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Staying on top of student loans and other financial obligations can be challenging. If you’re having trouble making monthly payments, or you’re concerned about how you’ll repay your loans down the road, you might be wondering what happens if you don’t pay your debt.

While you cannot be arrested or put in jail for failing to pay your student loans, there are repercussions for missing student loan payments, including damage to your credit and wage garnishment.

Here’s a look at the potential legal and financial consequences of not paying debt, as well as tips for tackling student loan debt after you graduate.

Going to Jail for Debt

No matter how much or what type of outstanding debt you have, a debt collector cannot threaten to or have you arrested for that unpaid debt. Doing so is a violation of the Fair Debt Collection Practices Act and would be considered harassment.

A lender can, however, file a lawsuit against you to collect on an outstanding debt. If the court orders you to appear or to provide certain information, but you don’t comply, a judge may issue a warrant for your arrest. A judge can also issue a warrant for your arrest if you don’t comply with a court-ordered installment plan (such as child support).

Bottom line: You never want to ignore a court order, since doing could result in an arrest and, potentially, jail time.


💡 Quick Tip: Pay down your student loans faster with SoFi reward points you earn along the way.

Can You Go to Jail for Not Paying Student Loans?

No, you can’t be arrested or put in prison for not making payments on student loan debt. The police won’t come after you if you miss a payment. While you can be sued over defaulted student loans, this would be a civil case — not a criminal one. As a result, you don’t have to worry about doing any jail time if you lose.

As mentioned above, however, ignoring an order to appear in court could result in an arrest. And, unless you want to deal with a long, messy legal process and added expenses on top of your debt (in the form of attorney and court fees), it’s in your best interest to do whatever you can to avoid defaulting on your student loans.

Statute of Limitations on Debt

In terms of debt collection, the statute of limitations refers to the amount of time that creditors have to sue borrowers for debt that’s past due.

Federal student loans don’t have a statute of limitations. This means that federal loan servicers can collect your remaining student loan balance at any point. Keep in mind that the federal government doesn’t have to sue you to start garnishing wages, tax refunds, and Social Security checks.

For other types of debt, including private student loans, many states have statutes of limitations between three and six years, but some may be longer. The timeframe can vary based on the type of debt and the state law named in your credit agreement.

If you’re sued by a debt collector and the debt is too old, you may have a defense to the lawsuit. You may also have a claim against the collector for violating the Fair Debt Collection Practices Act, which prohibits suing or threatening to sue for a debt that is past the statute of limitations.

Recommended: Private Student Loans vs Federal Student Loans

What Are the Consequences of Not Paying Off Student Loan Debt?

The consequences of not paying your student loan debt differ depending on what type of student loans you have.

Federal Student Loans

Typically, with federal student loans, the loan becomes delinquent the first day after a payment is missed. If you don’t make a payment within 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.

Once your federal student loan is in default, you can no longer receive deferment or forbearance or any additional federal student aid. Plus, you’re no longer eligible for an income-driven repayment plan, and your lender can sue you for the money you owe.

If, however, you had student loans that were on the pandemic-related pause, there is good news: Until September 30, 2024, borrowers who miss making payments on their federal student loans won’t be penalized in the ways described above. The Biden administration is providing a 12-month “on-ramp period,” during which a borrower won’t be reported as being in default to the national credit agencies. Interest will still accrue, though, so you’re not completely off the hook.

Private Student Loans

If you don’t pay private student loans, the consequences will depend on the lender. Generally, however, this is what happens: As soon as you miss a payment, your loan will be considered delinquent. You’ll get hit with a late fee and, after 30 days, your lender can report your delinquency to major credit agencies.

After 90 days, your loan will typically go into default. At that point, your loan may be sold to a collections company. Your (and any cosigner’s) credit score will also take a hit. In addition, your lender can sue you for the money you owe. They may also be able to get a court order to garnish your wages. However, they can’t take any money from your tax refunds or Social Security checks.

Tips for Getting Out of Student Loan Debt

You won’t go to jail for not paying back your student loans, but you can still face some significant consequences for missing payments. Here are some ways to stay (or get back) on track.

1. Set up a Budget

It can be hard to manage your finances without a plan. Creating a monthly budget is a helpful way to keep your spending in check and make sure you have enough money for your loan payments. Once you write down everything you’re spending on each month, you may find some easy places to cut back, such as getting rid of streaming services you rarely watch or spending less on takeout and afternoon coffees. Any money you free up can then go towards loan repayment.

2. Increase Cash Flow

Reining in your spending with a budget is a good place to start, but it may not be enough for getting out of debt. Having some extra cash on hand can help manage debt payments and offer some breathing room within your monthly budget.

To boost your income, you might consider taking on more hours at your current job, getting some freelance work, or picking up a side gig (such as food delivery, dog walking, or babysitting). You don’t have to do this forever — just until your student debt is paid off, or at least well under control.

3. Create a Debt Reduction Plan

If you have multiple debts, it’s a good idea to take an inventory of everything you owe and then set up a comprehensive debt reduction plan.

A popular system is the avalanche method, which calls for putting any extra cash toward the debt with the highest interest rate while making minimum payments on other balances. When that debt is paid off, you put your extra money towards the debt with the next-highest interest rate, and so on.

Another option is the snowball method, which focuses on ticking off debts in order of size, starting with the smallest debt balance, while still taking care of minimum payments on other debt.

4. Apply for an Income-Based Repayment Plan

If you have federal student loans, there are four income-driven repayment plans you can apply for to make your monthly payments more manageable. These include:

•   Saving on a Valuable Education Plan (SAVE; replacing Revised Pay As You Earn)

•   Pay As You Earn

•   Income-Based Repayment Plan

•   Income-Contingent Repayment Plan

Monthly payments are a percentage of your discretionary income, usually 10% or 20%. What’s more, all four plans forgive any remaining balance at the end of the 20- or 25-year repayment period. Note that in some situations, you may be required to pay taxes on the forgiven amount, according to IRS rules.

5. Find Another Repayment Plan

Besides income-based repayment, borrowers can explore a variety of other federal repayment plans to help pay off debt. For example, the graduated repayment plan helps recent college grads find their financial footing by setting smaller monthly payments at first before increasing every two years.

Some private lenders also offer a choice of different repayment options.

6. Look Into Forgiveness Programs

The federal government offers student loan forgiveness to borrowers who meet certain eligibility criteria, such as working in a certain profession, having a permanent disability, or after making payments for a certain amount of time on an income-driven repayment plan. Similar programs are available at the state-level across the country, and generally base eligibility on specific professions or financial hardship.

The Rural Iowa Primary Care Loan Repayment Program, for instance, provides up to $200,000 toward repaying eligible student loans for doctors who commit to working five years in designated locations.

The NYS Get on Your Feet Loan Forgiveness Program, on the other hand, offers up to 24 months of debt relief to recent graduates in New York who are participating in a federal income-driven repayment plan.

7. Ask About Employer Tuition Reimbursement Programs

Besides health insurance and a 401(k), your employer may provide other benefits, including tuition reimbursement programs, to support and retain their employees.

Often, these programs are focused on annual tuition expenses that employees incur while studying and working concurrently. Still, employers may offer to contribute to student loan payments as well.


💡 Quick Tip: Master’s degree or graduate certificate? Private or federal student loans can smooth the path to either goal.

8. Explore Refinancing Your Student Loans

Student loan refinancing could help you save interest and make your monthly payments easier to manage. Generally, though, refinancing only makes sense if you can qualify for a lower interest rate.

Refinancing involves taking out a new loan with a private lender and using it to pay off your existing federal or private student loans. You can often shop around and “browse rates” without any impact to your credit scores (prequalifying typically involves a soft credit check). Just keep in mind that refinancing federal loans with a private lender means losing access to government protections like income-driven repayment plans, student loan forgiveness programs, and deferment and forbearance.

Also know that lenders typically require your loans to be in good standing before approving a refinance. That means you generally can’t refinance a student loan in default. You can, however, consider refinancing after recovering from a student loan default.

The Takeaway

Although you won’t go to jail for failing to pay your student loans, there are a number of negative consequences, like late fees, a damaged credit score, wage garnishment, and even being taken to court. The current “on ramp” to repayment of federal student loans, however, removes these consequences until September 30, 2024.

Whatever type of student loan you have, you can help the road to repayment go smoothly by setting up a budget that makes room for monthly loan payments, picking a repayment plan that fits your needs and budget, and investigating forgiveness options.

Finding a student loan with a competitive interest rate and flexible repayment terms can help avoid the stress and repercussions of not paying student loans down the line.

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

FAQ

Do student loans go away after 7 years?

No, student loans won’t disappear after seven years. Negative information about your student loans (such as late payments or defaulting on a loan) will be removed from your credit report after seven years, but the loans themselves will stay on your reports until you pay them off or have them forgiven.

Many states have statutes of limitations of between three and six years to prevent creditors and debt collectors from using legal action to collect on older debts. However, federal student loans don’t have a statute of limitations.

How long before student loans are forgiven?

The Public Service Forgiveness Program requires making the equivalent of 120 qualifying monthly payments under an accepted repayment plan (while working full-time for an eligible employer) for student loan forgiveness. With an income-based repayment plan, you need to make payments for 20 to 25 years to have the remaining balance forgiven. State programs may offer more rapid repayment assistance and forgiveness.

Can student loans seize bank accounts?

Yes, but not right away. If you have federal student loans, your wages or bank accounts can be garnished only if you have officially defaulted on your loans (i.e., you haven’t made a payment for at least 270 days). The government does not need a court order or judgment to garnish your wages.

If you default on a private student loan, your creditor must first sue you to obtain a judgment and submit a court order to your employer before your wages can be garnished.

Photo credit: iStock/shadrin_andrey

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.

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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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.

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