Financial Topics Archives

Dec

2025

A young woman is sitting on the floor, looking at her phone near a laptop, wondering if she should pay off her car loan or student loans first.

Should I Pay Off My Car Loan or Student Loans First?

By Rebecca Safier | Debt Payoff, Financial Independence, Student Loans, student_loan | Comments Off

Table of Contents

Understanding Your Debt Types
Factors to Consider When Prioritizing Debt
Benefits of Paying Off Car Loans First
Advantages of Prioritizing Student Loans
Develop a Debt Repayment Strategy
The Takeaway

If you’re juggling a car loan and student loans, you might be wondering which debt to prioritize. While it’s important to keep up with minimum payments on all your loans, making extra payments on one of these types may help you save money on interest.

The decision of whether to pay off a car loan or student loans first ultimately depends on your personal financial situation. Here, we’ll look at the benefits of paying off each, what factors to consider, and how you can best decide which option is right for you.

Key Points

• Looking at the interest rates and total cost of car loans and student loans can be a helpful way to compare them.

• Prioritizing the loan with the highest interest rate can generally save borrowers the most money.

• Federal student loans are more flexible than car loans, providing income-based repayment options and opportunities for potential loan forgiveness.

• Interest on student loans may be tax deductible. New car loans may qualify for a tax break if purchased between 2025 and 2028.

• Paying off a car loan first can prevent possible repossession of the car in the case of loan default.

Understanding Your Debt Types

First, it’s important to understand the difference between student loans and car loans. Student loans may be federal or private, and they might come with fixed or variable interest rates. They’re unsecured loans, meaning they’re not backed by collateral. Auto loans, on the other hand, are a secured form of debt.

Secured Debt

Secured debt is a type of loan backed by collateral, meaning the lender can seize the pledged asset if the borrower fails to repay.

Car loans are secured by your vehicle. If you fall behind on car loan payments, a lender can repossess your car. Car loans commonly have fixed interest rates and repayment terms of 36 to 84 months.

Unlike student loans, auto loans don’t usually offer much flexibility if you’re having trouble making payments. And car loan payments can be costly — the average car payment in 2025 is $745 a month for new cars. By comparison, the average student loan payment is estimated to be about $536 per month in 2025, according to the Education Data Initiative.

Unsecured Debt

Unsecured debt is a loan that isn’t backed by collateral. Both federal student loans and private student loans are unsecured forms of debt.

Federal student loans qualify for various benefits and plans that can help lower student loan payments, such as income-driven repayment, as well as programs to temporarily pause payments if needed, like deferment and forbearance. Federal student loans are also eligible for forgiveness programs such as Public Service Loan Forgiveness.

Private student loans don’t have as many benefits as federal loans, but some private lenders will let you modify or postpone payments if you run into financial hardship. You might also explore refinancing student loans to see if you can qualify for a lower interest rate or more favorable terms that might help make your payments more manageable.

Factors to Consider When Prioritizing Debt

There are several things to think about when deciding whether to pay car or student loans first. Some of the main considerations include your loan’s interest rate, tax implications, repayment terms, and the impact on your credit score.

Interest Rates and Total Costs

It typically makes sense to pay off the loan with the highest cost of borrowing first. This usually means the loan with the highest interest rate. If your student loan has a rate of 5.00%, and your car loan has a rate of 10.00%, paying off the car loan would save you more money in the long run.

Along with the interest rate, consider whether the loan carries any other fees, such as a prepayment penalty. Student loans don’t charge penalties for prepayment, but a car loan might. Compare each loan’s annual percentage rate (APR), as this figure takes both interest and fees into account.

Tax Implications and Deductions

Another factor has to do with tax deductions. The student loan interest deduction allows you to deduct up to $2,500 a year in student loan interest from your taxable income, depending on your modified adjusted gross income (MAGI). At certain income limits, student loan tax deduction phase-outs begin. In 2025, if your MAGI is less than $85,000 a year if you’re a single filer, and $170,000 if you’re married and filing jointly, you can qualify for the full deduction. If you earn between $85,000 and $100,000 ($170,000 and $200,000 if married filing jointly), you can make a partial deduction.

Car loans may also qualify for a tax deduction. Beginning in the 2025 tax year, the new One, Big, Beautiful Bill Act permits taxpayers to deduct up to $10,000 in interest paid on qualifying auto loans — even if they use the standard deduction. This deduction applies only to new, U.S.-assembled vehicles purchased after December 31, 2024, and only for personal (not business) use. The benefit phases out for individuals with modified adjusted gross income (MAGI) over $100,000 (or $200,000 for joint filers).

Loan Terms and Repayment Periods

Student loans tend to have more flexible repayment terms than car loans. Federal student loan borrowers are eligible for various repayment plans, including the Standard Repayment Plan and income-driven repayment plans. Keep in mind that for new loans taken out on or after July 1, 2026, borrowers will be limited to the standard plan or the new Repayment Assistance Program (RAP).

Car loans don’t qualify for many options. You’ll often choose a repayment term of three to seven years and be expected to pay monthly on your agreed-upon rates and terms. If you can’t make payments, the lender can repossess your vehicle.

Impact on Credit Score and Financial Flexibility

Neither type of payoff is universally better for your credit score, as it depends on your situation. Paying off a car loan can boost your score by reducing installment debt and freeing up cash flow, but it may slightly lower your credit mix. Paying down student loans, which are typically long-term, can improve your payment history and lower your overall debt burden. Paying off either one should have a positive impact on your credit score.

It’s also important to consider your financial situation. If your student loan payment is higher, for example, you may want to pay that off first to free up more cash.

Recommended: Student Loan Consolidation vs Refinance

Benefits of Paying Off Car Loans First

Paying off a car loan before your student loan can have several advantages, especially since car loans don’t have as much repayment flexibility or offer any tax benefits for vehicles that are strictly for personal use. Here are some reasons to consider prioritizing your car loan over your student loans.

Eliminating Secured Debt

Defaulting on a car loan could lead to losing your car. The sooner you can pay off your secured car loan, the sooner you’ll own your car outright and you won’t have to worry about the possibility of car repossession.

Potential Savings on Interest

Car loans may come with higher interest rates than student loans, so paying off the auto loan first could lead to more savings. Keep in mind, though, that if you purchased a new car in 2025, you could qualify for the new car loan interest deduction. Savings on interest mostly applies to vehicles purchased in or before 2024, used vehicles, or foreign brand vehicles.

Let’s say, for example, that you owe $15,000 on a car loan at a 10.00% rate and a $15,000 student loan at a 5.00% rate, and that both loans have five years left on their repayment.

If you put an extra $100 per month toward your car loan, you’d save $1,232 on interest and get out of debt nearly a year and a half sooner. If you put that extra $100 toward your student loans, you’d also get out of debt about a year and a half sooner but you would save just $574 in interest charges. Our student loan payoff calculator can help you crunch the numbers on your student debt.

You could also consider refinancing your car loan for a better rate to help save on interest. This option might be worth exploring if interest rates are lower now than when you originally took out the loan.

Building Equity in Your Vehicle

The faster you pay down your car loan, the more equity you’ll hold in your vehicle. That means you’ll own more of your car outright, which could come in handy if you ever want to sell it. Plus, you’ll be less likely to end up underwater on your car loan, which can happen when the debt you owe on your vehicle exceeds what the vehicle is worth.

Lower Monthly Obligations and Insurance Costs

Paying off your car loan can significantly reduce your monthly financial obligations, freeing up room in your budget for savings, investments, or other expenses. Once the loan is gone, you’re no longer responsible for a sizable installment payment each month, which can improve overall cash flow. In addition, some lenders require comprehensive and collision insurance coverage for financed vehicles, meaning you may be able to lower your insurance costs once the car is fully paid off.

Advantages of Prioritizing Student Loans

Although it often makes sense to prepay a car loan before a student loan, there are certain advantages to paying off student loans first. Here are some scenarios where you could benefit from prepaying your education debt:

• Your student loans have a variable rate: Some private student loans have a variable rate that can increase and make your borrowing costs unpredictable. If you’ve been dealing with a rising variable rate, you may want to pay off those loans as quickly as you can. You might also explore refinancing those loans, which could allow you to switch to a fixed (and potentially lower) interest rate.

• You’re considering filing for bankruptcy: If you’re in dire financial straits, you might be looking into potentially erasing or restructuring your debts through bankruptcy. Although it’s possible to discharge student loans in bankruptcy, the process is notoriously difficult. It may be easier to discharge a car loan through bankruptcy than a student loan.

Access to Federal Loan Protections and Forgiveness

Federal student loans come with a variety of borrower protections, but you may not require any of them for managing your student loan debt. If you aren’t pursuing loan forgiveness, for instance, you might focus on paying off your federal loan debt.

Income-Driven Repayment Options

Federal student loans also come with income-driven repayment plans, where your monthly payments are based on your income and family size. If you aren’t using that benefit, it might make sense to prioritize paying off your student loans before your car loan.

Recommended: Student Loan Refinancing Calculator

Develop a Debt Repayment Strategy

Once you’ve decided which loans to pay off first, it’s important to develop a strategy for repayment. Here are some steps to take.

Create a Budget and Debt Snowball

Start with making a budget so you have a clear sense of your income and expenses. Track your spending, and look for areas where you could cut back. By reducing your spending, you might find room in your budget to direct extra payments toward your debt.

There are debt pay-off strategies that can help. For example, with the debt snowball method, you pay off the loan with the smallest balance first. Then you work on paying off the next smallest loan and so on. The debt avalanche, in contrast, targets the loan with the highest interest rate first, and then the loan with the next highest interest rate, and it can save you the most money in the long run.

The debt snowball may not save you as much money as the debt avalanche, but it can be psychologically rewarding to pay off a debt in full before moving onto the next one.

Seek Additional Income Sources

After budgeting and cutting down on spending, you might explore ways to increase your income. This could mean going for a promotion and raise at work or finding a new job. You could also consider taking on a side hustle, such as driving for a ride-sharing service or doing freelance tutoring.

By setting up additional income streams, you’ll have more cash to put toward your loans and get out of debt faster.

Negotiate with Lenders

If you’re looking to modify payments or adjust your interest rate, try negotiating directly with your lender. Notify the lender that you’re having difficulty repaying the loan and see if they might be willing to work with you. Depending on the type of loan, the lender might offer a repayment plan or reduce the loan interest rate. Although there’s no guarantee of success, it’s worth a try.

Consider a Hybrid Approach to Paying Off Both Loans

A hybrid approach — paying more than the minimum on both your car loan and student loans — can be a smart strategy if you’re unsure which to prioritize. By splitting extra payments, you reduce both balances simultaneously, chip away at interest, and avoid neglecting one debt while focusing on the other. This method also preserves financial flexibility, allowing you to adjust your payoff strategy if your income, expenses, or interest rates change over time.

The Takeaway

While there’s no one-size-fits-all answer to whether you should pay off a car loan or a student loan first, paying off the loan with the highest interest rate can generally save you the most money. For many borrowers, that may be their car loan. If your student loans have high interest rates, you might consider refinancing your student loans.

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

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Is it better to pay off higher interest debt first?

Paying off high-interest debt first usually makes the most financial sense, since it will save you more money in the long run. However, it’s important to keep up with the minimum payments on all your debts so you don’t end up in delinquency or default.

Can I deduct student loan interest on my taxes?

It depends on your income. The student loan interest deduction lets you deduct the interest you pay on student loans, up to $2,500 a year if your modified adjusted gross income (MAGI) is less than $85,000 for single filers and $170,000 if you’re married and filing jointly. If you earn between $85,000 and $100,000 ($170,000 and $200,000 if married filing jointly), you can make a partial deduction. Anything more than that and you cannot take the student loan interest deduction.

Can I claim car loan interest on my taxes?

Yes, you may be able to claim a deduction for car loan interest starting 2025, but only under certain conditions. The loan must be for a new, U.S.-assembled vehicle purchased for personal use, and the deduction is capped at $10,000 per year. This temporary benefit applies through tax year 2028, and you’re eligible whether you itemize or take the standard deduction.

What happens if I default on my car loan or student loans?

A car loan is secured by your vehicle, and if you default on the loan, the lender can repossess your car. Student loans are unsecured, so a lender can’t take your personal property. However, the government can garnish your wages, tax refunds, and Social Security benefits if you default on a federal student loan. Defaulting on private and federal student loans can also damage your credit, and a private lender could potentially take you to court to try to collect the money.

Can paying off a car loan early hurt your credit score?

Paying off a car loan early may cause a small, temporary dip in your credit score because it closes an active installment account and slightly reduces your credit mix. However, the impact is usually minor, and becoming debt-free often outweighs the short-term change in your score.

Should I refinance my car loan or student loans before paying them off?

Refinancing your car loan or student loans before paying them off can be beneficial if you qualify for a lower interest rate or better terms. Lower monthly payments or reduced interest costs can free up cash and make repayment more manageable. However, compare fees, credit requirements, and federal loan benefits before refinancing.

Photo credit: iStock/damircudic

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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

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.

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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SOSLR-Q425-059

Dec

2025

Does an MBA Degree Increase Your Salary?

By Pam O’Brien | Going to College, Money & Life, Student Loans, student_loan | Comments Off

Earning an MBA, or a Masters of Business Administration, degree can increase your salary, teach you specialized skills, and provide you with new career opportunities. But getting your MBA is expensive, with an average cost of $62,600 for a two-year program versus $51,740 for a master’s degree in general at a public school. A degree from a top-tier school can be considerably more, with tuition and living expenses totaling $200,000 for the program.

Just how big of an MBA pay increase you’ll get in return depends on a number of factors, including the school you attend, the field you’re in, and your previous work experience. Here’s what to know about an MBA salary increase and how much you might expect to receive.

Table of Contents

Value of an MBA Degree
Average Salary Increase with an MBA
Factors Influencing MBA Salary Potential
Choosing the Right MBA Program
How to Pay for Your MBA
The Takeaway

Key Points

• MBA graduates may earn 70% more than those with a bachelor’s degree.

• The median starting salary for MBA grads may range from $85,000 to $120,000, which is much higher than the average for bachelor’s degree holders.

• The salary boost from an MBA varies significantly by industry — graduates in finance, technology, consulting, health care, legal, and manufacturing tend to earn very different post-MBA pay.

• Your MBA salary potential is strongly influenced by the prestige of your school, your previous work experience, and how specialized your MBA program is.

• Ways to pay for your MBA include student loans, grants, scholarships, and tuition reimbursement. You can also refinance your undergrad loans to possibly lower your payment.

Value of an MBA Degree

An MBA degree can make you more marketable to employers, which can in turn help you land a better job and a higher salary, research shows. And while earning your degree can come with a hefty price tag, taking out MBA loans is one option to help you pay for it.

The median starting salary of recent MBA graduates in the U.S. ranges from $85,000 to $120,000. That’s significantly more than the $68,680 starting salary of grads with a bachelor’s degree. Knowing how much you might earn could help you determine if an MBA is worth it.

An MBA can also help you advance in your career. MBA grads typically perform better and move up the ladder faster than other employees. That places them in high demand in the workplace, and 37% of employers plan to hire more MBA graduates in 2025 (up from 17%).

Average Salary Increase with an MBA

MBA graduates may earn up to 70% more than those with just a bachelor’s degree, assuming an entry level salary of $120,000 for MBA grads and $70,000 for those with a bachelor’s degree.

However, the amount your salary might increase once you have an MBA depends on the field you’re in. Here’s a closer look.

Salary By Industry and Job Function

The following industries tend to pay well for those who have earned an MBA, making them some of the best jobs for MBA graduates.

Industry	Median Annual Salary
Finance	$175,000
Technology	$162,750
Consulting	$190,000
Health Care	$163,000
Legal	$225,000
Manufacturing	$165,000
Entrepreneurship & Startups	$151,200

Finance

Many MBA grads pursue a career in finance, and it can be lucrative. The average salary for an individual with an MBA in finance is $175,000, but the amount can be more than $250,000 annually depending on your position.

Technology

Another hot field for those with an MBA is technology, especially as AI becomes more prevalent. The average salary for MBA grads in tech is $162,750 a year. However, your MBA salary increase could run higher still and may even include a signing bonus.

Consulting

Those who work as consultants and have their MBA average about $190,000 annually, but a consultant’s salary may go up dramatically within a few years, especially if they work at a big firm.

Health Care

Health care management is a popular job for MBA graduates. The average earnings are $163,000 per year. Top earners can make over $200,000 per year, but those with less experience may make less than a six figure salary.

Legal

MBA graduates working in the legal field earn a median annual salary of about $225,000. Job title matters, though, with those working as general counselors earning more than as general attorneys.

Manufacturing

MBA graduates in the manufacturing field earn a median annual salary of $165,000, demonstrating the industry’s strong demand for leaders with advanced operational and strategic expertise. Job titles include industrial production manager, purchasing manager, general manager, and senior operations leader.

Entrepreneurship and Startups

MBA graduates in the entrepreneurship and startups field earn a median annual salary of $151,200. However, this can vary substantially. Those just starting out typically earn much less, whereas the income potential for successful business owners could be unlimited.

Factors Influencing MBA Salary Potential

In addition to the field you choose to work in, how much you’ll earn after getting your degree is influenced by such things as the MBA program you choose and your previous work history and salary.

These are the five major factors that can affect MBA salary potential.

School Reputation and Rankings

Although it’s likely to be pricier, going to a top-rated school to get your MBA can pay off in multiple ways. These schools tend to have robust networking programs and employer recruitment opportunities. Some colleges may help prospective graduates find internships and jobs. Also, grads from top 10 schools tend to earn more than those who attend other programs.

Before applying to an MBA program, do your research to see where recent alumni have ended up and which companies have recruitment relationships with the school. For instance, certain coveted employers might always attend a particular school’s job fairs. If a university has connections to companies you might be interested in working at, you may want to apply to their MBA program.

Recommended: Why Accredited MBAs Are Important

Specialization and Concentration

Every MBA program offers different classes, internships, and hands-on opportunities, and it’s important to look for ones tailored to your goals and career path. Choose a program with specialized concentrations in the field you’re most interested in. For instance, some MBA programs specialize in health care while others focus on finance.

If you’re currently in a field that you want to pivot out of — moving from marketing to consulting, say — an MBA could help with career change without going back to an entry-level job.

Work Experience and Performance

The more work experience you have, the more likely you are to score a higher salary once you get an MBA. This is especially true if that experience is relevant to the area of study you’re pursuing. Most people going for their MBA have about five years of experience on the job. And some MBA programs require students to have a certain number of years of work experience before they apply.

Networking Opportunities and Alumni Connections

Strong networking opportunities and access to a well-established alumni network can significantly influence your MBA salary potential. Business schools with active alumni communities provide valuable connections to hiring managers, industry leaders, and recruiters, often opening doors to high-paying roles that might not be publicly advertised. These networks can also offer mentorship, referrals, and insider knowledge that help you strategically position yourself in competitive job markets.

Internship and Recruiting Access

Many top business schools have strong relationships with leading employers who actively recruit MBA students for high-paying internships that often lead to full-time job offers. These internships provide crucial hands-on experience, skill development, and exposure to different industries, all of which enhance your marketability.

Recommended: MBA Refinancing

Choosing the Right MBA Program

It’s important to find an MBA program that fits your interests and goals. Look for programs that offer concentrations in the areas and fields you want to pursue. Then review the curriculum and the courses offered to make sure they appeal to you.

In addition, learn where graduates of the MBA program have ended up. What companies do they work for and what kinds of jobs do they have? You might even reach out to ask how they felt about the program and if they would recommend it.

Location

Where the school is located is also a prime consideration. If you’re working and going to school at the same time, you’ll need to find a program in your area. You could also explore top online MBA programs if you want to take advantage of a particular school’s offerings when you’re unable to attend it in person. These programs tend to cost less than in-person ones, but you may miss out on networking opportunities.

If you’re a full-time student and you have the opportunity to move to attend school, you could choose an MBA program near the area where you hope to work. For instance, if you’d like to be employed in Silicon Valley, a school nearby might be a good choice for you. It may be easier to get an internship there as well as a job after graduation.

Cost

Of course, the cost of an MBA program is likely to be one of the most important factors in your decision. Beyond the tuition, find out the true cost of getting an MBA at any school you’re interested in. This includes living expenses, books, transportation, and so on.

Delivery Format (Online vs On-Campus vs Executive MBA)

In addition to location and cost, you need to consider how you want to learn the information. Some people learn best in a classroom environment where they can ask questions and interact with classmates face-to-face. Others prefer online learning where they can go at their own pace and learn the information on their own time.

Executive MBAs (EMBAs) are typically part-time and hybrid, with a mix of online classes, in-person modules, and intensive residential sessions. Most students can still work full-time while pursuing an EMBA.

How to Pay for Your MBA

There are a number of ways to pay for your MBA, such as student loans, scholarships, grants, employer sponsorships, and more.

Student Loans

You may want to consider both federal and private student loans. Federal loans include Direct PLUS Loans for graduate students from the Education Department. However, those are being eliminated for new borrowers on July 1, 2026.

Borrowers will have to rely on Direct Unsubsidized Loans moving forward. Starting July 1, 2026, borrowing is capped at $20,500 for graduate students, with a lifetime aggregate limit of $100,000.

Students can also rely on private student loans. Private graduate loans may have fixed or variable rates, and are offered by banks, credit unions, and online lenders. Be aware, though, that with private student loans, you will not have access to the same federal protections and programs you would with federal loans, including income-driven repayment plans.

Scholarships, Grants, and Fellowships for MBA Students

Scholarships, grants, and fellowships are some of the most valuable funding sources for MBA students because they do not need to be repaid. Many business schools offer merit-based awards to applicants who demonstrate academic excellence, leadership potential, or significant professional achievement. These programs can cover anywhere from a portion of tuition to the full cost of attendance, making them highly competitive but extremely worthwhile.

Employer Sponsorships and Tuition Reimbursement

Employer sponsorships and tuition reimbursement programs can be ideal for professionals who plan to keep working while pursuing their degree. Many companies provide partial or full tuition coverage as part of their employee development initiatives, seeing it as an investment in building stronger leaders and more skilled teams. For working students, this support can make an MBA far more affordable without taking on significant debt.

However, employer-assisted education typically comes with conditions that are important to understand upfront. Many employers require a commitment to stay with the company for a certain period after graduation, and leaving early may result in repaying some or all of the funds.

It’s best to ask your employer what they cover and what the expected commitment is from you prior to making a decision.

Recommended: Average Salary by State

The Takeaway

Earning an MBA may help you fulfill your career dreams and earn a higher salary. The degree could increase your salary by as much as 70%, depending on such variables as the school you attend and the field you work in. But getting an MBA can be costly, averaging more than $60,000 for a two-year program, and up to $200,000 for top-tier schools.

If you decide that earning an MBA makes sense for you, there are ways to help cover the costs and develop a solid budget. You can explore all options, including scholarships, grants, and federal and private student loans, as well as refinancing your existing loans.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What is the average starting salary with an MBA?

The median starting salary with an MBA ranges from $85,000 to $120,000. That’s far higher than the $68,680 starting salary of graduates with a bachelor’s degree.

Is an online MBA worth the investment?

Online programs offer greater flexibility and are typically less expensive than in-school programs. However, with an online program, you may not have access to all possible networking opportunities or the opportunity to speak with professors face to face. You may also feel less connected to the school and the overall experience.

How long does it take to recoup MBA program costs?

How long it takes to recoup MBA program costs is different for everyone, depending on the price of the program and the salary increase they enjoy after earning their degree. In general, though, it takes grads of two-year full-time MBA programs about three and a half years of working to recoup the cost. Those who enroll in online MBA programs recoup the cost in about two and a half years of work.

What factors most affect post-MBA salary?

Post-MBA salary is most affected by factors such as the reputation of the business school, the student’s pre-MBA work experience, the chosen concentration or specialization, and the industry and location of employment. Networking opportunities and internships during the program also play a significant role.

Do all MBA programs lead to higher salaries?

Not all MBA programs guarantee higher salaries. The impact on earnings depends on the program’s reputation, the student’s pre-MBA experience, the chosen specialization, and the job market. Top-tier programs and relevant industry experience often lead to better job opportunities and higher salaries.

Photo credit: iStock/Xavier Lorenzo

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.

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

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

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

SOSLR-Q324-023

Dec

2025

An aerial view of college graduates in black caps with red tassels in a crowded ceremony, receiving advice on college graduates entering the real world.

33 Pieces of Advice for College Graduates Entering the Real World

By Kaitlyn Farley | Fresh Out of School, Life & Career, student_loan | Comments Off

Woo-hoo! You have your degree, perhaps a job offer, a place to live with a chill roommate, and you’ve found your favorite cafe where the cold brew is just right. Life is great, right?

Even if you don’t have all of the items above checked off, starting your independent, post-school life is an exciting time, and it’s a moment to learn all sorts of adulting skills.

To help you with that, here are 33 things to consider, learn, or do to help you as you discover everything from how to speak up in meetings to how to find an in-network doctor. Read on for tips for joining the real world and finessing your finances, career, and personal life.

Key Points

• Creating a budget to track income and expenses is one of the most important things you can do as a new grad entering the workforce.

• Start saving for retirement as soon as you can. It leverages the power of compound interest, allowing even small contributions to grow significantly over time.

• Build a professional network by attending industry events, joining online groups, and connecting with alumni to open doors for career opportunities.

• Stay competitive in your field by pursuing ongoing education and certifications, which can enhance your skills and job prospects.

• If your student loan payments are too high, consider refinancing them. This could offer you lower monthly payments or a lower interest rate.

1. Tackle Your Overall Financial Situation

Your finances tend to get more complicated as you get older. At its most basic, though, understanding your financial situation means knowing your credit score, taking stock of your outstanding debts, figuring out ways to pay off student loans (if you haven’t already), and understanding what your monthly bills are.

💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

2. Embrace a Budget

Here’s another bit of advice for college grads: Once you know how much money you have, owe, and make, it’s time to figure out your budget. Even if you have one already, post-graduation is a perfect time to reconsider your budget and make updates as needed. Never made one before? The popular 50/30/20 budget can be a smart start.

3. Learn About Job Perks

No matter if your job is still shiny and new or an old hat at this point, it’s good to take time to review your employee handbook for perks you may have overlooked. Check out your company’s retirement plan types and health insurance plans. You’ll also want to review potential bonuses and perks, such as free gym memberships, commuting stipends, and the like.

4. Start Saving for Retirement

Seriously? Yes! This may not be the most fun thing to review (and likely wasn’t part of your college advice), but your future self will thank you. Take time to learn about a 401(k) plan that may be available at work and hopefully enroll. You want to at least contribute enough to get any company match, which is like free money.

No job yet or retirement plan you qualify for? Spend a bit of time learning about the different kinds of IRAs.

5. Evaluate Your Housing Costs

Depending on your location, it can be hard to find affordable housing or even a job if your industry isn’t hot in your market. Before signing on the dotted line, consider how much home you can afford to rent. It can be expensive to live alone; having roommates can be a great way to save money.

6. Check Your Social Media

Even if you already have a job lined up, you may want to take stock of your social media. A professional online presence may help prevent current or future employers from second-guessing about hiring you. Those wild nights out with friends definitely don’t need to be broadcast via an account that’s public.

Recommended: College Graduation Rates

7. Network

Networking is crucial to helping you achieve your career goals. Whether through industry conferences or social media sites like LinkedIn, it’s smart to stay connected with professionals in your industry to get career advice and learn about job openings you may be the perfect fit for.

8. Schedule Some “You” Time

Scheduling dedicated “you” time after graduating college helps you decompress, recharge, and adjust to the new pressures of adult life. It also creates space for reflection, allowing you to set healthy routines and stay grounded as you navigate major transitions.

9. Start an Emergency Fund

Once you have a steady income, it’s wise to start an emergency fund, perhaps by a recurring automatic transfer into savings. Start slow and steady, and aim to build up to at least three to six months’ worth of living expenses in the bank. This will help protect you if you have a major expense or job loss.

Recommended: Emergency Fund Calculator

10. Find Your Medical Team

This tip is especially important if you’ve moved to a different state or city. Out-of-network bills can be costly, so having a doctor and knowing which hospitals are in-network can help you save money and stress in the long run. Ask coworkers, do online research, and don’t forget to explore where the nearest and best urgent care centers are.

11. Snag a First-Aid Kit and Emergency Bag

This may sound like your parents or grandparents talking, but no one sees an accident or disaster coming. You could get burned cooking brunch one Saturday, or a major storm could sweep through and leave you without power.

Store-bought first aid kits may be good starting points, but extra bandages, allergy relief pills, antacids, and other over-the-counter medicines will take your kit to the next level.

For an emergency go-bag, consider packing at least three days’ worth of clothes, a mini first aid kit, cash, a flashlight, and other provisions you think you (and your pets or loved ones) may need if you need to leave your home in a rush.

12. Consider Life Insurance

If your employer offers life insurance as a benefit and you’re supporting family members, it may be worth considering. Understanding life insurance policies can help you make the right decision for you. Even if you decide you don’t need it right now, you’ll be better prepared to sign up when the time is right.

💡 Quick Tip: If you have student loans with variable rates, you may want to consider refinancing to secure a fixed rate in case rates rise. But if you’re willing to take a risk to potentially save on interest — and will be able to pay off your student loans quickly — you might consider a variable rate.

13. Dive into Hobbies

It’s healthy to have interests outside of your career. If you’re wondering what to do after college besides work, you can learn to play instruments, sing, run, join a local soccer team, play games online, or enjoy any other hobby that helps you unwind and relax. Or maybe you’ll want to give back and spend some time planting at a local park or prepping meals at a soup kitchen. Find some passions and take the time to pursue them.

14. Tackle Your Taxes

If you’re employed (full-time, part-time, seasonally, side hustle, etc.), it’s time to learn how to prepare for tax season, which can help you avoid filing them late. Whenever you get an important piece of paperwork that’ll affect your taxes (such as W2s, charitable contribution receipts, or even home office receipts), you can put these in a safe place so you’re ready to go come tax time.

Then, determine if you’ll do your taxes yourself (say, with tax software) or work with an income tax preparer to get your return in on time.

15. Find Your Work-Life Balance

Each person has their own idea for work-life balance. If you’re not sure what yours is, consider taking the first few months on the job to figure that out. Being a good employee, for instance, doesn’t have to mean being the first person at the office in the morning and the last one out at night. If you feel tired or overwhelmed, it may be time to dig into and renegotiate those work-life boundaries.

16. Master Basic Home Repairs

Home repair costs can add up (especially as the years unfurl). You could save money by doing them yourself, especially if or when you own your own place and don’t have a landlord to pay for those costs. Problems such as a clogged sink, broken light switch, and dripping shower head may be easier than you think to fix.

If you do have a landlord, you might even get a discount on your rent by making simple repairs yourself. Just be sure to get a signed agreement from your landlord outlining how that will work.

17. Be Smart About Subscriptions

Monthly subscriptions add up over time, and it’s easy to forget how many you have going at a given moment. Consider looking at what you’re actually subscribed to. Do you really need Max, Hulu, Peacock, and Netflix, or could you save on streaming services by dropping one (or two)? And do you really need so many gym passes and coffee clubs? Take a closer look and see if you can cut back.

18. Learn to Cook

Takeout is great, but you could save money on food and healthy up your meals if you cook at home. It’s also helpful to plan your groceries ahead of time to avoid overspending and food waste. Plus, it’s a fun pursuit with loads of free recipes and cooking videos available online. Invite a friend over and make it a social occasion.

19. Speak Up in Meetings

If you think you don’t have much to add to the conversation, agreeing with what someone has said — and tacking on an extra thought — can be a way to participate and not feel like a wallflower.

20. Tweak Your Sleep Hygiene

Getting enough high-quality sleep can be a key contributor to your wellness. Going to sleep around the same time every night can help to ensure you get enough rest so you can make good decisions and keep healthy habits. And here’s a reminder that taking your mobile device to bed with you is likely to lead to an hour or more of rabbit holes that rob you of your rest.

21. Start Investing

The idea of investing may sound intimidating, but you don’t have to be a Wall Street wolf to invest. Many rookies start small. Learn more about investing in your 20s and perhaps open an account.

22. Find a Mentor

If there’s someone higher up the ladder at your workplace with whom you click and who offers great guidance, ask them out for coffee to learn more about how their career progressed and see what advice they might share. You can also look for guidance via a professional group; you might find a mentor at a summit or similar event.

Mentors can often help you navigate your workplace, offer advice, and keep you motivated and sane when things get stressful. They also have contacts that may be helpful for you to know.

23. Change Your Mind

Many people end up with jobs outside of what they studied, even after getting a master’s or MBA. If this turns out to be the case for you, just know that people can change their minds and that it’s okay to switch paths.

Recommended: Benefits of Returning to School

24. Get Help

Unemployment, Medicaid, and other social nets exist for a reason. There are going to be choppy waters, and these services are meant to help. Using them because you got laid off or furloughed isn’t shameful. And if you can’t find employment, that’s another reason to get support versus staying silent and toughing it out.

25. Put Home Maintenance on Your Calendar

When was the last time you cleaned your dryer vents? Do you know how to change the filter in your HVAC? Avoiding these kinds of things for too long can result in big maintenance bills — and potentially be a safety hazard. Not sure what to clean? Check out a house maintenance list and put reminders in your mobile device’s calendar.

26. Travel

Hopping on a plane and traveling to far-flung places can get more difficult as you become older. It can be harder to take time off work, and perhaps you’ll have a family, meaning you will need a bigger travel budget. Now, when you’re young and probably okay with “roughing it,” it’s possible to travel cheap!

27. Learn to Say No

An important life skill is learning how to say no. Don’t want to go out for drinks? Can’t finish that report by Monday? Your best bet may be to just be honest. Taking on too much may only backfire, so learning to say no without feeling guilty can be important for your mental health and work-life balance.

28. Avoid Lifestyle Creep

Lifestyle creep is the situation in which the more your income increases, the more you spend. While a pay raise may mean you can splurge a bit, if you wind up renting a bigger house, leasing a luxury car, and treating yourself to a week in Tulum, you could wind up in the hole. Instead, treat yourself within reason, and plow more money into savings, such as for a down payment on a future home.

29. Outfit Your Home Office

Are you going to be working from home for some or all of your week? Having ergonomic, comfortable, and functional furniture can help keep your back and neck from hurting and your mind from getting distracted. Don’t just perch on the couch or in bed with your laptop. Scan home office ideas if you’re in need of some inspiration.

30. Give Back

You’re joining the ranks of adults, so do the right thing and find a way to contribute and help others. Maybe you can spend some time on the weekend at a Habitat for Humanity site or make a charitable donation to a favorite cause.

31. Understand Student Loan Repayment Options

Understanding your student loan repayment options sets yourself up for financial stability after graduation. Consider income-driven repayment plans, which adjust your monthly payments based on your income and family size, consolidating your federal loans into a single, simplified payment, or refinancing your loans — especially if you have strong credit — to potentially secure a lower interest rate.

32. Set Career Goals and Revisit Them Annually

Setting clear career goals helps you stay focused, motivated, and intentional as you navigate life after graduation. Reviewing these goals each year allows you to adjust based on new experiences, changing interests, and evolving opportunities, ensuring your career trajectory stays aligned with who you are and where you want to go.

Recommended: Tips for Applying for Graduate School

33. Learn the Basics of Insurance (Health, Renters, Auto)

Learning the basics of insurance is an important part of stepping into financial adulthood. Understanding how health insurance works helps you choose a plan that fits both your medical needs and your budget, while renters insurance protects your belongings and provides liability coverage in case of accidents. Auto insurance ensures you’re protected financially if you’re involved in a car accident or experience vehicle damage.

The Takeaway

Your post-college years can be exciting and fun but also a bit confusing and challenging at times. Start with a few items on this list, and work your way through to build your life skills, launch your career, and manage your money confidently.

And if your student loan payments are getting in the way of you living your best post-college life, you may want to consider refinancing your student loans.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How long does it take to get a job after college on average?

It typically takes graduates three to six months to find a job after college. However, recent grads reportedly face tougher economic conditions and less employer demand, extending their search beyond six months. Networking, internships, and a well-crafted resume can help expedite the process.

What is the average salary for college graduates?

The average starting salary for college graduates holding a bachelor’s degree is $68,680 in 2025. Engineering and computer science graduates often earn higher starting salaries, while those in humanities and social sciences may start lower. Experience and location also play significant roles.

What’s the average age of a college graduate?

The average age of a college graduate is around 24 years old for those who complete their degree right after high school. However, this can vary widely depending on factors like part-time study, career breaks, and returning to education later in life. Many nontraditional students graduate in their 30s or even 40s.

What percent of college graduates go back to school?

About 14% of the population holds an advanced degree, such as a master’s degree or professional certification. This varies by field and career goals, with higher rates in fields like medicine, law, and academia. Continuing education can enhance career prospects and personal development.

What percent of college graduates use their degree?

A recent study found that more than half of college graduates are working in fields that do not require a degree. However, this can vary by field, with higher usage rates in specialized professions like engineering and health care. Factors like job market conditions and personal career choices also influence whether a degree is directly applied.

Photo credit: iStock/Rattankun Thongbun

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

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.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

SOSLR-Q425-052

Dec

2025

Septic Tank Loan and Financing Options: A Comprehensive Guide

By Kim Franke-Folstad | Home Ownership, personal_loan | Comments Off

Table of Contents

Septic System Costs
What Factors Influence Septic System Pricing?
Personal Loans for Septic System Financing
Home Equity Loans and HELOCs
Credit Score Considerations for Septic System Loans
Government Programs and Grants
Contractor Financing and Payment Plans
Comparing Septic System Financing Options
Tips for Choosing the Right Financing Option
The Takeaway

If your home isn’t connected to a local sewer system, a septic tank is a must. But setting up a new septic system or replacing an old one can be a pricey endeavor. A new system, as of 2025, can typically cost between $3,634 and $12,512, with an average of $8,035, according to the home improvement site Angi.

Fortunately, there are a few different payment options available to help homeowners cover the costs of installing this essential piece of equipment.

In this guide, you’ll learn the various sources you might choose to fund your septic system project, and some of the pros and cons of each.

Key Points

• The average septic system replacement currently costs about $8,035.

• Personal loans offer quick funding for septic system projects, with flexible terms and no collateral required for qualifying borrowers.

• Home equity loans and HELOCs provide financing options with lower interest rates, but require sufficient home equity and involve closing costs.

• Government programs offer grants and low-interest loans for septic system costs, but eligibility criteria apply.

• Contractor financing and payment plans may be available, offering convenience for those who prefer to finance through their septic tank company.

Septic System Costs

Most homeowners in the U.S. pay from $3,634 to $12,512 for a septic system installation, according to the home improvement site Angi. The average cost comes out to about $8,035. But prices can vary significantly depending on the size and type of tank you choose, the materials used, labor, and other factors — and costs could go over $20,000.

If you’re a die-hard DIYer who’s considering tackling this project with the help of some YouTube videos, you may want to think again. This is a big and dirty job that’s probably best left to professionals with the experience and machinery to get it done right. Here, take a look at some ways you can pay for the work and stay clear of the mess and stress.

Recommended: Personal Loan Interest Rates

What Factors Influence Septic System Pricing?

How much a new septic system costs will depend on several factors. Among them are:

• How large and complex the septic system is

• The site conditions, which can include everything from whether it’s steeply sloping to what type of soil needs to be dug up

• Local permit guidelines and other regulations

• What type of materials and tank you opt for

• The cost of labor which can vary considerably with the cost of living in your area

As with other home improvement projects, it’s wise to comparison-shop and get multiple bids before starting a septic system replacement project.

Personal Loans for Septic System Financing

If you need to finance your project in a hurry (and with a septic system repair, that’s often the case), you may want to consider a personal loan.

With personal loans, it’s possible you could receive your money on the same day you apply or within a few business days. You also may have some flexibility in when the funds arrive and how long you have to pay back the money.

Personal loan repayment terms typically range from two to seven years, but they vary by lender. The amount you can borrow and the interest rate you’ll pay with home improvement loans are generally based on a few different factors, including your credit score. Typically, the better your credit, the lower the interest rate.

Generally speaking, qualifying borrowers with a strong credit history and high income may be able to secure a loan of up to $100,000 without having to provide some type of collateral. This type of home improvement loan usually has a fixed interest rate, so you can know exactly what your monthly payments will be.

Home Equity Loans and HELOCs

Another potential way to finance a septic system project is to tap your home equity and apply for a home equity loan or home equity line of credit (HELOC).

If you qualify for a home equity loan for your septic system, you’ll receive a lump-sum amount that you’ll repay in equal monthly installments, much like a personal loan.

A home equity line of credit (HELOC), on the other hand, works more like a credit card. The interest rate usually isn’t fixed with a HELOC, and neither is the payment amount. As you repay the money you’ve borrowed, you can use it again — up to a predetermined limit.

Because both home equity loans and HELOCs are secured with your home as collateral (which means the lender can foreclose if you fail to make your payments), the interest rates are generally lower than with unsecured personal loans. But it’s worth noting that you typically have to have at least 15% to 20% equity in your home to qualify, it can take longer to get your money, and you can expect to pay closing costs with this type of financing.

Credit Score Considerations for Septic System Loans

If you’re planning on getting a loan to finance a new septic system, your credit score will likely come into play in a few important ways.

• Your credit score and credit report will impact the kind of loan you qualify for. Those with higher scores and strong reports will usually be approved for lower interest rates and higher loan amounts, and the opposite is true as well.

• More specifically, many lenders require a good to excellent credit score (say, 660 or higher) in order for an applicant to be approved for a loan at a favorable rate. Loans are often available to those with lower scores (even borrowers with bad credit), but they will probably involve higher interest rates.

• When you apply for a loan to fund a new septic system, the lender will typically require a hard credit pull to gain insight into your creditworthiness. This usually lowers your credit score by several points for a short period of time.

• Once you have a loan for your new septic system, on-time payments should positively impact your credit score. Late payment or missing payments entirely, however, can lower your score.

Government Programs and Grants

If you meet certain criteria, you may be able to get help with funding through federal or state assistance programs. Here are a few options you may want to research:

• The Environmental Protection Agency (EPA) Clean Water State Revolving Fund provides grants to all 50 states and Puerto Rico so that qualifying residents can receive low-interest loans to install, upgrade, or maintain their septic systems.

• The U.S. Department of Agriculture (USDA) offers both loans and grants that can benefit low-income homeowners who need help with their septic system costs.

• An FHA 203(k) loan combines a mortgage and funding for repairs, which may include septic system replacement.

• The Department of Housing and Urban Development (HUD) provides community block grants to help eligible homeowners repair, install, or improve their residential septic system.

• Some states also offer tax credits or deductions to residents who repair or replace a septic system. (You may want to check with your state government or local tax professional first to see what’s available and if you qualify.)

Contractor Financing and Payment Plans

It’s possible the septic tank company you’re considering has teamed up with a lender in order to offer its own financing plan to potential customers.

The salesperson or contractor will likely take you through each step of how the company’s septic tank financing works and may even offer a financial incentive if you sign up. Just remember that a contractor isn’t obligated to find you the best payment solution when it comes to how to pay for septic repair. So it’s important to review and understand the terms of any offer you receive, and to compare the contractor’s offer with other options available.

Recommended: How Much Does a Home Inspection Cost?

Comparing Septic System Financing Options

Hopefully, you’ll have time to do some comparison shopping as you consider the various financing methods for your septic system project. Here are some things to keep in mind as you do your research:

• What monthly payment works for your budget? A longer loan term generally means lower monthly payments. Keep your budget in mind as you choose how much time you’ll need to pay back your septic tank installation financing.

• How’s your credit? Good credit can often get you a better interest rate and other loan terms. If you aren’t sure where your credit stands, you may want to check out your latest credit report and/or credit score and dispute any errors you see.

• What’s in the contract? Understanding the terms you’re being offered for a septic tank loan can keep you from running into trouble down the road. For example, if a contractor or credit card company offers you a low introductory interest rate, it’s important to ensure you’ll have enough time to pay off your purchase before the interest rate goes up.

• Are there fees? Remember, fees can add to the overall cost of your loan. Some lenders may charge origination, application, and other loan fees. And you can expect to pay for a home appraisal and other closing costs if you get a home equity loan or HELOC.

• How fast can you get the money? If you don’t have enough cash stashed away for your project, applying for a personal loan may be the quickest way to finance the work. Some personal loan lenders can get you your money on the same day you’re approved. Contractor financing also may offer a convenient and fast approval process.

Tips for Choosing the Right Financing Option

Deciding on the right financing option for your septic system replacement or repair will depend upon your unique situation. A few points to consider:

• If you are in a rush to get your system back up and running (which is often the case), a personal loan can be a good avenue to pursue. Some lenders even offer same-day financing options. Note that your credit score will come into play, with higher scores typically contributing to lower interest rates.

• If you have built up home equity, you might investigate a home equity loan or line of credit. These can take longer to secure and they use your home as collateral (meaning you risk foreclosure if you default), but they can offer favorable interest rates.

• If you qualify, you may be able to secure government-backed loans and grants to pay for your septic system work. Diving into the requirements and documentation needed is a key step here.

• Contractor payment plans may work well for some homeowners; be sure to review the terms and conditions carefully and compare them to other options.

• Another option is to use your emergency fund to take advantage of a no-interest way to finance the work needed.

Understanding Total Loan Cost

As you look into the options available for funding your septic system work, remember to consider the total cost of the loan. That includes:

• The principal, or the amount you are borrowing

• The interest charged over the life of the loan

• The fees that are often assessed, such as origination fees, which can be 1% to 10% of the principal amount

Understanding these factors will help you determine the full cost of the loan over the term you select and how much money you may need upfront. Equipped with this intel, you can determine which loan option best suits your needs.

Evaluating Repayment Flexibility

Sometimes, as you repay a loan, life happens and finances get tight. In that case, you may need flexibility to repay your loan. You may want to check the fine print before signing up for a lona. Features that can help in challenging times include grace periods, which are a buffer between when the payment is due and late fees kick in. Also, a loan may offer deferment and forbearance options, allowing you to pause or reduce payments in times of financial need.

On the other hand, you may also want to look into whether a loan offer has prepayment penalties. These fees can be applied if you pay off a loan before the term expires. The reason: The lender is losing out on the interest payments they were expecting to collect over the life of the loan. Prepayment fees can help compensate them for that.

Lastly, keep in mind that other features impact your repayment. A longer term can lower monthly costs but increase the amount of interest you pay over the life of the loan. Also, whether you opt for a fixed or variable rate loan will influence your monthly payment amounts, meaning whether they are stable or vary with the market.

The Takeaway

Replacing your septic system can be expensive, currently averaging more than $8,000. To fund this project, you might look into tapping your home equity via a home equity loan or line of credit, wherein you use your home as collateral. Or perhaps there’s a contractor financing plan that suits your needs. A personal loan, sometimes called a home improvement loan, can be a good option for many people, especially when funding is needed quickly; no collateral is typically needed. You may also be able to cut some of your costs if you can qualify for a government-funded grant or low-interest loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Are there tax deductions for septic system installation or repair?

A new septic system doesn’t qualify for any of the tax credits the Internal Revenue Service, or IRS, currently allows for home improvements. But some states offer tax credits or deductions to homeowners who replace or repair a septic system. A tax professional in your area can help you check for potential tax savings.

Can I finance both installation and ongoing maintenance of my septic system?

It’s a good idea to make septic tank maintenance costs a part of your household budget, but those expenses likely won’t be included in the amount you borrow to pay for a new system.

Are there special financing options for rural homeowners?

Yes. USDA loan programs can benefit rural homeowners who need to repair or replace a septic system.

What credit score do I need to qualify for septic system financing?

There is no one single credit score needed to qualify for septic system financing. However, it’s important to know that higher credit scores typically lead to approval for more favorable loan interest rates and terms, while people with bad credit are usually assessed higher rates and, say, qualified for lower loan amounts.

How long does it take to get approved for a septic loan?

How long it takes to get approved for a septic system loan will depend on the kind of financing you seek. If you are applying for a home equity loan or line of credit, that can take up to 6 weeks, depending on the lender and your specific circumstances. A personal loan can be significantly faster, with some lenders offering same-day funding or disbursement in just a few days.

Photo credit: iStock/Kwangmoozaa

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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 .

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.

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.

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.

SOPL-Q425-054

Dec

2025

Are Student Loans Secured or Unsecured?

By Jennifer Calonia | Going to College, Student Loans, student_loan | Comments Off

Student loans are a type of financial aid option that lets you borrow a lump sum of money upfront that you’ll repay over time later, with interest. Some students are unclear whether a student loan is a secured or unsecured debt.

Both federal and private student loans are considered an unsecured form of debt. Keep reading to learn more on secured loans versus unsecured loans, pros and cons of each, and why student loans are considered an unsecured debt.

Table of Contents

What Are Secured Loans?
What Are Unsecured Loans?
Pros and Cons of Secured vs Unsecured Loans
How Federal Loans Differ From Typical Debt
Managing Your Student Loan Debt
The Takeaway

Key Points

• Student loans are unsecured debt, meaning you don’t need to provide any collateral like a home or car when borrowing.

• Secured loans are backed by assets, which reduces risk for the lender and can result in lower interest rates.

• Unsecured loans rely on creditworthiness, so lenders evaluate your income, credit history, and financial stability instead of collateral.

• Federal student loans have unique protections, including income-driven repayment plans and forgiveness options not typically available with other unsecured debt.

• Managing your unsecured student loan debt wisely — such as making in-school interest-only payments — can prevent interest capitalization and lower long-term costs.

What Are Secured Loans?

A secured loan is a type of debt that requires borrowers to provide the lender with an asset of value to back the loan. This asset is called collateral. Collateral could be your home, your car, other property that has monetary value, a savings account, jewelry, and more. The type of collateral you put up is stated in the loan agreement.

If a borrower defaults on their loan and doesn’t pay it back, the lender can take actions to seize possession of the collateral. It then uses the proceeds from the sale of the collateral to recover the unpaid debt.

Common Examples of Secured Debt

Common types of secured loans include:

• Mortgage loans

• Home equity loans

• Auto loans

• Some personal loans

Lenders typically view secured loans as less risky to their bottom line since the promised collateral offers them at least some financial protection. In turn, secured loans might offer lower interest rates compared to unsecured loans.

Certain secured loans are also designed as accessible financing for individuals whose credit doesn’t qualify for an unsecured loan.

What Are Unsecured Loans?

An unsecured loan is an installment loan that doesn’t require an asset or collateral upfront to secure the debt. Since this type of loan doesn’t offer an asset-based guarantee to the lender, the borrower must demonstrate a strong likelihood that they’ll repay the debt.

A positive and extensive credit history, consistent and sufficient income, and low credit utilization are some markers that lenders use to determine how risky a borrower is for an unsecured loan. Additionally, since lenders don’t have access to collateral to fall back on in the event of default, unsecured loans generally have higher interest rates.

Credit cards, some personal loans, and private student loans are considered unsecured loans.

Why Most Student Loans Are Unsecured

Most student loans are unsecured because lenders do not require collateral to provide the funds. This allows students without significant assets to access the funds needed for tuition, fees, and living expenses, making higher education more accessible to a broader population.

Federal student loans, in particular, are designed to be accessible and flexible, so they are always unsecured. The government assumes the risk of lending, providing protections like income-driven repayment and deferment options that wouldn’t be feasible if loans were tied to collateral. Private lenders also issue unsecured student loans to allow students to finance their education without requiring property or other assets, though interest rates and approval criteria may vary.

Pros and Cons of Secured vs Unsecured Loans

Secured and unsecured loans have their own advantages and downsides. Before signing a loan agreement, it’s important to understand the pros and cons of each option.

	Secured Loans	Unsecured Loans
Pros	More accessible for certain borrowers (higher approval odds) May offer lower interest rates Might qualify for larger loan amount Certain loans might qualify for tax deductions	No risk of lost collateral Application process might be more straightforward Might offer convenient features or perks Student loans might qualify for tax benefits
Cons	Collateral required upfront Risk losing collateral if you default	More stringent borrowing criteria Interest rates may be higher

Risk to Borrower and Lender

Secured loans are riskier to the borrower than to the lender. For borrowers, failing to make payments can result in the loss of the asset used as security, potentially causing financial hardship. For lenders, collateral reduces the risk of total loss, since they can repossess or sell the asset to recover funds if the borrower defaults. This security often allows lenders to offer lower interest rates compared with unsecured loans.

Unsecured loans, including student loans, pose different risks for both parties. Borrowers face the consequences of default through damaged credit scores, collections, and potential legal action, but they do not risk losing specific assets. Lenders, however, bear a higher risk since there is no collateral to recover if a borrower fails to repay. To offset this increased risk, unsecured loans often carry higher interest rates, stricter approval requirements, or reliance on cosigners to ensure repayment.

Interest Rate Differences

Interest rates for secured and unsecured loans differ primarily due to the level of risk each type of loan poses to the lender. Secured loans are backed by collateral, which reduces the lender’s risk and often results in lower interest rates.

When it comes to student loans, federal student loans often have lower interest rates than private unsecured loans because they’re backed by the federal government, which reduces lender risk.

However, secured loans (like auto or mortgage loans) still tend to have even lower interest rates overall because they’re backed by collateral. So federal student loans fall in between: lower than many unsecured loans, but typically higher than secured loans.

How Federal Loans Differ From Typical Debt

Both federal loans and private education loans are unsecured debt. However, federal loans have significant perks and protections that private student loans don’t offer.

Unlike private student loans that require a minimum credit score or cosigner, most federal student loans don’t require a credit check or a cosigner to qualify for a loan. The Direct PLUS Loan is the only federal loan that requires a credit check, but borrowers with adverse credit can still access a Direct PLUS Loan by completing a few additional steps.

Federal loan rates are fixed, meaning your monthly payment won’t change throughout your repayment term. With federal Direct Subsidized Loans, the Department of Education pays for interest that accrues while you’re in school. Conversely, federal Direct Unsubsidized Loans start accruing interest once the loan is disbursed.

You’ll also have access to a range of repayment options, including income-driven repayment (IDR) plans and student loan forgiveness programs that cancel a portion of your student debt after meeting minimum program requirements.

Lack of Collateral but Strong Repayment Enforcement

Federal student loans come with unusually strong repayment enforcement compared with other types of debt. Even without an asset to seize, the federal government can use powerful tools — such as wage garnishment, tax refund withholding, and Social Security benefit offsets — to collect on defaulted loans. Unlike many other unsecured debts, federal student loans are also difficult to discharge in bankruptcy, which further strengthens repayment expectations.

Options for Deferment, Forbearance, and Forgiveness

Federal student loan deferment allows borrowers to temporarily pause payments during certain qualifying situations, such as unemployment, economic hardship, or enrollment in school at least half-time. During deferment, interest does not accrue on subsidized loans, which helps prevent balances from growing while borrowers regain financial stability. Unsubsidized loans, however, will continue to accrue interest, even though payments are paused. Note that under the “Big, Beautiful Bill,” loans made after July 1, 2027 are no longer eligible for deferments based on unemployment or economic hardship.

Student loan forbearance is another option for borrowers who need temporary relief but do not qualify for deferment. General and mandatory forbearances pause payments for a limited period, but interest accrues on all federal loan types, which can significantly increase the total cost of the loan if left unpaid.

And finally, federal forgiveness programs offer long-term solutions for borrowers who meet certain employment or repayment criteria. Options such as Public Service Loan Forgiveness (PSLF) can eliminate remaining loan balances after a set number of qualifying payments. These programs provide a pathway to manageable repayment and potential debt relief, especially for borrowers working in public service, nonprofit roles, or those whose income makes standard repayment plans challenging.

Managing Your Student Loan Debt

Getting a handle on your unsecured student loan debt can feel challenging as you balance other areas of your life. Below are a few strategies to help you manage your student loans:

• Make in-school interest-only payments. If you can afford to, consider paying off the monthly interest that accrues while your loan is on in-school deferment. This applies to both unsubsidized federal loans and private loans. Making these small but meaningful interest payments can help you avoid interest capitalization (i.e., paying interest on interest) later.

• Track when your loan payments are due. Be aware of your loan due dates and minimum payments each month. Late payments or missing a payment altogether can have a negative effect on your credit score, since loan repayment history is reported to the major credit bureaus.

• See if you qualify for loan forgiveness or loan repayment assistance. The Department of Education offers a few forgiveness and cancellation programs for eligible borrowers with qualifying loans, like the Public Service Loan Forgiveness program for government and nonprofit employees. Some states also offer loan repayment assistance programs to workers in certain professions, like health care, social work, and law.

• Reach out to your loan servicer or lender. If you’re struggling to make your student loan payment, your loan servicer or lender is your best resource. They can guide you through relief options that are accessible to you, whether that’s getting on a different repayment plan or temporary forbearance.

Choosing the Right Repayment Plan

Choosing the right repayment plan can help you effectively manage student loan debt because it directly impacts your monthly payments, total interest costs, and long-term financial stability. The best plan aligns with your income, career goals, and budget, helping you stay current on payments while avoiding unnecessary financial strain.

Options for student loan repayment include a standard plan, an income-driven option, or refinancing or consolidating your loans. Selecting the right structure can make repayment more manageable and prevent your balance from growing due to accrued interest or missed payments.

Refinancing or Consolidating Loans

Borrowers can also consider refinancing or consolidating their student loans. With a student loan refinance, you replace one or more existing loans with a new loan — typically from a private lender — that may offer a lower interest rate, reduced monthly payment, or different repayment term. This option can save money over time, especially for borrowers with strong credit, but it also means giving up federal protections if federal loans are refinanced.

Consolidation, on the other hand, is a federal program that combines multiple federal student loans into a single Direct Consolidation Loan. While student loan consolidation generally won’t lower your interest rate, it can simplify repayment and may help borrowers regain eligibility for certain federal benefits, such as income-driven repayment or loan forgiveness programs.

Recommended: Student Loan Refinancing Calculator

The Takeaway

Both federal and private student loans are categorized as unsecured debt because they do not require collateral such as a car or house. With federal student loans, you gain access to unique protections that typical unsecured private student loans don’t offer.

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

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Are student loans considered secured or unsecured?

Student loans are considered unsecured debt, meaning they don’t require collateral from you as a condition of securing the loan. Since there’s no collateral tied to the loan, if you default on the debt, the lender might choose to take you to court in an attempt to collect some or all of the debt.

Is it possible to get a secured student loan?

It may be possible to get a secured student loan, though it’s uncommon. Some private lenders may offer secured education loans that require collateral, such as a savings account or certificate of deposit. These loans can offer lower interest rates, but borrowers risk losing the pledged asset if they fail to repay.

How are federal student loans different from private?

Federal student loans are issued by the government and offer fixed interest rates, income-driven repayment plans, deferment, forbearance, and potential forgiveness programs. Private student loans come from banks or lenders, often require credit checks, may have variable interest rates, and lack the wide range of protections and flexible repayment options federal loans provide.

What happens if you default on an unsecured student loan?

Defaulting on an unsecured student loan can lead to collections, damaged credit, higher costs from fees and interest, and potential legal action. Lenders may garnish wages or place liens depending on state laws. Default also limits future borrowing options, making it harder to access credit or additional student loans.

Do student loans affect your credit like other unsecured loans?

Yes, student loans affect your credit much like other unsecured loans. Your payment history, loan balance, and length of credit history all influence your score. On-time payments can build credit, while missed or late payments can lower your score and remain on your credit report for years.

Photo credit: iStock/DNY59

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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