SoFi

When it comes to choosing a school, cost is top of mind for many students. In fact, nearly 81% of students and their families eliminated a prospective college based on its price tag, according to a 2022 Sallie Mae survey.

If the cost is a factor you’re considering, it could be worth looking into a college tuition payment plan. These plans allow students and their families to pay tuition and fees over an extended period of time. Qualifying for a plan is usually not difficult, though you may be required to pay an enrollment fee.

Here’s a look at how college tuition payment plans work.

What Is a College Tuition Payment Plan?

Instead of paying for college tuition at the beginning of each year, semester, or quarter, college tuition payment plans — also known as tuition installment plans or deferred payment plans — allow students and their families to spread out the cost of tuition over a period of time.

Depending on the school, the plan may allow payments to be made over the course of the semester or over the full year.

While you’ll generally have to start making payments right away, schools frequently offer the option to spread payments into monthly installments. Some also offer plans that break the payment into a few equal payments throughout the semester.

How Do Payment Plans Work?

Some colleges and schools run their own tuition payment plans. Others use an outside service to administer the plan.

Typically these payment plans only cover the direct costs charged by and paid to the college, such as tuition and fees. Sometimes the cost of housing and meal plans will also be included. The cost of things like textbooks and school supplies are not usually included in these plans.

Many tuition payment plans require an enrollment fee, which may run around $50 to $100, although it could be lower. These plans don’t usually charge interest, which can make them less expensive than taking out a student loan, as long as you are able to make the monthly payments. There generally isn’t a credit check.

What Types of Schools Offer Payment Plans?

Many schools offer some sort of tuition payment plan. Generally, qualifying for the plan isn’t very difficult. However, some schools do have specific enrollment periods. Check with your preferred school to determine when you need to enroll in a payment plan and what is required to do so.

Colleges and Universities

Tuition payment plans are offered at most, though not all, colleges and universities. Check your school’s website for details on available installment plans and see if there’s one that fits your needs and budget.

Graduate Schools

Many graduate programs offer payment plans. Enrollment dates can vary, so contact your program to find you when you’ll need to sign up.

Community Colleges

Community colleges typically offer payment plans for students and their families who are unable to pay costs upfront. Similar to plans at other types of schools, installment plans at community colleges may only cover certain costs, such as tuition and fees.

Trade Schools

On average, trade school tuition can range from $3,674 to nearly $16,000, according to data from the Department of Education. Some schools may offer a payment plan so students can pay the tuition and fees in installments.

What if My School Doesn’t Offer a Payment Plan?

If your preferred school doesn’t offer a payment plan, you can explore independent plans offered through private organizations. Your school’s financial aid office may be able to provide referrals.

Of course, even with a payment plan, the burden of tuition can still be too high for some students and their parents. Consider some of the following options when planning to pay for college tuition. While these ideas alone might not be enough to help you cover the full cost of tuition, a combination of a few could do the trick.

Federal Aid

Federal aid for college encompasses grants, scholarships, student loans, and work-study. To apply, students must complete the Free Application for Federal Student Aid (FAFSA) each year.

The schools you apply to will use this information to determine how much aid you receive. You’ll typically receive an award letter detailing what types of federal aid you’ve qualified for and the amounts.

Federal Student Loans

Federal student loans can be either subsidized or unsubsidized. Subsidized loans are awarded based on need. The Department of Education covers the interest that accrues on these loans while you are in school at least part-time, during the grace period after leaving school, and during periods of deferment or forbearance.

Unsubsidized federal loans are awarded independent of need. Borrowers are responsible for paying the interest that accrues on these loans while they are in school and during periods of deferment.

Payments are not required on either unsubsidized or subsidized loans while you are actively enrolled more than part-time in school.

There are also PLUS loans available to parents who are interested in borrowing a loan to help their child pay for college.

Work-Study

The federal work-study program provides jobs for undergraduate and graduate students who demonstrate financial need. The amount of work-study you receive will depend on factors like when you applied, your level of determined financial need, and the amount of funding available at your school.

The money earned for work-study won’t count against you when you fill out the FAFSA, so it shouldn’t jeopardize future financial aid awards. Each time you fill out the FAFSA, it’s worth indicating that you’re still interested in receiving work-study as part of your financial aid award (that is, if you are still interested).

And it’s important to remember that your financial aid award may change from year to year, depending on your and your family’s circumstances.

Scholarships and Grants

Scholarships and grants don’t typically have to be repaid, which makes them one of the best options for students trying to pay for school. Some scholarships and grants are awarded by schools based on the information you provided in the FAFSA, but there are scholarships and grants available that aren’t based on financial need.

Taking some time to comb through online scholarship search tools could prove helpful. Each scholarship will have different application requirements. Some might require an essay or additional supplementary materials, but the effort could be worth it if you’re able to fund a portion of your tuition costs.

Private Student Loans

Sometimes federal aid, scholarships, and your savings aren’t enough to cover the full cost of tuition. In those cases, private student loans could be an option. Unlike federal student loans, which are offered by the government, private student loans are offered by banks, credit unions, or other private lenders.

The private student loan application process will vary slightly based on lender policies, but will almost always require a credit check. Lenders will review your credit score and financial history as they determine how much money they are willing to lend to you.

In some cases, students might need the help of a cosigner to take out a private student loan. This could be the case if they have little to no credit history.

Some parents may also be interested in taking out a private loan to help their child pay for their education.

The Takeaway

Tuition payment plans, which extend the payment for college tuition over a fixed period of time, can be helpful for parents and students as they navigate how they’ll pay for the cost of education. Spreading tuition payments over the semester or year can help make them more manageable. Check if your preferred school offers a tuition payment plan. Many do.

Sometimes, the burden of tuition is still too high, even with a payment plan. Scholarships and grants, work-study, and federal aid can help you cover the cost of tuition. If you’ve exhausted all federal aid options, private student loans can fill gaps in need, up to the school’s cost of attendance, which includes tuition, books, housing, meals, transportation, and personal expenses.

FAQ

Are college tuition payment plans the same thing as tuition installment plans?

Yes, college tuition payment plans are also called tuition installment plans.

Do college tuition payment plans cover all school-related costs?

Typically, payment plans only cover tuition and fees. This means you may be responsible for the cost of books, supplies, housing, food, and transportation. Check with your preferred school to find out what its plan covers.

Do college tuition payment plans charge interest?

These plans don’t typically charge interest. However, you may be required to pay a modest fee to enroll.

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.

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

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.

SOIS0123005

Regardless of your age and life stage, unexpected bills can derail someone’s finances. Unforeseen events can be particularly challenging for college students who don’t have a lot of wiggle room in their budgets.

If you’re a student who’s experiencing financial hardship — or you’re just worried about how to prepare for a rainy day — be assured that help is available to students in need. Emergency financial aid grants are designed to keep students in college through financial setbacks.

We’ll review your options, and the pros and cons of each, so you can feel ready to take on any situation.

Why You Might Urgently Need More Money as a Student

Students are pretty familiar with seeking financial aid to help pay for tuition, school supplies, and other educational costs. However, some expenses aren’t covered by scholarships and student loans.

Emergency financial aid for college students can help cover the cost of:

•   Medical treatments

•   Job loss

•   Rent increases

•   Financial hardship due to COVID-19

•   Replacement technology, such as a laptop or phone

•   Car repairs

•   Loss of athletic scholarship due to injury

•   Loss of child care services

Some of these costs are fairly common, while others affect only a small percentage of students. The common thread: They’re all unpredictable and financially challenging. (By the way, we have a great guide to money management for college students.)

Recommended: What Is a TEACH Grant?

HEERF Emergency Grants

Students around the world experienced a sudden shift during the pandemic. Some students also felt a direct financial impact from COVID-19. If your schooling was disrupted by the pandemic, you might be able to receive a Higher Education Emergency Relief Fund (HEERF) grant. The program was created in March 2020 under the CARES Act and continues through the American Rescue Plan of 2021.

What Are They?

A HEERF grant is a type of emergency grant for students whose lives were upended by the pandemic. In July 2022, the Biden-Harris Administration released the final funds: $198 million.

How Do They Work?

The Department of Education disbursed the emergency financial aid grants for HEERF directly to 244 participating schools. The institutions that received funding are required to allocate a certain percentage as emergency grants for college students. Schools are tasked with identifying students in need, especially those who demonstrate financial hardship. Students who have received a Pell Grant likely meet this requirement.

HEERF emergency financial aid grants can be awarded to online students, DACA recipients, asylum seekers, and other eligible student groups.

Students can use the funds for any expense resulting from the pandemic. That includes the cost of attendance, housing, food, healthcare, or child care.

Pros and Cons of HEERF Emergency Grants

Although emergency college grants can offer financial relief, there are limitations. Below are the pros and cons of HEERF emergency grants for college students.

Financial Support From Your College

Other emergency college grants and support programs can be discovered through your school:

Emergency Tuition Assistance

Emergency tuition assistance is designed to help students stay enrolled in school when they’re suddenly unable to cover the cost of attendance. Assistance might be in the form of a grant, scholarship, voucher, or other relief.

If you’re at risk of dropping out of school because an emergency is making it hard to pay your school bills, ask your financial aid office about emergency tuition assistance.

Emergency Food Options

Inflation is making it harder for everyone to pay for groceries. If you’re experiencing food insecurity, ask your Student Affairs office about campus food pantries.

This resource can offer non-perishable goods, like dry pasta, legumes, and canned foods, as well as fresh produce and even basic toiletries (don’t get us started on the “pink tax” for period supplies).

Emergency Housing

Although not many schools have dedicated emergency housing options for their students, it doesn’t hurt to ask. Reach out to your school’s Student Affairs department to inquire about short-term emergency housing programs that might be available.

If your school doesn’t offer emergency housing, they might point you to external resources, such as local nonprofits and community groups.

Recommended: What Is the Cost of Electrician School?

Private Student Loans

If you’ve already maximized the federal undergraduate loans or graduate loans you’re eligible for, a private student loan is an alternative financing option. Private student loans are offered by private lenders, like banks, credit unions, and online financial institutions.

This type of student loan can cover an amount up to the certified cost of attendance, minus the financial aid you’ve already received. Private loans can have fixed or variable interest rates, with rates and terms varying by lender. Additionally, private student loans don’t have the same borrower benefits as federal student loans, like loan forgiveness and income-driven repayment, so tread carefully.

Learn more in our private student loans guide.

The Takeaway

If you’re a student who’s struggling financially due to an unexpected expense or event, help is available. Reach out to your School Affairs or Financial Aid office, explain your situation, and learn about emergency financial aid grants. The federal HEERF program can cover any expense related to Covid-19, from tuition to hospital bills. Other emergency programs can help you cover housing, food, and other basic needs. If you’re ineligible or have exhausted your grant options, private student loans are an alternative to consider.

With SoFi private student loans, you can borrow up to your school’s certified cost of attendance with zero fees. And getting prequalified online takes only minutes, so you can get financing for school fast during an emergency.

FAQ

What did the CARES Act do for college students?

The CARES Act, which was passed in March 2020 as a response to COVID-19, offered student loan repayment relief and emergency grants for college students. Federal student loan borrowers were provided automatic administrative loan forbearance and a pause on interest. Eligible students can also receive emergency aid through the Higher Education Emergency Relief Fund (HEERF).

Will there be another CARES Act for college students?

In July 2022, the Department of Education announced that it allotted the final funds toward the HEERF. The amount of $198 million was provided to 244 colleges to help their students recover from the pandemic.

Are there grants for students due to Covid-19?

Yes, the federal government created a college emergency grant, called the Higher Education Emergency Relief Fund (HEERF). The program was created under the CARES Act in March 2022 and continues under the American Rescue Plan.

Photo credit: iStock/photo

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.

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

SOPS0322030

If you pay attention to the news, you have probably noticed that the Federal Reserve (or Fed, for short) makes headlines every so often. The Fed has recently been in the spotlight because it has been making policy moves to combat rising prices. In the face of the highest inflation rate in 40 years, the Fed has raised interest rates – otherwise known as the federal funds rate — to between 5.00% and 5.25% as of early July 2023.

There’s a connection between the Fed’s interest rate decisions, the national economy, and your personal finances. The Fed works to help balance the economy over time—and its actions and influence on monetary policy can affect household finances. Here’s what consumers should know about the Federal Reserve interest rate and how it trickles down to the level of individual wallets.

What Is the Federal Funds Rate?

The federal funds rate, or federal interest rate, is a target interest rate assessed on the bank-to-bank level. It’s the rate at which banks charge each other for loans borrowed or lent overnight.

The federal funds rate is not directly connected to consumer interest rates, like those that might be paid on a personal loan or mortgage. But it can significantly influence those interest rates and, over time, can impact how businesses and individuals access lines of credit.

How Is the Federal Funds Rate Set?

The Federal Open Market Committee (FOMC) sets the federal funds rate. The FOMC is a 12-member group made up of seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.

The FOMC meets a minimum of eight times per year—though the committee will meet more often than that if deemed necessary. The group decides the Fed’s interest rate policy based on key economic indicators that may show signs of inflation, rising unemployment, recession, or other issues that may impact economic growth.

The FOMC often slashes rates in response to market turmoil as an attempt to boost the economy. Lower rates may make it easier for businesses and individuals to take out loans, thus stimulating the economy through more spending. The Federal Reserve enacted a zero-interest rate policy in 2008 and maintained it for seven years to boost the economy following the Great Recession.

On the other hand, the FOMC may raise interest rates when the economy is strong to prevent an overheated economy and keep inflation in check. Higher interest rates make borrowing more expensive, disincentivizing businesses and households from taking out loans for consumption and investment. Because of this, higher interest rates theoretically will cool the economy.

Current Federal Funds Rate

As noted above, the current federal funds rate is between 5.00% and 5.25% as of early July 2023. The FOMC raised interest rates rapidly throughout 2022 in an effort to bring down inflation, which was at the country’s highest levels since the 1980s.

The federal funds rate is a recommended target—banks can ultimately negotiate their own rate when borrowing and lending from one another. Over the years, federal fund targets have varied widely depending on the economic outlook. The federal funds rate was as high as 20% in the early 1980s due to inflation and as low as 0.0% to 0.25% in the post-Covid-19 environment when the Fed used its monetary policy to stimulate the economy.

How Does the Fed Influence the Economy?

The Federal Reserve System is the U.S. central bank. The Fed is the primary regulator of the U.S. financial system and is made up of a dozen regional banks, each of which is localized to a specific geographical region in the country.

The Fed has a wide range of financial duties and powers to take measures to ensure systemic financial and economic stability. These duties include:

•  Maintaining widespread financial stability, in part by setting interest rates

•  Supervising and regulating smaller banks

•  Conducting and implementing national monetary policy

•  Providing financial services like operating the national payments system

The Fed has authority over other U.S. banking institutions and can regulate them in order to protect consumers’ financial rights. But perhaps its most famous job is setting its interest rate, otherwise known as the federal funds rate.

💡 Recommended: How Do Federal Reserve Banks Get Funded?

How Does the Federal Funds Rate Affect Interest Rates?

Although the federal funds rate doesn’t directly influence the interest levels for loans taken out by consumers, it can change the dynamics of the economy as a whole through a kind of trickle-down effect.

The Fed’s rate changes impact a broad swath of financial areas—from credit cards to mortgages, from savings rates to life insurance policies. The Fed’s rate change can affect individual consumers in various ways.

The Prime Rate

A change to the federal funds rate can influence the prime interest rate (also known as the Bank Prime Loan Rate). The prime interest rate is the rate banks offer their most creditworthy customers when they’re looking to take out a line of credit or a loan.

While each bank is responsible for setting its own prime interest rate, many banks choose to set theirs mainly based on the federal funds rate.

Generally, the rate is set approximately three percentage points higher than the federal funds rate—so, for example, if the rate is at 5.00%, a bank’s prime interest rate might be 8.00%.

Even for consumers who don’t have excellent credit, the prime interest rate is important; it’s the baseline from which all of a bank’s loan tiers are calculated.

That applies to a wide range of financial products, including mortgages, credit cards, automobile loans, and personal loans. It can also affect existing lines of credit that have variable interest rates.

Savings Accounts and Certificates of Deposit

Interest rates bend both ways. Although a federal rate hike may mean a consumer sees higher interest rates when borrowing, it also means the interest rates earned through savings, certificates of deposit (CDs), and other interest-bearing accounts will increase.

In many cases, this increase in interest earnings influences consumers to save more, which can help as an incentive to build and maintain an emergency fund that one can access immediately, if necessary.

How Does the Federal Funds Rate Affect the Stock Market?

While the federal funds rate has no direct impact on the stock market, it can have the same kind of indirect, ripple effect that is felt in other areas of the U.S. financial system.

Generally, lower rates make the market more attractive to investors looking to maximize growth. Because investors cannot get an attractive rate in a savings account or with lower-risk bonds, they will put money into higher-risk assets like growth stocks to get an ideal return. Plus, cheaper or more available money can translate to more spending and higher company earnings, resulting in rising stock performance.

On the other hand, higher interest rates tend to dampen the stock market since investors usually prefer to invest in lower-risk assets like bonds that may offer an attractive yield in a high-interest rate environment.

💡 Recommended: How Do Interest Rates Impact Stocks?

What Other Factors Affect Consumer Interest Rates?

Although the Federal Reserve interest rate can impact personal finance basics in various ways, it may take up to 12 months to feel the full effect of a change.

On a consumer level, financial institutions use complex algorithms to calculate interest rates for credit cards and other loans. These algorithms consider everything from personal creditworthiness to loan convertibility to the prime interest rate to determine an individual’s interest rate.

The Takeaway

The federal funds rate — or federal interest rate — set by the Federal Reserve is intended to guide bank-to-bank loans but ends up impacting various parts of the national economy—down to individuals’ personal finances. For investors, changes in the federal funds rate can indicate where the stock market may be headed. At least, it’s a factor that investors may watch.

If you’re paying attention to the Federal Reserve interest rate policy changes and want to make investing decisions based on those moves, SoFi can help. With a SoFi Invest® online brokerage account, you can trade stocks and exchange-traded funds (ETFs) for as little as $5.

SoFi Invest®