidation will not lower your interest rate, however. The fixed interest rate for a Direct Consolidation Loan is the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth of a percent. It might also extend your repayment term, which can result in paying more interest over the life of the loan.

Refinancing Student Loans

When you refinance your student loans, you combine your federal and/or private loans into one private loan with a single monthly payment. This can simplify repayment and might be a smart move if your credit score and income can qualify you for lower interest rates.

With a refinance, you can also choose a shorter repayment term to pay off your loan faster. Or, you can go with a longer repayment term to lower your monthly payments (note: you may pay more interest over the life of the loan if you refinance with an extended term).

If you’re considering a refinance, keep in mind that refinancing federal loans with a private lender disqualifies you from government benefits and protections, such as IDR plans and generous forbearance and deferment programs.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

The Takeaway

If you have federal student loans, you generally don’t need to start paying them down until six months after you graduate. At that point, you’ll have the opportunity to choose a repayment plan that fits your financial situation and goals. Whatever plan you choose, you’re never locked in. As your finances and life circumstances change, you may decide to switch to a different payment plan, consolidate, or refinance your student loans.

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

Is there a way to get rid of federal student loans?

If you repay your loans under an income-driven repayment plan, any remaining balance on your student loans will be forgiven after you make a certain number of payments over 20 or 25 years. Other ways to pursue federal student loan forgiveness are through Public Service Loan Forgiveness and Teacher Loan Forgiveness.

What is the best option for repaying student loans?

The best federal student loan repayment plan for you will depend on your goals and financial situation. If you want to pay the least possible in interest, you might want to stick with the standard repayment plan. If, on the other hand, you want lower monthly payments and student loan forgiveness, you might be better off with income-driven repayment. If your income is high but you want lower payments, you might look into a graduated or extended repayment plan.

What can the federal government do if you do not pay back your student loans?

Typically, If you don’t make payments on your loan for 90 days, your loan servicer will report the delinquency to the three national credit bureaus. If you don’t make a payment for 270 days (roughly nine months), the loan will go into default. A default can cause long-term damage to your credit score. You may also see your federal tax refund withheld or some of your wages garnished.

If, however, you had student loans that were on the pandemic-related pause, you have a little more breathing room. There is currently a 12-month “on-ramp” period that ends on September 30, 2024. Until that time, borrowers who miss making payments on their federal student loans won’t be penalized in the ways described above. Interest will still accrue, though, so you’re not entirely off the hook.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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