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Figuring out how to pay for school can be stressful, so it’s important to compare financial aid vs student loans so that you can reduce your financial burden as much as possible and find out what’s right for you.

When college financial aid isn’t enough, people use federal or private student loans to help cover costs. Private student loans can also close gaps between what you qualify for and how much you need. We’ll compare student loans vs financial aid and explore some features that can help you determine what makes the most sense for your financial situation.

What Is Financial Aid?

Financial aid is funding that is available to students to help make college or career school more affordable. College financial aid comes in several forms and helps students pay for higher education expenses, including tuition and fees, room and board, books and supplies and transportation.

Here are several types of financial aid available to students:

•   Scholarships: A scholarship is a form of financial aid that’s awarded to students to help pay for school. Scholarships are typically awarded based on academic or athletic achievement, community involvement, job experience, field of study, financial need and more.

•   Grants: A grant is a form of financial aid that doesn’t have to be repaid and is generally based on financial need.

•   Federal work-study programs: The federal work-study program offers funds for part-time employment to help eligible college students in financial need.

•   Federal student loans: Student loans are borrowed money from the federal government or private lenders to help pay for college.

Financial aid can come from federal, state, school, and private sources. Federal Student Aid, a part of the U.S. Department of Education, is the largest provider of student financial aid in the U.S. Federal aid is distributed to 13 million students each year, totaling $120 billion.

Recommended: Am I Eligible for Work-Study?

What Are Student Loans?

A student loan is money borrowed from the government or a private lender to help pay for school with the expectation that you will pay it back. Like most other types of loans, the amount borrowed will accrue interest over time. Student loans can be used on school-related expenses including tuition, room and board, and other school supplies.

Loans are different from grants or scholarships and it’s essential that you understand the differences between financial aid vs student loans. If you receive a grant or a scholarship, you typically don’t have to pay that money back. Student loans are also different from work-study programs, where students in financial need to work part-time jobs to earn money to help pay for school.

It’s common for college students to take out student loans to finance their education, but you should first compare federal vs private student loans. Federal student loans offer some borrower benefits that make them preferable to private student loans.

Federal Student Loans

Federal student loans are loans that are backed by the U.S. government. Terms and conditions of the loan are set by the federal government and include several benefits, such as fixed interest rates and income-driven repayment plans. To qualify, students must fill out the Free Application for Federal Student Aid (FAFSA®) every year that they want to receive federal student loans. The FAFSA also allows students to apply for federal aid including scholarships, grants, and work-study. Colleges may also use the information provided on the FAFSA to determine school-specific aid awards.

There are four types of federal student loans available:

•  Direct Subsidized Loans are student loans for undergrads in financial need to help pay for expenses related to higher education. The government covers the accruing interest on this type of loan while the borrower is enrolled in school at least half-time and during the loan’s six month grace period after graduation.

•  Direct Unsubsidized Loans are made to eligible undergraduate, graduate and professional students. Eligibility is not based on financial need. Borrowers are responsible for all accrued interest on this type of loan.

•  Direct PLUS Loans are made to graduate or professional students, known as the Grad PLUS loan, or parents of dependent undergraduate students, known as the Parent PLUS loan. These loans are meant to help pay for education expenses not covered by other financial aid.

•  Direct Consolidation Loans allow students to combine all eligible federal student loans into a single loan.

Private Student Loans

Private student loans can also be used to help pay for college. Private student loans are offered by banks, credit unions, and online lenders. Understanding how private student loans work is essential before borrowing. While federal student loans are generally the first option potential student borrowers pursue, private student loans may be an option to consider for borrowers who are trying to pay for college without financial aid. Unlike federal student loans, which have terms and interest rates set by the federal government, private lenders set their own and conditions that vary from lender to lender.

Private student loans are also credit-based. The lender will review an applicant’s credit history, income and debt, and whether they’re enrolled in a qualified educational program. Applicants who may lack credit history, or have a less than glowing credit score may consider applying with a cosigner to improve their chances of approval.

Unlike federal student loans, interest rates can be fixed or variable. A fixed interest rate stays the same for the life of the loan but a variable interest rate may change. The interest rate a borrower qualifies for will also depend on the lender as well as the borrower’s creditworthiness.

Not all private student loans are the same. Because of this, it’s important that you understand the annual percentage rates (APRs) and repayment terms before taking on the loan.

Financial Aid vs Student Loans Compared

When comparing financial aid vs student loans, you need to be aware of the similarities and differences between financial aid vs student loans. Here are some key comparisons.

Similarities

Financial aid and student loans are both used to help fund education-related expenses, like tuition, room and board, books and classroom supplies, and transportation. Financial aid and student loans backed by the federal government also require students to fill out FAFSA® for each year that they want to receive federal student loans or federal financial aid. Financial aid and student loans also have some sort of eligibility requirements, whether that be based on financial need, merit or creditworthiness.

Differences

The biggest difference between financial aid vs student loans is whether or not you need to pay back the money you are given to help pay for college. Financial aid is either money that doesn’t need to be paid back, known as gift aid, or earned through a federal work-study program.

Student loans must be repaid within a given loan term. Not only are students expected to pay back student loans, but there’s typically interest that accrues over the life of the loan.

There may also be differences in how financial aid and student loans are paid out to the student. Private student loans are usually paid in one lump sum at the start of each school year or semester; however, you may not receive the full amount of a scholarship award upfront. Government grants and loans are generally split into at least two disbursements and If you have a work-study job, you’ll be paid at least once a month.

Some private student loans may also come with greater flexibility and offer more money than financial aid.

Recommended: Gift Aid vs Self Help Aid For College

Pros and Cons of Financial Aid

Pros of Financial Aid

•  Money received through financial aid does not typically have to be repaid.

•  Potential to decrease future debt by minimizing the amount you have to borrow.

•  Opens up new opportunities for many students to attend a better school than they could without financial assistance.

•  Allows students to focus on their education instead of worrying about paying tuition.

Cons of Financial Aid

•  Most financial aid does not cover all school-related costs.

•  Scholarships, grants, and work-study programs can be highly competitive.

•  You may have to maintain certain standards to meet eligibility requirements during each semester.

•  There’s less flexibility on how you can spend funds.

Pros and Cons of Student Loans

Pros of Student Loans

•  Student loans offer financial support for those who would otherwise be unable to attend college.

•  You don’t need any credit history for federal student loans and you can use a creditworthy cosigner for private student loans.

•  Student loans can be used for things beyond tuition, room and board, and books.

•  Paying off student loans may help you build credit.

Cons of Student Loans

•  You start off with debt after graduating from college.

•  Student loans can be expensive.

•  Defaulting on student loans can negatively impact your credit score.

•  If you borrowed a private student loan, the interest rate may be variable.

Private Student Loans from SoFi

Financial aid and student loans financially support students by relieving some of the financial burden that’s often associated with higher education. When financial aid isn’t enough, students may seek private student loans to help cover their college costs. Although private student loans don’t come with as many perks as federal student loans, and are generally borrowers only as a last resort option as a result, they can help fill in the gaps between what you qualify for and how much you need.

Private student loans from SoFi can help serve as a supplement to federal aid. SoFi student loans offer plenty of benefits, such as no origination fees, no application fees, no late fees, and no insufficient fund fees. You can find out if you pre-qualify within minutes.

Learn more about private student loan options available with SoFi.

FAQ

Does FAFSA loan or grant money?

FAFSA is an application that you fill out in order to determine your eligibility for receiving a federal loan or federal student aid such as grants and scholarships. While a federal student loan is borrowed money that must be repaid after graduation, funds received through grants, scholarships, and work-study programs do not need to be repaid.

Can you get financial aid and student loans at the same time?

Yes. If you apply for financial aid at your school, you may be offered loans as part of your school’s financial aid offer to help cover the remaining costs.

Do scholarships count as financial aid?

Yes, scholarships are a type of financial aid that is considered gift aid and typically do not have to be repaid.

Photo credit: iStock/Altayb

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Juggling parenting, late-night studying, and possibly a job can wear on anyone, but time and money constraints can especially affect single parents. As a single parent, you may quickly realize that obtaining student loans will be an important factor in successfully completing your college journey.

So, how do you get that “single mom loan” or “single dad loan” to help you out? In this piece, we’ll spend some time comparing private and federal student loans and walk through options for student loans for single mothers and fathers. We’ll also cover the process that single parents can take toward getting private student loans and federal student loans.

What Are Student Loans?

Put simply, student loans allow you to borrow money from either the federal government or a private lender to help you pay for college costs. Student loans can help you cover tuition, fees, supplies, books, rent, living expenses, and other necessary school-related expenses.

Private vs. Federal Student Loans

Single parents can obtain both private and federal student loans. But before you get on the student loan bandwagon, it’s important to understand the whole picture — the amount you can get in private and federal loans as well as how much you can get in scholarships and grants, which are money you don’t have to repay. You may also want to pay for school by reserving a cache of funds from a current job or pulling from some funds you have in savings.

In the next two sections, we’ll walk through the definitions of both private and federal student loans.

Federal Student Loans

The U.S. Department of Education, through the William D. Ford Direct Loan Program (also called the Direct Loan program), offers federal student loans for borrowers who need to finance college or career school.

In order to get a federal student loan, you must file the FAFSA or Free Application for Federal Student Aid every year. The FAFSA lets colleges and universities know about your financial situation by asking you to input information about your savings and checking account balances, investments, and more. The FAFSA will also help you qualify for more than just loans — you could also qualify for scholarships through your institution, grants, and also for a work-study program. The federal work-study program allows you to work for your college or career school and earn up to a certain amount of money.

When you file the FAFSA, you receive a Student Aid Report (SAR) which also reports your Expected Family Contribution (EFC), an index number that colleges use to determine how much financial aid you can receive.

You can qualify for Direct Subsidized or Direct Unsubsidized Loans or Direct PLUS Loans — you can only get a Direct PLUS loan as long as you are an independent student (that is, nobody can claim you on their taxes) or if you are a graduate student.

Most types of federal student loans don’t require a credit check. Independent students may qualify for the following amounts and limits:

•  First-year undergraduate students: $9,500 (no more than $3,500 of this amount may be in subsidized loans)

•  Second-year undergraduate students: $10,500 (no more than $4,500 of this amount may be in subsidized loans)

•  Third-year and beyond undergraduate students: $12,500 (no more than $5,500 of this amount may be in subsidized loans)

•  Graduate or professional students: $20,500 (unsubsidized only)

The current interest rate for Direct Subsidized and Direct Unsubsidized loans is 5.50% for undergraduate students, and the rate for Direct Unsubsidized loans is 7.05% for graduate or professional students. The interest rates are fixed for the life of the loan.

Private Student Loans

The main difference between a private student loan and a federal loan is that you don’t get a private student loan from the federal government like you do a private student loan. You can get a private student loan from a bank, credit union, or another financial institution to finance college or career school.

In general, it’s a wise idea to exhaust all of your federal grant and loan options before you consider private loans because interest rates are usually higher for private student loans compared to federal student loans. The amount you can borrow depends on the costs of your degree, but also depends on personal financial factors (such as your credit score and income). Additionally, private student loans don’t have to offer the same borrower protections and benefits available to federal borrowers, such as income-driven repayment plans.

Student Loans for Single Parents

Single parents can get both private and federal student loans. We’ll also go over some specific financial aid ideas for single parents.

Private Student Loans for Single Parents

As a single parent, you may have a limited amount of time to research your private student loan options, but it’s to your advantage to do so because you can ensure that you choose the right type (and the right interest rate). Take a look at three to five different private student loan lenders and compare everything apples to apples — interest rates, fees, repayment terms, deferment, forbearance and discharge options, as well as in-school repayment options.

Then, walk through the next steps:

1.   Give yourself plenty of time to apply for private loans. The application and approval process can take longer than you might think. Remember that you’ll need to monitor your financial situation each semester to make sure you have enough loan money to carry you through the academic year.

2.   Gather your personal information. Before you apply, you’ll likely need to have the following handy: Social Security number, employment information (including a recent paycheck stub), gross annual income, assets, rent or mortgage information, as well as tax returns. Specific application requirements may vary by lender.

3.   Apply for a private student loan. You can apply on a private student loan lender’s website. The lender will ask for the personal information listed above and possibly more than that — it’s a good idea to be open to that possibility. You’ll submit information about your school, graduation date, and loan amount needed. You must also agree to the lender’s terms and conditions, which you’ll want to read carefully, and proceed with the application.

Your search for financial aid doesn’t have to end with filing the FAFSA or applying for private student loans. You may also want to look for single-parent grants or scholarships through organizations that include your school, state government, federal agencies, charitable foundations and professional associations.

Jumping on Google and searching for “single parent college scholarships” turns up a lot of scholarships, such as the Educational Foundation for Women in Accounting Scholarships and the Patsy Takemoto Mink Education Foundation Scholarships . However, it’s important to verify the validity of the scholarship and steer clear of scholarship scams.

One of the most important things you can do is to contact your school’s financial aid office and explain your situation as a single mother or father. Many colleges and universities offer endowed scholarships for students and may be able to offer you financial aid specifically for single-parent families.

Learn more: Private Student Loans Guide

Federal Student Loans for Single Parents

To obtain a federal student loan, you must demonstrate financial need, be a U.S. citizen or eligible noncitizen, have a valid Social Security number, enroll in an eligible degree or certificate program, show successful completion of a high school degree or GED, maintain satisfactory progress in school, and sign the certification on the FAFSA.

Undergraduate students who show evidence of financial need can qualify for a Direct Subsidized Loan. Undergraduate, graduate, and professional students can qualify for a Direct Unsubsidized Loan, but eligibility is not based on financial need. The government pays the interest for Direct Subsidized student loans while you’re in school but does not pay the interest on Direct Unsubsidized loans during that time.

Graduate or professional students may qualify for a Direct PLUS Loan. Eligibility is not based on financial need, but you will undergo a credit check. Borrowers who have an adverse credit history must meet additional qualifications.

Direct Consolidation Loans allow you to combine all of your eligible federal loans.

You must go through entrance counseling to make sure you understand your loan repayment obligations and you must sign a Master Promissory Note, which shows that you agree to the terms of the loan.

Above all else, in addition to learning more about single parents’ loans at your school, it’s also important to contact the financial aid office at the school you want to attend to fully understand the financial aid process at your college or career school.

Private Student Loans with SoFi

You may have mastered budgeting as a single parent but acknowledge that federal and private loans for single moms and dads will be key for your degree completion. It’s important to remember that loans for single parents aren’t out of your reach.

Why not choose a private student loan with low fixed or variable rates from SoFi? SoFi offers low fixed rates or variable interest rates on school loans for single moms and dads. SoFi can help you get a private student loan that fits your current and future financial budget.

The Takeaway

Affording higher education as a single parent can be a challenge, but there are student loans, grants, and scholarships available to help ease the burden. Single parents can apply for federal student loans by filling out the FAFSA each year. If this aid isn’t enough, some students may consider applying for private student loans.

FAQ

Do you get more financial aid if you are a single parent?

Schools award need-based financial aid based on demonstrated need. If you demonstrate financial need, you’ll more than likely receive some type of financial aid from the college or university that you plan to attend. It’s very important to file the FAFSA to qualify for federal student aid and also talk to the financial aid office of your college or university for more information about the financial aid opportunities available to you.

How can a single parent afford college?

There are a number of ways that a single parent can afford college, and it starts with open communication between you and your school’s financial aid office. A few excellent steps you can take include: filing the FAFSA, looking for scholarships and grants in your community and comparing private loan lenders for private loans that fit your needs.

Photo credit: iStock/Geber86

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Middle-class families today don’t make nearly enough money to afford full college tuition. In fact, many qualify for a significant amount of need-based financial aid.

This scenario is so common that some small, private colleges are beginning to “reset” their tuition prices to reflect what students actually end up paying after receiving financial aid, according to a New York Times report in Dec. 2022. For example, New Hampshire private school Colby-Sawyer dropped its published tuition from about $46,000 to $17,500.

Colby-Sawyer and other colleges are acknowledging what many parents and students already know. Plenty of middle-class kids who go to college don’t pay anywhere near the “sticker price.” Keep reading to learn how your family can maximize its financial aid with the help of a resource called the Common Data Set.

Stuck in the Middle

When you look at published tuition numbers, the cost of higher education has been rising at an astonishing pace over the past 20 years. But the amount that students actually pay is less than it was a decade ago, according to the College Board’s Trends in College Pricing report.

For the 2022-23 school year, students enrolled in private nonprofit colleges paid tuition and fees of $14,630 on average. Yet the sticker price for those institutions was much higher: around $39,400. Similarly, in-state tuition and fees at a public four-year college or university averaged $2,250 for 2022-23, compared to the published price of $10,950.

Even discounted college prices are substantial. Coming up with $60,000 for four years at a private college for one child is still a huge burden. Keep in mind that number includes tuition and fees only, not room and board.

Even with grants and other financial aid, many parents can’t afford the cost of college. At the same time, their earnings are too high to qualify for more need-based aid. College savings for kids can also be hampered by parents’ own federal and private student loans and other financial obligations, such as a mortgage or caring for aging grandparents.

If you’re feeling caught in the middle, know that resources are available to help make college tuition more affordable for your family. Here’s what to look for.

The First Step: Understanding Financial Aid

To maximize the amount of tuition help you get, you need to know how and when to apply for financial aid, the different types of aid, and especially how schools award that aid.

Financial aid can come from federal and state governments, colleges, and private organizations. Some help comes in the form of loans, which have to be paid back. Grants, scholarships and work-study programs do not have to be repaid.

Broadly, there are two types of financial aid: need-based and merit. Let’s take a closer look at both.

Need-Based Aid

Need-based aid is money students receive to help pay for college based on their financial situation.

How much need-based aid you get is largely determined by the information you submit on the Free Application for Federal Student Aid (FAFSA). Aid provided by the state and your college or university is also largely determined by FAFSA information.

Federal need-based aid includes subsidized government loans, Pell Grants, and work-study programs.

Then there’s need-based aid that colleges provide independently of federal financial aid. Many private colleges meet full financial need for admitted students without any loans. This aid is sometimes awarded to families with household incomes well over $100,000. Some colleges come very close to meeting full need, and many colleges will consider requests for more aid from admitted students.

Recommended: FAFSA Guide

How Colleges Calculate Your Need

Most colleges calculate aid based on the information you provide in the FAFSA each year. Factoring in your income and financial obligations, the government calculates your Expected Family Contribution, or EFC. (Starting with the 2023-24 academic year, the EFC will be renamed the Student Aid Index, or SAI.)

The EFC (or SAI) is the amount the government formula determines you can afford to pay for one year of college based on parent and student income, assets, number of dependents, number of children in college, and more. After you submit your FAFSA, you’ll see your EFC number in the confirmation email you receive.

Colleges use the EFC as a reference point, but are not obligated to stick to it. The colleges your student is accepted to may determine that your responsibility is higher than the EFC.

But need-based aid isn’t the only game in town. There’s also something called merit aid, or non-need aid, in the mix.

Recommended: FAFSA 101: How to Complete the FAFSA

What Is Merit Aid?

Merit aid consists of grants and scholarships that are awarded based on something other than financial need. It’s often given for academic, athletic, artistic, or other special interests. Merit aid does not need to be paid back, and it may or may not be renewed each year, depending on the award.

As you may guess, merit aid is far more subjective than need-based aid. During your student’s college search, it’s helpful to know these general trends in merit aid.

Which Schools Award Merit Aid?

Private and high-priced colleges usually award more merit aid than public state schools because of their larger endowments. One exception: Ivy League schools do not grant merit aid.

If your student plans to attend a public college or university out of state, you will likely face higher tuition. But attractive candidates may also be awarded more merit aid to help compensate for those extra costs.

Finally, state school honors programs can come with tuition discounts or academic scholarships.

Recommended: How To Get Merit Aid for College

What Is the Common Data Set and How Can You Use It?

One way to dispel the mystery around how colleges award financial aid is to understand the Common Data Set. The CDS is a standard set of data that schools collect about admissions, student demographics, faculty demographics, financial aid, academics, and campus life. Schools send the data to publications and organizations that rank colleges and universities.

The New York Times calls this data a “rich trove” about campus life and college finances. Most schools post their CDS on their website.

Not every school can meet every family’s full need for tuition. That’s where the CDS comes in: It can tell you how much need, on average, a school is able to meet and how many students receive need-based and merit aid. You and your student can then prioritize schools that either meet the most student need or award the most merit aid regardless of need.

How to Find the CDS

Most schools post their CDS data on their website. Often the best way to get to the data quickly is to type the name of the university and “Common Data Set” in your search engine. You’ll likely come up with a link to a PDF.

Try not to be overwhelmed by the length and less-than-reader-friendly format. As you scroll through, you’ll find lots of useful information on all aspects of admissions and campus life. If you’d like to get straight to the information about financial aid, skip to section H2. This will tell you how much need, on average, a school is able to meet and how many students receive all types of financial aid.

Why Some Schools Don’t Want You to See the CDS

You may discover in your search that some schools don’t post their CDS. That can be because they don’t want families to know they got a below-average aid offer, or they don’t want the public to know how many or few people are paying full price.

As efforts continue to encourage full disclosure and diversified, equitable student bodies across the country, the number of schools that don’t post this information is dwindling.

How You Can Fill the Gap

Even as savvy parents exhaust all sources of need-based and merit aid, you may find that you’ll still have to pay for some college costs. Here are some additional resources that may be available.

Scholarships

Scholarships are available for all types of students in virtually every area of study. Scholarship money, which does not have to be paid back, can be found through nonprofit groups, corporations, state governments, and community organizations, to name just a few. Start your search with SoFi’s scholarship search tool.

Federal Grants

•   Pell Grants. You do not have to pay back Pell Grants. They are awarded based on financial need to low-income families.

•   Work-study grants. As the name implies, these grants allow students to work at various part-time jobs at or around campus. You do not pay federal taxes on earnings from work-study programs.

Federal Student Loans

•   Subsidized Direct Loans. The government pays the interest on subsidized loans while you’re in school, during grace periods, and during periods of deferment. Interest rates are usually lower than private student loans, and there is usually a cap on how much you can borrow. You can learn more in our look at subsidized vs. unsubsidized loans.

•   Unsubsidized Direct Loans. These are not awarded based on financial need, but students with need often use them. Because the loan is “unsubsidized,” the principal will accrue interest while you’re in school. You may make interest-only payments during that time, but you’re not required to do so. If you don’t, the interest that accrued is added to the principal amount of your loan.

•   PLUS loans. Direct PLUS loans are fixed-interest rate loans available to parents of undergraduate, graduate, and professional degree students to help pay for tuition. They are not subsidized.

Private Student Loans

Once you’ve exhausted need-based and merit aid, you may find you still have some costs of attendance to cover. That’s where private student loans come in. The details vary, because terms and criteria will depend on the individual lenders and borrowers. SoFi offers no-fee private student loans for a variety of situations. You can find out more in our look at private vs. federal student loans.

The Takeaway

Middle-class families can often feel “caught in the middle” of the college financing situation. They earn too much to qualify for enough need-based aid but not enough to pay for all college costs. To maximize your financial aid award, it helps to know how and when colleges award their aid. First, use the Common Data Set to help you prioritize schools that award more need-based or merit-based aid. Then complete the FAFSA each year your student is in school. Also make sure to search for state and private scholarships that are not tied to the FAFSA.

SoFi private student loans can help families fill the gap between financial aid and the cost of attendance. There are never any fees: no origination fees, no late fees, and no insufficient-funds fees. And the application process takes just 3 minutes online.

FAQ

What income qualifies for need-based financial aid?

There’s no income cap for financial aid. Your need is determined by information you provide in the Free Application for Federal Student Aid (FAFSA) about your assets and financial obligations. Many families making six figures qualify for need-based aid.

Can middle-class families get financial aid?

Absolutely. It’s not unusual for families with annual income above $100,000 to receive financial aid.

Photo credit: iStock/jacoblund

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

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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If your application for a federal Parent PLUS Loan was denied, you and your child still have options to help pay for their college. Below, we’ll explain some reasons why a Parent PLUS loan application might be denied, what you can do if yours is rejected, and alternatives to consider.

What Is the Parent PLUS Loan Program?

Parent PLUS Loans are federally funded Direct PLUS Loans taken out by parents to help their child pay for college. To apply, students or their parents must first fill out the Free Application for Federal Student Aid. Then a parent applies for a Parent PLUS Loan on the Federal Student Aid site. Most schools require this to be done online, though some have a different application process. Unlike other types of federal student loans, these loans require a credit check.

Why a Parent PLUS Loan Might Be Denied

If your Parent PLUS Loan was rejected, it may be because you don’t meet the credit requirements. PLUS borrowers can’t have an adverse credit history, such as being at least 90 days overdue in making a debt payment or completing bankruptcy in the last five years.

Your application may also be denied if you or your child don’t meet other PLUS loan requirements. For instance, your child must be enrolled at least half-time at an eligible school, and you must meet the general eligibility criteria for federal student aid.

What Parents Can Do

In the event that your application for a Parent PLUS Loan is rejected, you may want to consider these options.

Appeal the Decision

If you had extenuating circumstances that led to an adverse credit event, you can ask the U.S. Department of Education to reconsider your application. You’ll need to provide documentation that proves that extenuating circumstances led to the adverse credit. The DOE will decide whether to approve the appeal. Check its website for a list of potentially acceptable appeals and the supporting documentation needed.

If your appeal is approved, you’ll be required to complete PLUS Credit Counseling before your loan is disbursed. Counseling takes between 20 and 30 minutes and can be done online.

Find an Endorser

You may want to consider having someone else endorse the Parent PLUS loan. An endorser is essentially a cosigner without an adverse credit history. In the event that you are unable to repay the loan, the endorser would be responsible.

An endorser must complete an addendum online. They should be prepared to provide personal information such as their mailing address and phone number and their employer’s information, plus two references. Once the endorser is approved, they’ll need to complete PLUS Credit Counseling before the funds are disbursed.

Your Child May Qualify for More Aid

If your Parent PLUS loan is rejected, there’s a chance your child may qualify for more federal student aid. They can contact their school’s financial aid office to see what can be done given that their parental contribution is now reduced.

It’s important to talk to your child about student loans so they understand how the loans work and how much they will cost upon graduation. It may be helpful to speak in terms of the expected monthly payment, so your student can compare that to their expected annual salary.

Scholarships

It’s likely not too late for your student to apply for scholarships. In fact, students should be searching for scholarships each and every year they’re in school.

While some types of scholarships may be limited to incoming freshmen, this is not always the case. In addition to looking at scholarships offered by your child’s school and the state, other local organizations may offer scholarships.

If your student is still in high school, their guidance counselor may be able to provide advice on ways to search for scholarships, including finding opportunities in your area.

Consider Other School Options

Depending on where you live, you may want to reconsider where your child goes to school. Switching to a state school or local community college could save thousands in tuition, room and board, and travel costs. Some community colleges even have transfer programs for getting students into four-year schools. Consider meeting with a counselor at the community college to see what the transfer process is like.

Private Student Loans After Parent PLUS Loan

Private student loans are another way to close the funding gap. Commercial banks, credit unions, online lenders, and other lending institutions offer these loans with varying terms and rates. Private student loans and private parent student loans are not backed by the federal government and therefore not subject to its qualification rules. They may also lack the borrower protections available to federal loans, such as deferment. Private student loans are often considered once all federal aid options have been explored.

Rates on private student loans are generally determined by your credit score and personal financial situation. Borrowers who did not qualify for a Parent PLUS loan may also have trouble qualifying for a private loan at a competitive rate. Still, it’s worth shopping around. In addition to comparing rates between lenders, you’ll want to factor in the costs associated with taking out a loan, such as origination fees, prepayment penalties, and more.

The Takeaway

Parent PLUS Loans are federal loans available to parents of students. There are credit-related requirements in order to qualify for a PLUS loan, so in some cases, it is possible to be denied for a Parent PLUS Loan. If your application is rejected, you still have options, including appealing the decision, adding an endorser to the loan, exploring scholarships, or looking into alternate schools.

If you’ve exhausted all your options, no-fee private parent college loans from SoFi can help you pay for your student’s education. The application process can be completed easily online, and you can see rates and terms in just a few minutes. Repayment plans are flexible, helping parents find an option that works for their financial plan and budget.

FAQ

How often can I take out a Parent PLUS Loan?

You can apply each year you want to receive a Parent PLUS loan. To do so, you must fill out a Direct PLUS Application.

When do Parent PLUS Loans need to be paid back?

Repayment begins 60 days after final disbursement for that academic year. If you’re approved for deferments each year, you may not need to begin repaying the loan until 6 months after your child graduates.

If I’m approved for a Parent PLUS Loan, where will the funds go?

Funds from Parent PLUS Loans are sent directly to your child’s school.

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.

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.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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Grad PLUS loans are federal student loans for graduate and professional students. Although Grad PLUS loans have higher interest rates and fees than some other types of federal student loans, they also have a major benefit — virtually no borrowing limits. You can borrow up to the full cost of attendance of your school, minus any other financial aid you’ve already received.

Read on for more on how Grad PLUS loans work, including their eligibility requirements, interest rates and repayment options.

What Are Grad PLUS Loans?

If you’re planning to attend a graduate or professional program, a Grad PLUS loan could help cover costs. Issued by the Department of Education, Grad PLUS loans are student loans designed for graduate and professional students.

PLUS loans are not the only federal loans available to you as a graduate student — you can also borrow Direct unsubsidized loans. Direct unsubsidized loans have lower interest rates and fees than PLUS loans, but they come with borrowing limits.

If you’ve hit your limit and need additional funding, a Grad PLUS loan could cover the gap. As mentioned above, you can borrow up to the full cost of attendance of your program, minus any other financial aid you’ve already gotten. This flexibility can be helpful for students who are attending pricey programs.

Recommended: How Do Student Loans Work? Guide to Student Loans

What Can Grad PLUS Loans Be Used for?

Grad PLUS loans can be used for tuition, fees and other education-related expenses. These expenses include,

•   Housing

•   Food

•   Textbooks

•   Computers and other supplies

•   Study abroad expenses

•   Transportation

•   Childcare costs

A Grad PLUS loan will first be disbursed to your financial aid office, which will apply the funds toward tuition, fees, room and board, and any other school charges. The financial aid office will then send any remaining funds to you.

Recommended: What Can You Use Student Loans For?

Who Is Eligible for Grad PLUS Loans?

To be eligible for a Grad PLUS loan, you must be a graduate or professional student enrolled at least half-time at an eligible school. What’s more, your program must lead to a graduate or professional degree or certificate.

You’ll also need to meet the eligibility requirements for federal financial aid (more on this below), as well as submit the Free Application for Federal Student Aid (FAFSA®).

Typical Grad PLUS Loan Requirements

Besides being enrolled in an eligible graduate or professional program, you need to meet a few other requirements to take out a Grad PLUS loan:

Meet the Requirements for Federal Student Aid

Since Grad PLUS loans are part of the federal student aid program, you must be eligible for federal aid to borrow one. Here are some of the criteria you need to meet:

•   Be a U.S. citizen or eligible noncitizen

•   Have a valid Social Security number (with some exceptions)

•   Have a high school diploma, General Educational Development (GED) certificate or other recognized equivalent

•   Maintain satisfactory academic progress while in school

•   Not already be in default on a federal student loan or owe money on a federal grant

If you’re a non-U.S. citizen or have an intellectual disability or criminal conviction, additional requirements might apply.

Submit the FAFSA

You’ll need to submit the FAFSA before you can borrow a Grad PLUS loan. After applying to grad school, you can submit this form, free of charge, on the Federal Student Aid website, with the myStudentAid mobile app or via the mail. Since the FAFSA only applies to a single academic year, you’ll need to submit it every year you’re in school and want to receive financial aid.

Complete the Grad PLUS Loan Application

Along with submitting the FAFSA, you’ll also need to fill out a separate application for the Grad PLUS loan. You can find and submit this application on the Federal Student Aid website, though some schools have separate processes. Your financial aid office can advise you on the steps you need to take.

If your application is approved, you’ll need to agree to the terms of the loan by signing a Master Promissory Note. If you haven’t borrowed a Grad PLUS loan before, you’ll also be required to complete student loan entrance counseling.

Not Have Adverse Credit History (or Apply With an Endorser)

While you don’t need outstanding credit to qualify for a Grad PLUS loan, you can’t have adverse credit. According to the Department of Education, you have adverse credit if one of the following applies to you:

•   You have accounts with a total balance greater than $2,085 that are 90 or more days delinquent

•   You’ve experienced a default, bankruptcy, repossession, foreclosure, wage garnishment or tax lien in the past five years

•   You’ve had a charge-off or write-off of a federal student loan in the past five years

If you have adverse credit, you have two options:

•   Appeal the decision due to extenuating circumstances. For example, you could provide documentation showing that you paid off a delinquent debt on your credit report.

•   Apply with an endorser who does not have adverse credit. Your endorser will be responsible for repaying the loan if you fall behind on payments.

Grad PLUS Loans Interest Rates

Grad PLUS loans come with fixed interest rates that will remain the same over the life of your loan. They also have a disbursement fee, which is a percentage of your loan amount that gets deducted from your loan.

Congress sets rates and fees on federal student loans periodically. These are the current Grad PLUS loan interest rates and fees:

Repaying Your Grad PLUS Loans

Grad PLUS loans are eligible for a variety of federal repayment plans:

•   Standard repayment plan, which involves fixed monthly payments over 10 years.

•   Income-driven repayment, specifically Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment or Income-Contingent Repayment. These plans adjust your monthly student loan payments to a percentage of your discretionary income while extending your loan terms to 20 or 25 years. If you’ve made on-time payments but still have a balance at the end of your term, it may be forgiven. The amount forgiven may be considered taxable income by the IRS.

•   Extended repayment, which extends your repayment term to 25 years and lets you pay a fixed or graduated amount.

•   Graduated repayment, which lowers your student loan payments in the beginning and increases them every two years. You’ll pay off your loan over 10 years, and your final payments won’t be more than three times greater than your initial payments.

Grad PLUS loans are also eligible for certain federal forgiveness programs, such as Public Service Loan Forgiveness.

Other Options to Pay for Grad School

Grad PLUS loans aren’t the only way to pay for graduate school. Here are some alternative options:

Direct Unsubsidized Loans

You can borrow up to $20,500 per year in Direct Unsubsidized loans as a graduate student with an aggregate loan limit of $138,500, including any loans you borrowed as an undergraduate.

Here are the interest rate and disbursement fee for graduate students:

Grants and Scholarships

Besides student loans, you can also pursue grants and scholarships for graduate school. You can find grants and scholarships from a variety of sources, including the Department of Education, your state, your school or a private organization. By earning grants and scholarships, you might not need to borrow as much in student loans.

Private Student Loans

You can also explore your options for private graduate student loans from banks, online lenders or credit unions. Some lenders offer interest rates that start lower than Graduate PLUS loan interest rates and don’t charge an origination fee.

Although private student loans aren’t eligible for federal repayment plans or programs, some lenders offer flexible repayment options or deferment if you need to pause payments. But, because private student loans aren’t required to offer the same borrower benefits as federal student loans, they are generally borrowed as a last resort option after all other sources of financing have been exhausted.

The Takeaway

If you’re looking for ways to pay for graduate school, a Grad PLUS loan could help. You can use this flexible loan to cover your school’s cost of attendance, as well as choose from a variety of federal repayment plans when it comes time to pay it back.

A Grad PLUS loan, however, might not be your most affordable borrowing option. Depending on your credit and other factors, it may be possible to find a private student loan with an even lower interest rate than a Grad PLUS loan.

FAQ

What kind of loan is Grad PLUS?

The Grad PLUS loan is a federal graduate student loan issued by the Department of Education. It is designed specifically for graduate and professional students.

Is there a max on Grad PLUS loans?

There is virtually no limit on the amount you can borrow with a Grad PLUS loan. You can borrow up to your school’s cost of attendance, minus any other financial aid you’ve already received.

Can Grad PLUS loans be used for living expenses?

Yes, you can use Grad PLUS loans to cover your living expenses while at school. You must use your loan on education-related expenses, which can include housing, food, supplies, transportation and other costs related to attending school.

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.

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Photo credit: iStock/PeopleImages
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