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If you paid money on your student loans in the last tax year, you might qualify for the student loan tax deduction, which allows borrowers to deduct up to $2,500 in interest they paid out of their taxable income.

Here are some important things you should know about the student loan interest deduction and whether you qualify.

How the Student Loan Tax Deduction Works

With the student loan tax deduction, you claim the interest you paid on your student loans throughout the tax year when it’s time to do your taxes.

The interest applies to qualified student loans that were used for tuition and fees; room and board; coursework-related fees, books, supplies, and equipment; and other necessary expenses like transportation.

So how much student loan interest can you deduct? If you qualify for the full deduction, you can deduct student loan interest up to $2,500, as long as you actually paid that much in interest. (You don’t need to itemize in order to get the deduction.)

Not only do required interest payments count, but if you made any additional interest payments toward your student loans in the past tax year, those count too.

How to Qualify for the Student Loan Tax Deduction

To be eligible to deduct student loan interest, individuals must meet the following requirements:

•   You paid interest on a qualified student loan (a loan for you, your spouse, or a dependent) during the tax year.

•   Your modified adjusted gross income (gross income for the year minus certain deductions) is less than a specified amount that is set annually.

•   Your filing status isn’t married filing separately.

•   Neither you nor your spouse can be claimed as a dependent on someone else’s return.

The loans in question can be federal or private student loans.

Recommended: Private Student Loans Guide

What Are the Income Requirements for Student Loan Tax Deduction?

Your modified adjusted gross income (MAGI) is calculated on your federal tax return before any student loan interest deduction is made. The eligible ranges are recalculated annually.

For tax year 2022 (filing in 2023), the student loan interest deduction was worth as much as $2,500 for a single filer, head of household, or qualifying widow/widower with a MAGI of under $70,000.

For those who exceeded a MAGI of $70,000, the deduction began to phase out, meaning the most they could deduct was less than $2,500. Once their MAGI reached $85,000 or more, they were no longer able to claim the deduction.

For married couples filing jointly, the phaseout began after a MAGI of $145,000, and eligibility ended at $175,000.

Confused by all these requirements? If so, consider going to a tax professional to help with your return to make sure you can take advantage of the deduction.

Other Tax Deductions for Students

In addition to the student loan interest rate deductions, there are other tax breaks that may be available to you if you’re a student, or you’re saving for or paying for certain education expenses for yourself, a spouse, or a dependent. Here’s a look:

529 Plans

A 529 college savings plan is a tax advantaged plan that allows you to save for qualified education expenses — like tuition, lab fees, and text books — for yourself or your children. You can contribute up to $15,000 per year without triggering gift taxes, and other family members can contribute to the fund, as well.

Savings can be invested and grow tax free inside the account. And while the federal government doesn’t offer any tax deductions, some states will provide tax benefits like deductions from state income tax. Withdrawals must be used to cover qualified expenses, otherwise you will face income taxes and a 10% penalty.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) helps offset $2,500 in qualified education expenses per student per year for the first four years of higher education. Unlike a tax deduction, tax credits reduce your tax bill on a dollar-for-dollar basis. And if the credit brings your taxes to zero, 40% of whatever remains of the credit amount can be refunded to you, up to $1,000.

To be eligible for the AOTC you must be getting a degree or another form of recognized education credential. And at the beginning of the tax year, you must be enrolled in school at least half time for one academic period, and you cannot have finished your first four years of higher education at the beginning of the tax year.

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) helps pick up where the AOTC leaves off. While the AOTC only lasts for four years, the LLC helps offset the expense of graduate school and other continuing educational opportunities. The credit can help pay for undergraduate and graduate programs, as well as professional degree courses that help you improve your job skills. The credit is worth $2,000 per tax return, and there is no limit to the number of years you can claim it. Unlike the AOTC, it is not a refundable tax credit.

To be eligible, you, a dependent or someone else must pay qualified education expenses for higher education or pay for the expenses of an eligible student and an eligible educational institution. The eligible student must be yourself, your spouse or a dependent that you have listed on your tax return.

Recommended: Can You Deduct Your Child’s Tuition from Taxes?

Look for Form 1098-E

Unfortunately, you can’t deduct the entirety of your student loan payments from your taxes. As mentioned, you can only deduct your interest. How to get the student loan interest deduction? Your loan provider reports information on interest paid on Form 1098-E, which is a tax form financial institutions generally send to borrowers when the tax year ends.

The only reason you wouldn’t receive one from your lender is if you paid less than $600 in interest on their loan. But these forms don’t always report things like the interest you paid on certain origination fees or capitalized interest, which may also qualify for the student loan deduction.

How to Calculate the Student Loan Tax Deduction

To calculate the full value of the interest deduction, start with the amount of interest the form says you paid, and then add any interest you paid on qualified origination fees and capitalized interest. Just make sure these amounts don’t add up to more than the total you paid on your student loan principal.

Clear as mud, right? Hey, no one said the IRS makes things easy! Here are some examples of how to deduct these amounts.

Deducting the origination fee: As of Sept. 1, 2004, this fee — usually a one-time fee that lenders charge for creating a new loan — is included on your 1098-E. For loans issued before that date, you can use any reasonable method to allocate the loan origination fees over the term of the loan. One way to do this is to figure out how much the fees will cost you monthly over the life of the loan.

Example: If the origination fee you were charged on your loan was $1,000 and the term length was 10 years, or 120 months, that would mean your origination fee would be $8.33 per month, or $100 per year.

Deducting capitalized interest: If your Form 1098-E says your loan has capitalized interest, you can also claim that after you’ve claimed an origination fee deduction. Capitalized interest accrues and then is added to the loan principal if you don’t pay it. For example, Unsubsidized federal student loan accrue interest while the student is in school and during the loan’s grace period. It’s common for that interest to be capitalized (added to principal) at the end of the grace period.

Example: If you made $6,000 in student loan payments, of which $1,000 went to interest and $5,000 to principal, you can claim the $100 you paid toward your origination fee and the full $1,000 in capitalized interest. But if you only paid off $750 of your principal, you can claim $650 of the $1,000 of capitalized interest, because you’ll have to claim the $100 in origination fees first and you can’t exceed the amount you paid toward your principal.

Tips for Lowering Your Student Loan Payments

Tax credits and deductions are one way to help pay for the cost of school. Finding ways to lower your student loan payments is another cost-saving measure and can be good to know about when it comes to the basics of student loans. Here are a few ideas:

•   Put money toward student loans by making additional payments to pay down your principal. Doing this may help reduce the amount of interest you will owe less interest over the life of the loan, but beware of any prepayment penalties.

•   Make interest only payments while you’re still in school. This may prevent thousands of dollars from being added to your loan principal.

•   See whether your loan provider offers discounts if you set up automatic payment. Federal Direct Loan holders may be eligible for a 0.25% discount when they sign up for automatic payments.

•   Consider refinancing student loans, replacing your student loan with a new loan that ideally has a lower interest rate or more favorable terms.

While there are advantages of refinancing student loans, such as possibly lowering your monthly payments, there are disadvantages as well. One major caveat: If you refinance federal loans, they are no longer eligible for federal benefits or protections. Also, you may pay more interest over the life of the loan if you refinance with an extended term. Refinancing is not right for everyone.

The Takeaway

Who doesn’t love a tax deduction? Qualified filers can take a student loan interest deduction of up to $2,500 atop the standard deduction. Most private and federal student loans are fair game.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. And lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

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

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Student loans are meant to be used to pay for your education and related expenses so that you can earn a college degree. Even if you have access to additional student loan money, it doesn’t mean you should use it on nonessential living expenses.

By learning the answer to, “What can you use a student loan for?” you will make better use of your money and ensure you’re in a more stable financial situation post-graduation.

5 Things You Can Use Your Student Loans to Pay For

Here are five things you can spend your student loan funds on.

1. Tuition and Fees

The first thing your student loans are intended to cover is your college tuition and fees. The average college tuition and fees for a private institution is $37,641 per year, while the average for a public, out-of-state school is $27,279 per year, and a public, in-state school is $9,377 per year.

2. Books and Supplies

Beyond tuition and fees, student loans can be used to purchase textbooks and supplies, such as a laptop, notebooks and pens, and a backpack. You may be able to save money by purchasing used textbooks online or by renting textbooks instead of purchasing them.

3. Housing Costs

Your student loans can be used to pay for your housing costs, whether you live in a dormitory or off-campus. If you live off-campus, you can put your loans toward paying for related expenses, such as your utility bill. Compare the costs of on-campus vs. off-campus housing, and consider getting a roommate to help cover the costs of living off-campus.

4. Transportation

If you have a car on campus or you need to take public transportation to get to school, work, or your internships, you can use your student loans to pay for those costs. If you have a car, you may want to consider leaving it at home when you go away to school. Gas, maintenance, and a parking pass could end up costing much more than using public transportation and your school’s shuttle, which should be free.

5. Food

What else can you use student loans for? Food would qualify as a valid expense, whether you’re cooking meals at home or you’ve signed up for a meal plan. This doesn’t mean you should eat out at fancy restaurants all the time just because the money is there. Instead, you could save by cooking at home, splitting food costs with a roommate, and asking if local establishments have discounts for college students.

Recommended: 23 Tips on Saving Money Daily

5 Things Your Student Loans Should Not Cover

Now that you know what student loans can be used for, you’re likely wondering what they should not be used for. While your lender is not tracking your expenses, it’s not wise to use student loans for non-school related expenses. You will eventually have to pay this money back, with interest.

Here are five expenses that should not be covered with funds from your student loans.

1. Entertainment

Going to the movies, concerts, and bowling are all part of the college experience, but you should not use your student loans to pay for your entertainment. Your campus likely offers plenty of free and low-cost entertainment, such as sports games and movie nights, to pursue instead. You can also consider getting a job on campus to help pay for entertainment and fun.

2. Vacations

College is draining, and you deserve a vacation from the stress every once in a while. However, if you can’t afford to go on spring break or another type of trip out of your own pocket, then you should put it off at this time. It’s never a good idea to use your student loans to cover these expenses.

3. Gym Membership

You may have belonged to a gym at home before you went to college and you still want to keep up your membership there. You can, as long as you don’t use your student loans to cover it. Many colleges and universities have a gym or fitness center on campus that is available to students and included in the cost of tuition.

4. A New Car

Even if you need a new car, student loans cannot be used to buy a new set of wheels. Consider taking public transportation instead or buying a modest used car when you save up enough money.

5. Extra Food Costs

While you and your roommates may love pizza, it’s not a good idea to use your student loan money to cover that cost. You also shouldn’t take your family out to eat or dine out too much with that borrowed money. Stick to eating at home or in the dining hall, and only going out to eat every once in a while with your own money.

Student Loan Spending Rules

Your student loan refund — what’s left after your scholarships, grants, and loans are applied toward tuition, campus housing, fees, and other direct charges — isn’t money that’s meant to be spent willy-nilly. It’s meant for education-related expenses. If you don’t need the refund, it’s best to send it back to the loan servicer.

The amount of financial aid a student receives is based largely on each academic institution’s calculated “cost of attendance,” which may include factors like your financial need and your Student Aid Index, or SAI (formerly called the Expected Family Contribution, or EFC). Your cost of attendance minus your SAI generally helps determine how much need-based aid you’re eligible for. Eligibility for non-need-based financial aid is determined by subtracting all of the aid you’ve already received from your cost of attendance.

Recommended: What Is the Student Aid Index (SAI)?

Additionally, when you took out a student loan, you probably signed a promissory note that outlined what you’re supposed to be spending your loan money on. Those restrictions may vary depending on what kind of loan you received — federal or private, subsidized or unsubsidized. If the restrictions weren’t clear, it’s not a bad idea to ask your lender, “What can I use my student loan for?”

Alternatives to Using Student Loans

If you can’t pay for college on your own or you don’t have the luxury of someone paying for it for you, oftentimes you’ll have no choice but to rely on student loans to get you through. There’s nothing wrong with that; that’s what they’re there for! However, you may not need to cover all of your tuition and living expenses with loans. Here are some alternative ideas to help fund your college education:

Work Part-time While in School

While working and attending college is not easy, it’s possible. Roughly 40% of full-time undergraduate students maintain a job while in school, with 10% of those students working full-time hours in addition to a full class load. Working is a great way to reduce your student loan debt and pay for additional living expenses.

Recommended: Am I Eligible for Work-Study?

Apply for Scholarships

There are thousands of scholarships available for many different types of students, it’s just a matter of finding them. Putting in the time to find a scholarship, apply, and get awarded can save you thousands in tuition over the course of your college experience.

Attend a Community College

The best way to cut down on the cost of college and reduce your student loan debt is to choose a less expensive route, such as a community college or in-state institution. The average cost of community college is $5,155 per year for in-state students. Consider taking your prerequisites at your community college and then transferring to your in-state public university.

Refinancing Student Loans

If you’re interested in adjusting loan terms or securing a new interest rate, you could consider refinancing your student loans. Refinancing can allow qualifying borrowers to secure a lower interest rate or more preferable terms, which could potentially save them money over the long run. Refinancing federal loans eliminates them from all federal borrower benefits and protections, including deferment options and the ability to pursue Public Service Loan Forgiveness, so it’s not the right choice for all borrowers.

The Takeaway

Student loans are intended to be used to pay for qualifying educational expenses such as tuition and fees, room and board, supplies, transportation, and food. Expenses like entertainment, vacations, cars, and fancy dinners cannot generally be paid for using student loans.

If you already have student loans and are looking to lower your monthly payment, refinancing may be one way to do it – by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. And lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

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

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For the average American, no single expense is as large as the cost of purchasing a home. Because the price is so high, a mortgage is usually necessary. And in most cases, a home purchase requires a down payment plus monthly mortgage payments.

What you’ll pay each month on a $300,000 mortgage will depend on several factors, such as the interest rate and mortgage term. These numbers will differ for everyone, so you must do some math to know your monthly cost, and it’s important to consider the total cost of a home purchase as well.

Total Cost of a $300K Mortgage

There is more than one element to the total cost of a $300,000 mortgage. It can be a lot to take in, especially for first-time homebuyers. However, we can generally break the total costs of buying a home into upfront and long-term costs.

Upfront Costs

Even in the beginning stages of your home purchase, there are some costs you will have to pay. Upfront costs of a home purchase include:

•   Earnest money: Earnest money is also known as a good faith deposit. This is a sum of money you put down to show a seller you are serious about buying their home.

•   Down payment: When you buy a home, you typically must pay a portion of the home price upfront, known as a down payment. While down payments can be up to 20% of the home price, they are often a much lower percentage. How much you put down upfront can impact your mortgage rate and thus your monthly costs.

•   Closing costs: Closing costs cover administrative activities involved in buying a home, such as the cost of an appraisal, lender’s fees, and a charge to record the property transfer.

Long-Term Costs

Most of the money you spend on your home will probably be long-term costs. Your monthly mortgage payment will likely be the biggest of these. The monthly payment you make against the loan you obtained to purchase the home will cover the principal plus interest. Some other long-term costs are:

•   Property taxes: In most cases, you must pay taxes on your home. These can be significant, often totaling thousands of dollars annually.

•   Home maintenance: Homes usually require ongoing maintenance, and these costs can be more variable than other ongoing costs.

•   HOA Fees: Some homes, such as townhouses and condos, may have an ongoing homeowners association fee to cover landscaping, pools, and general maintenance.

Estimated Monthly Payments on a $300K Mortgage

The monthly payment on a $300,000 mortgage depends on your down payment, annual percentage rate (APR), and term. You must factor each into the equation to estimate your monthly mortgage payment.

For example, suppose you secure a 30-year fixed $300K mortgage at 4.5% APR. In this case, the monthly payment would be $1,520. On the other hand, if you have a 15-year fixed $300K mortgage at 4% APR, the monthly payment would be $2,219. As you can see, APR and terms can have a big impact on your monthly mortgage payment.

Monthly Payment Breakdown by APR and Term

A monthly $300K mortgage payment amount can vary widely, even if you know you will have a $300,000 loan. Use a mortgage calculator to estimate your monthly payment. Here are a few examples of how these calculations may vary depending on the APR and term:

How Much Interest Is Accrued on a $300K Mortgage?

The amount of interest you accrue on a $300,000 home mortgage loan will, again, depend on several factors. However, the most important factors are the mortgage term and APR. When comparing two 30-year mortgages, the one with a lower APR usually accrues less interest. When comparing 15-year vs. 30-year terms with the same APR, the 15-year term will generally accrue less interest.

For instance, a 15-year mortgage with a 3.0% interest rate results in a total of $72,914 of interest over the life of the loan. Meanwhile, a 30-year mortgage with a 6.0% interest rate results in $347,515 of interest. There are also different types of mortgage loans, which can affect how much you ultimately pay.

$300K Mortgage Amortization Breakdown

As we have observed, APR and term significantly impact the interest you pay. However, the term can also affect how much you pay per month. The following table breaks down the amortization schedule of a 30-year $300,000 loan with a 5.0% APR:

What Is Required to Get a $300K Mortgage?

Getting a $300,000 mortgage generally requires a combination of a sufficient income and a large enough down payment. For example, if your gross annual income is $75,000 and you want to borrow $300,000 with a 30-year mortgage at 5.0%, you would probably need to make a deposit of at least $30,000 on a property.

Running the numbers in a housing affordability calculator can help you pinpoint the costs. The numbers above result in spending about 23% of your income on housing. This falls comfortably below the 30% threshold. Above that point, the Department of Housing and Urban Development (HUD) considers you “price burdened.”

Credit score can also matter when applying for a home. There’s no definite rule, as your income, down payment, and other factors will also be a part of the decision. However, you should generally have a credit score of at least 620 to apply for a conventional loan.

How Much House Can You Afford Quiz

The Takeaway

Buying a home is usually the largest expense for the average American. The monthly payment you will make on your home depends on several factors, but the most important are the APR and term. A shorter term and a lower APR will reduce how much you pay overall, though a shorter term will increase your monthly payment.

It’s important to align your purchase with factors like your annual income and down payment. Our Home Loan Help Center can be a good resource. Buying a house that you can afford will help you make your monthly payments comfortably — so you can relax and enjoy your new home.

FAQ

How much house can I afford on $70,000 a year?

How much house you can afford on a $70,000 salary depends on several factors, such as your APR, term, and down payment. With a $30,000 down payment, a mortgage rate of 5.0%, and $2,500 of monthly expenses (not including rent), you can afford a home up to $300K.

Can I afford a 300K house on a 50K salary?

You might be able to afford a $300K house on a $50K salary if you can secure a low APR and have a sizable down payment. However, you’ll want to review your monthly expenses to make sure you have room in your income to pay the mortgage.

How much is 20% down on a $300,000 house?

To put 20% down on a $300,000 house, you’ll need $60,000. People often believe you must put 20% down to qualify for a mortgage. While this might be true for some lenders, it isn’t always the case.

Photo credit: iStock/Morsa Images

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

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 you’re gearing up for your first job post-graduation, you might be feeling a mix of emotions. There’s happiness about landing your new gig, excitement about what’s to come, and some nervousness, too.

And then there are all the practical considerations. You’ll need to budget for your new work life to cover things like commuting and your wardrobe. At the same time, you probably have student loans to pay off, and you’ll want a solid plan in place to manage your debt.

That’s a lot! But not to worry. With a little prep, and by taking a few smart steps, you’ll be set to start your new job and start working toward your financial goals.

Researching the Company

You likely researched your new employer before you accepted the position. Now that you’ve got an official start date, it’s time to dig a little deeper.

Consider learning about the history of the company. And then brush up on what’s ahead. Is there any information about the direction the firm is headed in or any future plans that have been released? Are new products and services about to be launched?

Researching the broader industry could also be beneficial. Search for general trends that are worth noting. What are their biggest competitors working on?

It’s also a good idea to take a look at your network. Do you know anyone who works at the company you could reach out to? Perhaps there is a friend-of-a-friend who might be willing to chat with you before your first day. Getting some information on the company’s culture could help relieve your anticipatory anxiety. Plus, then you’ll have a familiar face to look out for around the office.

Recommended: 10 Personal Finance Basics

Doing a Dry Run of Your Commute

Worrying and stressing about whether or not you’re going to be on time for your first day is no way to start a job, so do a test run of your new commute. Whether it’s a drive, walk, or bus or train ride, making the commute in advance means you’ll get all of your second guessing, potential detours, and missed turns out of the way.

Plus, this way you can get a sense of the traffic patterns and find out where and when you may need to allow more time. You can also see how much commuting might cost you and figure out ways to pay less for your drive to work.

Planning for the Day Ahead

One good way to destress your morning routine is to prepare everything the night before. Get the coffee ready to go and set on a timer so you don’t have to think about it when you wake up. Plan what to have for breakfast so you’re not scrambling at the last minute.

Choose your clothes for the big day in advance. Try everything on to make sure it fits and that there aren’t any loose buttons. This will save you precious time in the morning.

If you’re not sure what the standard attire is at your new office, err on the side of being more professional than casual. As you get to know the company culture, you can adjust your outfit choices, which could even help you save money on clothes.

Gathering the Appropriate Paperwork

Before you head into the office, you’ll usually get an email from HR with some information about your first day. It’s worth reading through it carefully and gathering any paperwork that might be needed. Organize the documents and pack them in your bag the night before. If you have questions about benefits, holidays, when you’ll be paid, or anything else, jot them all down and bring them with you so you can go over everything with the HR rep.

Getting to Know the Team

You will likely be collaborating with your coworkers on a daily basis, so first impressions matter. Project a friendly, professional, and fully engaged attitude as you meet and interact with your colleagues.

Be receptive and enthusiastic when you get your first assignment. Listen closely and ask your manager questions so you fully understand your responsibilities. Then you can get down to work.

Updating (Or Creating) Your Financial Plan

Some of the other important work-related changes you’ll need to make involve getting your financial life in shape. You can start by:

Refining Your Budget

A new job means a new salary, which makes this a good time to update or create a budget. Consider making adjustments based on your new salary. If you don’t have an existing budget in place, this could be the perfect time to add some structure to your spending and saving.

If you’re moving to a new city for the job or into a new apartment, it’s wise to start planning for all those moving costs now.

Planning for Future You

Next, focus on building your financial security. Carefully review the options your new company offers for retirement savings. Do they have a 401(k)? And if so, do they offer matching contributions?

Saving for retirement might not be on your radar right now, but it’s never too early to start prepping for your future. Sign up to contribute to your employer’s 401(k) plan, and contribute at least enough for the company to match your contributions.

Handling Debt

As a recent graduate, you likely have student loans you’re paying off. If that’s the case, part of your financial strategy could include figuring out if your current repayment plan is the best one for you—or if there’s one out there that might be a better fit.

The repayment plan you choose will depend on a variety of factors, including the types of student loans you have, the amount of debt, and your income and profession. If you have federal student loans, you might be eligible for repayment options including income-driven repayment plans, federal student loan consolidation, or loan forgiveness.

It’s also worth seeing if your new company offers assistance to employees repaying student loans. A growing number of employers have such programs. If yours is one of them, find out how you can get some help repaying what you owe.

If paying off student loan debt quickly is a priority for you, consider putting any windfalls, like a signing bonus, toward your student loans.

Another option to think about is student loan refinancing. For qualifying borrowers, refinancing could offer better terms, which could potentially lead to savings. But refinancing may not be for everyone. When federal loans are refinanced they become private loans and are no longer eligible for federal repayment plans or protections, such as the Public Service Loan Forgiveness program.

If you decide that refinancing is beneficial for you, you’ll want to shop around for the best deal. SoFi offers student refinancing loans with low fixed and variable interest rates, flexible terms, and no fees. Plus, SoFi members get free perks like career coaching and financial advice.

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

With the rising price of tuition, fees, and room and board at four-year public colleges and private nonprofit institutions, more students in all income brackets have been taking out loans.

If you’re wondering where to get a student loan for college, you have two options. The first is getting a federal student loan through the government. Federal student loans account for more than 93% of all student loan debt. The second option is a private student loan, which is given by a bank, credit union, or online lender. Private student loans are not based on need, but rather your college’s cost of attendance, your credit profile, and your income (or your cosigner’s income).

Prioritizing a Plan

When creating a plan to fund college education, it can make good sense to first explore any avenues for free money in the form of grants and scholarships.

By taking a look at the remaining balance after any free money has been found, exploring federal loans can be a smart next step. They come with income-based repayment options and the ability to request loan forgiveness under some circumstances. There are also work-study programs that can help students earn money while attending college.

If all needs are not covered, then there are private student loans to consider, along with Direct PLUS Loans that parents can apply for to get funds for their children.

After that, some people may seek out personal loans to cover living expenses while in school and/or emergency loans from the college.

Here are more specifics about these options.

Where to Get a Federal Student Loan

When the funding for college comes from the federal government, then—as the name indicates—that’s considered a federal student loan. To obtain any kind of federal student loan, a student must first fill out the Free Application for Federal Student Aid, commonly called the FAFSA®. Here are tips on how to fill out the FAFSA®.

After filling out this form, a student will have insights into what federal funding is available for them, along with work-study options. More specifically, each school that a student applies to can send a financial aid offer letter, which includes information about how to apply for student loans that they qualify for.

Two broad types of federal loans are:

•   Direct subsidized loans: These are for undergraduates with financial need.

•   Direct unsubsidized loans: These are available for undergraduate students, as well as graduate and professional ones, that do not demonstrate financial need.

A key difference between the two types involves the interest on the loan. With a subsidized loan, the U.S. Department of Education pays the interest when a qualifying student is attending school at least half time, as well as during a six-month grace period when the student graduates, withdraws, or reduces to less than part-time. This can also apply if the loan goes into deferment, meaning when loan payments are postponed. With an unsubsidized loan, the student is responsible for paying the interest.

Where to Get a Private Student Loan

A variety of financial institutions offer private student loans and have their own criteria for qualification. Some allow students to apply online and can give quick responses, while others go a more traditional route with in-person applications.

Private lenders will typically review a student’s income, plus that of any cosigner, along with credit histories and more to make lending decisions. A lender might grant a private student loan to someone whose credit isn’t stellar, but charge a higher interest rate.

When applying for a private student loan, it’s important to understand the loan terms before signing the note. This includes the interest rate and whether the rate is fixed (staying the same over the life of the loan, with the principal and interest payments also staying the same) or variable. If a loan is variable, how much can the rate change? How often? What is the term of the loan?

Recommended: Fixed vs. Variable Rate Loans

Benefits of private student loans can include the following:

•   They can bridge the gap between what is owed after federal student loans are applied to the balance and what is needed to attend college.

•   Students can apply for them any time of the year, without the strict deadlines associated with federal loans.

•   Borrowers may have more choices in interest rates and terms.

•   The loans may not include origination fees or prepayment fees, although that isn’t universally true.

Potential cons can include these:

•   It isn’t unusual for a private lender to require a cosigner because college students often don’t have enough income to qualify or have established a good enough credit profile to get the loan on their own.

•   Students who are considered a higher credit risk may pay more in interest.

•   Private student loans don’t come with many of the benefits associated with federal loans, such as forgiveness programs and income-based repayment plans.

•   Students may borrow more than they can ultimately afford, and these loans are typically not dischargeable in bankruptcy proceedings.

Check out this Guide to Private Student Loans for more information on funding your education through a financial lender.

Parent PLUS Loans and More

Parent PLUS Loans

When asking “Where is the best place to get a student loan?” also consider the Parent PLUS Loan, in which parents can apply for federal funding to help their children attend college.

Eligibility for a Parent PLUS Loan isn’t based on financial need, but credit is checked. If applicants have a credit history that’s considered “adverse,” they “must meet additional requirements to qualify.”

So, what does “adverse” mean? According to the Federal Student Aid office, this can include:

•   Having accounts that, in total, have an outstanding balance of more than $2,085 and are at least 90 days delinquent.

•   A default or a bankruptcy discharge during the previous five years.

•   Involvement in a foreclosure, repossession, or tax lien situation in the previous five years.

•   Write-off of federal student loan debt or wage garnishment during the past five years.

Qualifying parents of a dependent undergraduate student can receive funding through this loan program to cover education-related costs that are not covered by other financial aid.

Personal Loans

It’s also possible to apply for personal loans from financial institutions to cover living expenses during college or to address an emergency. There are downsides to this, though, including:

•   Interest rates will likely be higher than student loans, along with shorter payoff periods (which means principal and interest payments can be higher).

•   There isn’t typically a grace period, which means repayment starts right away.

•   These loans don’t come with deferments or forbearance, as can be available through federal student loans.

Emergency Loans

In an emergency, a student might want to reach out to the college financial aid center to see if the school offers emergency loans for those in need. These loans would not typically be large, perhaps $1,000 to $1,500, but might be enough to address a dire situation.

Each college has its own guidelines, so check them out carefully. Some charge interest; others may not. Some may charge a service fee; others may not. As with personal loans, repayment may start immediately, so factor that into budget planning.

Private Student Loans at SoFi

To help students who decide that private student loans should play a role in their funding mix for college, SoFi offers private student loans.

Students should take advantage of federal student aid opportunities first. Then, when private loans make sense, SoFi offers them with no fees and flexible repayment options to fit a range of budgets.

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.

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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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