Life Stages Archives

Apr

2025

College Graduation Rates: How Many People Graduate College?

By Melissa Brock | Going to College, Student Loans, student_loan | Comments Off

It may seem to you that droves of college students collect diplomas every year, but how many students actually start college and graduate — at the same college?

The most recent data from the U.S. Department of Education National Center for Education Statistics (NCES) reported in 2020 that the overall six-year graduation rate for bachelor’s degree-seeking full-time undergraduate students at four-year degree-granting institutions in fall 2014 was 63%.

Graduation rates refer to the percentage of a school’s students who complete their program within 150% of the published time for the program. It’s important not to confuse graduation rates with retention rates, which refer to the percentage of students who continue at a particular school the next year. In other words, the retention rate is the percentage of students who finish their first year and return for a second year.

We’ll walk through what the college graduation rate can tell you about a school, why it’s important, as well as outline a good graduation rate. We’ll also break down graduation rates by state and colleges (from lowest to highest), discuss some reasons that students might not graduate, and how to overcome some of these obstacles.

What Does the College Graduation Rate Tell Us?

As a prospective student, understanding the difference between graduation rates and retention rates allows you to be better prepared to compare these percentages against the schools on your list. Comparing the graduation rate of your first-choice college gives a definite indication of whether the schools fall above or below the average. It’s a quick way to find out how many students finish their degrees “on time” and also tells you the type of institutions that deliver the highest graduation rates. Based on available statistics, private, nonprofit institutions graduate students at a higher rate.

Why Is Knowing the Graduation Rate Important When Selecting a College?

When you’re researching colleges, many different things matter to different students. Athletes may want to know more about their individual athletic programs. English majors may want to know how many professors are published writers.

However, among all the different factors you can research, graduation rate remains one of the most important for all prospective students to understand.

Why? The graduation rate serves as a gauge for many things — student satisfaction and happiness in addition to indicating how many students graduate in a timely manner. However, it’s not the only metric you want to consider when you choose a college. Other priority considerations include teacher-to-student ratio, retention rate, loan default rates, and selectivity.

Two trusted websites compile information on graduation rates: College Navigator and College Results Online.

• College Navigator : College Navigator compiles information from about 7,000 colleges and universities in the United States. College Navigator breaks down both retention rates and graduation rates on its site, and you can also access these rates by race/ethnicity and gender.

• College Results Online : College Results Online also lists both rates and retention rates for institutions. You can also cross-index certain peer institutions against each other to compare graduation and retention rates.

What Is a Good Graduation Rate for a College?

The best graduation rates in the U.S. are from schools that have a graduation rate in the 90th percentile, which many of the Ivy League schools have. For example, let’s take a look at a few six-year graduation rates based on College Navigator data:

• Harvard University: 98%

• Yale University: 96%

• Cornell University: 95%

However, you can still find high graduation rates within highly selective liberal arts colleges:

• Amherst College: 95%

• Davidson College: 93%

• Claremont McKenna College: 92%

It’s important to remember that since these highly selective schools only admit students with top-tier credentials, they naturally attract some of the most driven students on the planet, resulting in a high graduation rate.

So, what is a good graduation rate for a college? Does this mean that a college in the 80th or even 70th percentile isn’t a good school or that it isn’t the right school for you? Absolutely not. As mentioned before, other factors play into the mix as well, based on your personal preferences and interests. The right fit for you may be a school with a 70% graduation rate. The better the fit, the more likely you will graduate on time.

Lowest Graduation Rate College in the United States

Unfortunately, the college with the lowest graduation rate in the U.S. isn’t a highly popularized statistic. However, if, during your own research, you see a school that graduates at or below 60%, you may want to probe your admissions counselor at the college for the reasons why rates are so low and find out more about how the college plans to improve.

Average College Graduation Rate in the United States

When digging a bit more into the 2020 NCES report, it states that the average college graduation rate (more specifically, the six-year graduation rate) was:

• 63% at public institutions

• 68% at private nonprofit institutions

• 29% at private for-profit institutions

Overall, 60% of males and 67% of females graduate within six years, and females had a higher six-year graduation rate at the following types of institutions:

• Public institutions (66% female vs. 60% male)

• Private nonprofit institutions (71% female vs. 64% male)

However, at private for-profit institutions, males had a higher six-year graduation rate than females (31% vs. 28%).

How does the U.S. Department of Education arrive at this data? The NCES uses Integrated Postsecondary Education Data System (IPEDS), a system of interrelated surveys conducted annually by NCES through institutions.

The IPEDS graduation rate is calculated like this:

Graduation Rate =
Number of students who completed their program within a specific percentage of normal time to completion / Number of students in the entering cohort

College Graduation Rates by State

Here are the college graduation rates by state, according to World Population Review :

State	College Completion (or Higher)
Massachusetts	44%
Colorado	41%
New Jersey	40%
Maryland	40%
Virginia	39%
Connecticut	39%
Vermont	38%
New York	37%
New Hampshire	37%
Washington	36%
Minnesota	36%
Illinois	35%
Utah	34%
Rhode Island	34%
Oregon	34%
California	34%
Kansas	33%
Hawaii	33%
Nebraska	32%
Montana	32%
Maine	32%
Delaware	32%
Pennsylvania	31%
North Carolina	31%
Georgia	31%
Wisconsin	30%
Texas	30%
North Dakota	30%
Florida	30%
Arizona	30%
Alaska	30%
South Dakota	29%
Missouri	29%
Michigan	29%
Iowa	29%
South Carolina	28%
Ohio	28%
Idaho	28%
Wyoming	27%
Tennessee	27%
New Mexico	27%
Indiana	27%
Oklahoma	26%
Alabama	26%
Nevada	25%
Louisiana	24%
Kentucky	24%
Arkansas	23%
Mississippi	22%
West Virginia	21%

Number of College Graduates in the 21st Century

In the past 20 or so years, the number of college graduates has increased. According to information published by Education Data , in 2001 approximately 1.24 million students graduated from college with a bachelor’s degree. In 2022, that number reached 2.02 million.

Reasons Why College Students Don’t Graduate

When looking at graduation rates, let’s turn the tables a bit and take a look at a few reasons why students might not graduate. Depending on the student, these could include things like the high cost of tuition, trying to balance work and school, or poor academic performance.

Cost

The increasing price tags aren’t a new reason that students leave school. When it gets too expensive, they may feel they have no way out. According to the National Association of School and Financial Aid Administrators (NASFAA) , an analysis of 2,000 colleges and 10 theoretical students found that 48% of families with annual incomes above $160,000 could afford the colleges on the list. Those with a family income over $100,000 could afford more than one-third of the colleges. Finally, the theoretical students from lower-income backgrounds could only afford up to 5% percent of the colleges.

Balancing Work and School

Many undergraduates work part-time jobs to help pay their way through college. Students often get stuck in the quagmire of trying to keep up with both work and school, which can be a challenging balancing act. Many seasonal jobs for college students exist, which means you might be able to get a job during the summer instead of working during the school year.

Recommended: 3 Summer Job Ideas for College Students

Transferring

Transferring colleges sometimes means some credits get lost in translation. When transfer students are forced to retake classes, it not only costs more financially, but they also have to spend extra time pursuing their degree. This sometimes means that students often face trouble getting enough credits to graduate.

Poor Grades

Sometimes, students simply can’t make the grades. Even if it happens during just one semester, it can cause students to shy away from college altogether. In particular, first-generation college students, those who are low-income students, as well as minority students, are vulnerable and question whether they really belong in college.

Being Denied a Student Loan

Being denied a student loan or other types of financial aid can be a huge deterrent to continuing on in college. However, remember that there are ways around it — including seeking a loan through a different lender.

Overcoming the Obstacles as a College Student

What can you do to overcome the obstacles and successfully graduate from college? Let’s find out. We’ll list a few things you can do to help you stay the course:

• Get organized with everything — school work, athletics, homework, and more.

• Get support from family and friends.

• Create healthy habits. Eat nutrient-dense meals, get enough sleep, and stay healthy.

• Carefully consider the best ways to pay for college and focus on managing your money.

• Get to know professors and academic support professionals at your college or university.

• Work on your time management skills so you have the time you need for important assignments.

• Take care of your mental health. If you are struggling to balance the many priorities of being a college student, reach out to family or friends for help. If you need additional support, contact your campus’ health and wellness center to see what counseling resources are available to students.

• Investigate transfer options early on if you attend a community college so you know how to make the transition smoother.

Recommended: FAFSA Guide

Ways to Fund College

Making sure you have a concrete plan to pay for college is one of the best ways to make sure you successfully graduate. Let’s walk through a few tips for making sure you have all your ducks in a row.

• Fill out the Free Application for Federal Student Aid (FAFSA®).
This is the first step in applying for federal financial aid, including grants, scholarships, and low-interest-rate federal student loan options.

• Search for scholarships. Ask the college or university you plan to attend about scholarships they offer. Don’t forget to search around in your community as well.

• Get a work-study job. If you qualify for work-study this can be an opportunity to earn a bit of money for college expenses. This is a federal program in which you earn money and your school pays you for that work via a check, usually every week, every two weeks, or every month.

• Look into private loans. If you need to fill the gap between scholarships, grants, and federal student loans, look into private loans to help you make it across the graduation stage. These may lack the borrower protections afforded to federal student loans (like deferment options or income-driven repayment plans) and are therefore generally only considered after other financing sources have been exhausted.

The Takeaway

A school’s graduation rate is a reflection of the percentage of students that graduate within 150% of the published time frame. This is different from a school’s retention rate which is a measurement of how many students remain at a school from year to year. A school’s graduation rate can be an informative benchmark as you evaluate and compare schools during the application process.

If you are a current college student, you can do a lot to make sure you stay the course, including taking care of yourself, using scholarships and grants to your advantage, getting academic help, and making sure (if needed) that you have the right private loans to make it all happen.

Ready to find private student loans to make sure you get to throw your cap at graduation? Visit SoFi and learn more about private student loans and the low rates we have to offer. Our friendly experts can also help you decide your best course of action.

About the author

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.

Photo credit: iStock/digitalskillet

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Apr

2025

Can You Refinance Part of Your Student Loans?

By Melissa Brock | Going to College, Student Loans, student_loan | Comments Off

There are different ways to refinance student loans, including refinancing part of your loans. Partial refinancing means you could choose to refinance some of your loans but not all of them. Or you could decide to refinance a portion of just one student loan.

But first, you need to determine if refinancing your student loans makes sense for you. Here’s how refinancing works, including partial refinancing.

What Is Student Loan Refinancing?

With student loan refinancing, you take out a new private loan to cover the cost of your current loans. Refinancing may allow you to get a lower interest rate or better loan terms. Borrowers who qualify for a lower interest rate may consider refinancing student loans to save money.

It’s possible to refinance both private and federal student loans, but be aware that if you refinance federal loans with a private lender, you are no longer eligible for federal programs and protections like income-driven repayment.

Benefits of Refinancing Student Loans

Student loan refinancing can be beneficial for some borrowers. For instance, you might be able to lower your monthly loan payment if you qualify for a lower interest rate, or you may be able to change the length of your repayment term.

Refinancing might also help simplify your loan payments. By refinancing multiple loans into one new loan, you’d have just one loan payment to make instead of several.

This student loan refinancing guide spells out the potential benefits and drawbacks.

Reasons to Refinance Part of Your Student Loans

A borrower might choose to refinance part of their student loans if it makes repayment easier or more affordable. Some popular reasons to refinance include:

Lower Interest Rate

If you qualify for a student loan with a lower interest rate, you could save money by paying less in interest over the life of the loan. Shop around for the best student loan refinancing rates.

Simplify Multiple Loan Payments

If you have several student loans with different lenders, it may be difficult to keep track of all the payments and due dates. Combining loans with a partial refinance can streamline the process and make payment easier to manage.

Change Repayment Terms

With student loan refinancing, you may be able to lower your monthly payments by extending your loan term. Essentially, you are stretching out the loan over a longer period of time, which could ease the stress on your budget each month.

However, there is a trade-off. Lowering your monthly loan payments will increase the total amount you’ll pay over time because you’ll be accumulating interest on the loan over a longer period. Be sure to take that into consideration as you’re thinking about refinancing.

Qualifying to Refinance Part of Your Loans

If you decide to refinance part of your student loans there are eligibility criteria you’ll need to meet.

Credit Score and Income Requirements

When you apply for student loan refinancing, a lender will base the interest rate they offer you in part on your credit score and income. Typically, the higher your credit score, the better your chances of getting a lower interest rate.

To be approved for student loan refinancing, many lenders require you to have a credit score in the mid-600s or higher. And to get a lower interest rate, you’ll typically need a credit score in the upper-700s — or you may have to enlist a cosigner for refinancing. The cosigner agrees to repay the loan in the event you can’t.

Before applying to partially refinance, check your credit report to make sure it doesn’t have any errors. If it does, correct them before you apply. If your credit score is low, it may be beneficial to work on building your credit before you refinance. For instance, you could pay down other debt you owe (like credit card debt) and make on-time bill payments.

Lenders will also ask for proof of your income, such as pay stubs, to ensure that you can repay the loan. In addition, they’ll look at your debt-to-income (DTI) ratio, which is the amount of monthly debt you have compared to your monthly income. Aim for a DTI of 36% or lower.

Loan Types and Eligibility

The type of student loans you currently have are another important factor in refinancing. Borrowers with federal student loans may not want to refinance if they believe they’ll need access to federal programs and protections like income-driven repayment plans.

However, for borrowers with private student loans who think they may be able to qualify for a lower interest rate or more favorable terms, refinancing could make sense.

Student Loan Refinancing Process

Refinancing is fairly straightforward. You’ll do some comparison shopping to choose your lender and then submit your application.

Compare Lenders and Rates

In order to get the best rates, shop around with several different lenders and then prequalify for refinancing. During prequalification, the lender does what’s called a soft credit check. This won’t impact your credit score, but it will give you a better sense of the interest rate you might qualify for.

Apply for Refinancing

Once you’ve decided on a lender, you can fill out an application on their website. In general, you’ll be asked for:

• Information about your student loan debt

• Government-issued photo identification

• Proof of employment

• Proof of where you live

• Recent pay stub

• Loan statement from your current lender or loan servicer

If you are refinancing part of your student loans, indicate on the application which loans you want to refinance.

Managing Old and New Loans

With partial student loan refinancing, you’ll have a mix of new and old loans to stay on top of. Consider setting up automatic payments for each of them to ensure that all the payments are made on time. Just log into your accounts online and change your payment settings to autopay. That way you won’t have to worry about forgetting or missing a payment.

Potential Drawbacks of Partial Refinancing

Along with the potential benefits, partial refinancing also has some drawbacks. Consider each of these factors carefully before you decide whether to move ahead.

• Lose access to federal loan benefits: When you swap your federal loans for a private loan with refinancing, you’ll no longer be able to take advantage of federal benefits and protections, such as Public Service Loan Forgiveness, deferment, and forbearance. If you think you might need any of these things, refinancing may not be the best option for you.

• No guarantee of better rate or terms: If you don’t have good credit or a steady income, you may not qualify for refinancing. And even if you do qualify, you might not get a favorable rate. A student loan calculator can help you figure out if partial refinancing makes sense for you.

• Won’t achieve full student loan consolidation: Refinancing all your student loans into one, known as consolidation, can make them easier to manage. But with partial refinancing, you’ll still be juggling different lenders, due dates, and payments. You can use autopay to simplify the process, but it’s worth considering this downside.

The Takeaway

Refinancing your student loans isn’t an all or nothing endeavor. Partially refinancing your loans is possible. It could be beneficial if you have both private loans and federal loans and want to keep your access to federal programs, and also get a lower interest rate. In that case, you could refinance your private loans and leave your federal loans as they are.

Just be sure to weigh the pros and cons of refinancing. If you decide to go ahead with the process, shop around for the best rates and terms.

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

Can you refinance federal and private student loans together?

Yes, you can refinance federal and private student loans together. You can combine private and federal loans by refinancing them with a private lender.

And if you’re partially refinancing your student loans — for instance, maybe you’re refinancing one federal loan and two private loans, and leaving your other federal loans as is — you can typically indicate on the application which loans you want to refinance. But if you have any questions, check with the lender.

Is it better to refinance all or part of your student loans?

Whether you should refinance all or part of your student loans depends on your specific situation and the type of loans you have. You may want to refinance your private loans if you can qualify for a better rate and terms. And you might want to hang onto your federal loans in case you need the federal programs and protections they provide access to. Consider all the possibilities before you make your final decision.

How soon can you refinance student loans after graduation?

You can typically refinance student loans as soon as you graduate from school. However, you might want to consider refinancing right before the end of the six-month grace period, when you don’t have to make any student loan payments. That way you can take advantage of the six months of no payments before your new refinancing loan rates and terms kick in.

About the author

Melissa Brock

Photo credit: iStock/Srdjanns74

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Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY 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).

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 .

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.

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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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Apr

2025

Can I Take Out More Student Loans During the Semester?

By Melissa Brock | Going to College, Student Loans, student_loan | Comments Off

If you get midway through the college semester and realize you can’t meet your expenses, whether that’s due to unanticipated costs or underestimating how much you needed, don’t panic. You can take out more student loans to help cover the extra costs even when the semester is underway.

With the average cost of college reaching $38,270 per year, according to the Education Data Initiative, it’s no wonder that some students find they need extra money during the academic year. Fortunately, student loans and other funding options can help fill the gap if you’re coming up short during the semester.

Which Types of Student Loans Can You Take Out?

You can take out federal student loans and private student loans during the semester. But as you’re considering the options, you should be aware of some important factors.

Federal student loans come from the government, through the U.S. Department of Education, and they tend to offer better rates and terms. Your school determines the type of federal loans you can receive as well as the amount you can get, but there are caps on how much a student can borrow in federal loans per year. There are also deadlines to apply for federal student loans (more on that below).

Private student loans come from such entities as banks, credit unions, and online lenders. Each lender has their own criteria for eligibility, and the interest rate you get generally depends on your creditworthiness.

Here are some of the types of loans you may be eligible for, along with their requirements.

Federal Direct Subsidized Loans

Undergraduates with financial need may be eligible for Federal Direct Subsidized loans. The government pays the interest that accrues on these loans while you’re enrolled in school, during the six-month grace period after graduation, and during any student loan deferment. Direct Subsidized loans also offer fixed interest rates, which means the interest rate doesn’t change.

To qualify for a Direct Subsidized loan, you must file the Free Application for Federal Student Aid (FAFSA), which can help in making college more affordable, by the deadline. For the 2025-2026 academic year, the FAFSA must be submitted by June 30, 2025. Any updates to the form must be submitted by September 14, 2026. However, states and schools may have different deadlines, so be sure to check with yours.

It’s possible that you may have already used a Direct Subsidized loan to help pay your tuition. If so, check to see if you’ve reached the borrowing cap. For example, first-year undergraduate dependent students can take out a maximum of $3,500 in subsidized loans.

Federal Direct Unsubsidized Loans

You aren’t required to demonstrate financial need to get Federal Direct Unsubsidized loans, but you do need to file the FAFSA. With an unsubsidized loan, the interest begins accruing the day the loan is disbursed and continues the entire time you’re in college. That means you will likely end up with a higher loan balance after college than the amount you initially borrowed. Your first payment is due six months after you graduate.

First year undergraduates can take out a maximum total of $5,500 in subsidized loans and unsubsidized loans. That means if you’ve reached the max of $3,500 in subsidized loans, you can take out $2,000 in unsubsidized loans.

Direct PLUS and Parent PLUS Loans

Parent PLUS.

Unlike Direct Subsidized and Unsubsidized loans, borrowers applying for PLUS loans need to undergo a credit check and must have a strong credit history in order to qualify. They must also file the FAFSA. In the case of the Parent PLUS loan, parents are expected to repay the loan — these loans do not transfer to the student.

Private Student Loans

Students may use private student loans to help fill the gap after they max out their federal student loans. There is no mandated limit on the amount you can borrow with private loans, and there is no application deadline. To qualify for a private student loan, you must have strong credit or apply with a cosigner, which is someone who has good credit and who will take over the loan if you default.

Private student loan interest rates may be fixed or variable, and the rates tend to be higher than those of federal loans — though you could consider refinancing student loans at some point if you can qualify for better terms. The interest on private student loans will generally begin to accrue the day the loan is disbursed. Another caveat: With private student loans, you cannot take advantage of income-driven repayment options and forgiveness programs.

How Much Can You Borrow During the Semester?

You can use federal and private loans to cover up to the full cost of college attendance. However, as mentioned, while there is no cap on how much you can borrow with private loans, there’s a limit to how much money you can receive with federal loans.

The amount you can take out in federal loans as a dependent student (meaning that your parents are supporting you) depends on your year in college. For your first year, you can receive up to $5,500 in federal loans, and $3,500 of that can be in subsidized loans. For your second year, the amount rises to a total of $6,500, with $4,500 in subsidized loans; and for your third and fourth years, the total amount you can borrow is $7,500, with $5,500 in subsidized loans.

If you’ve reached the annual limit on what you can borrow with federal loans, you can use a Parent PLUS loan and/or private loans to cover the gap — up to the full school-certified cost of attendance.

How Quickly Can You Get Student Loans Mid-Semester?

Although the time frame is different for each lender, it’s possible to get private student loan funds within a few business days after submitting your application.

Federal student loans generally require more time. Once your FAFSA is processed, the information will then be sent to your school. Each school has its own schedule for disbursing loans; check with your college’s financial aid office for more information.

Other Options if You Run Out of Student Loans

If financial aid isn’t enough to cover your college costs, you do have other options to help pay what you owe. Here are some ideas to look into.

Apply for Scholarships and Grants

While FAFSA typically matches you with any federal scholarships and grants you may be eligible for, there are many other types offered by states, cities, community groups, businesses, religious organizations, associations you or your family may be involved in, and more. Your college may even offer scholarships that you’re not aware of, so be sure to investigate. SoFi’s Scholarship Search Tool can also help you find scholarships that may be a good fit for you.

The best part: Scholarships and grants are considered ”gift aid” and usually don’t need to be repaid.

Reevaluate Your Circumstances

If your family’s financial situation changed over the last few months, you may want to consider appealing your financial aid and asking for more.

For example, if one of your parents lost their job, your parents got divorced or separated, or you faced a medical crisis, you may be able to get more funds. Speak with your college’s financial aid office and explain the situation to see what suggestions they may have. You’ll probably have to submit more documentation as part of the process, but it could be well worth it.

Get a Part-time Job

A part-time job can help you directly cover some of your college costs. You might qualify for a federal work-study job based on financial need as part of your financial aid package. The number of hours you can work at these jobs is determined by your school. Find out from your university’s financial aid office if you qualify for work-study and how many hours of work you’re eligible for.

If you don’t qualify for work-study, you can apply for a part-time job working for a local business, like a coffee shop or retail store.

Consider an Emergency Student Loan

Here’s one of the best-kept financial aid secrets: Some schools offer emergency student loans if you run into financial challenges. These short-term loans don’t cover school-related costs, and the borrowing amounts are usually small — around $500. They’re intended to cover things like food, medical expenses, and monthly bills. Ask your school’s financial aid office if they offer emergency loans, and find out what the interest rates and repayment terms are to see if it might be a good option for you.

Apply for Private Student Loans

Private student loans are another option to help cover your college expenses. Again, these loans have higher borrowing limits than federal student loans, and once you’re approved, the funds are generally disbursed quickly. But private student loans also tend to have higher interest rates, and they don’t give you access to forgiveness and income-driven repayment programs. You’ll need to weigh the pros and cons.

The Takeaway

If you discover that you need more money to cover your costs once the school semester is underway, don’t freak out. There are a number of options you can turn to for the money you need. You may be able to take out more federal student loans, get an emergency loan from your school, or qualify for a scholarship or grant. You could also get a part-time job to help pay the bills. And if you take out private student loans, which typically have higher interest rates, you may be able to refinance your loans at some point for a lower rate or better terms. In other words, there are many different ways to help cover the costs of college — just explore and investigate the options to find what works best for you.

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

FAQ

Can you request more financial aid during the semester?

Yes, you can request more financial aid during the semester. For instance, you may be able to appeal the amount you were initially awarded, especially if your family circumstances have changed, such as a parent losing a job. Contact your college’s financial aid office to find out how the appeals process works.

Can you increase your student loan amount?

It is possible to increase your student loan amount. One way to do it is to appeal the amount you were awarded, especially if your family circumstances have changed (such as your parents getting divorced) or there was an error on your Free Application for Federal Student Aid (FAFSA). Contact your college’s financial aid office to find out more about this process.

Can I get student loans in the middle of the semester?

Yes, you can get student loans in the middle of the semester. Just be sure to fill out and submit the FAFSA by the deadline in order to qualify for federal student loans. And be aware that there is a limit to the amount you can get in federal loans depending on what year student you are.

You can also take out private student loans during the semester. There is no set limit on how much you can borrow with these loans and there’s no deadline to meet — you can take them out anytime. However, private student loans do typically have higher interest rates, and you’ll likely need a cosigner in order to qualify. Private loans also don’t offer federal protections and programs.

About the author

Melissa Brock

Photo credit: iStock/miniseries

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.

SOSLR-Q324-004

Apr

2025

What Is Cash Settlement in Options?

By Mike Zaccardi, CMT, CFA | Growing Wealth, invest, Investing, Terminology | Comments Off

Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

Cash settlement in options is a method where the buyer of an option contract receives a cash payment equal to the difference between the option’s strike price and the market price of the underlying asset, rather than the physical delivery of the underlying asset. This means that instead of receiving the stock or commodity, for example, the option holder will receive an equivalent amount of cash that’s determined when the option is exercised.

Cash settlement may be used in options trading because it allows traders to speculate on the price movement of securities without having to actually own or hold the underlying assets. This can be particularly useful for traders looking to hedge their positions or who want to avoid the potential market risks associated with holding the underlying assets.

Key Points

• Cash settlement in options involves paying the difference between the strike price and the market price.

• The cash settlement method is used for index options and other financial instruments.

• Physical delivery of the underlying asset is not required.

• Cash settlement simplifies the process and reduces transaction costs.

• Settlement occurs on the expiration date or exercise date.

What Is Cash Settlement?

Cash settlement refers to a settlement method where the buyer of an option contract receives the cash difference between the strike price and the current market price of the underlying security. This is in contrast to the more traditional method of physical settlement, where the buyer of the option contract receives the underlying security upon exercise. Physical delivery and cash settlement are the two primary methods for settling a contract in options trading.

With physical delivery, the buyer of the option may receive, as an example, the shares of an equity or physical commodity when the option is exercised. Most listed equity options contracts are settled with the actual delivery of shares.

On the other hand, cash settlement allows the buyer of an option to receive the value of the underlying asset (per the contract terms) in the form of cash when the option is exercised rather than a stock or commodity. Equity index and binary options are often cash-settled.

How Does Cash Settlement Work?

The purchaser of an options contract has the right, but not the obligation, to exercise their option, allowing them to buy (as with a call) or sell (as with a put) the underlying security at the agreed-upon price (called the strike price).

In a cash settlement, as noted above, the buyer of the option does not purchase or sell the underlying security. Instead, they receive a cash payout based on the difference between the strike price and the current market price of the underlying security.

Example of Cash Settlement

Suppose an investor buys a call option on a stock with a strike price of $50. This means the investor has the right to buy the stock at $50 per share at any time before the option expires, if the stock’s price is above the strike price. If the stock’s market price rises above $50, the option becomes “in the money,” and the investor can exercise their right to buy the stock at $50, even if the market price is higher.

Suppose that, when the option expires, the stock’s market price is $55 per share. If the option is cash-settled, the investor can exercise their right to buy the stock at $50 per share and thus receive a cash payment of $5 per share, which is the difference between the strike price and the market price, multiplied by the number of shares in the contract (typically 100). This means the investor would receive a total cash payment of $500 (assuming they exercised a standard options contract of 100 shares).

Alternatively, if the stock’s market price is below $50 when the option expires, the option becomes “out of the money,” and the investor will not exercise their right to buy the stock. In this case, the option would expire worthless, and the investor would not receive any cash payment.

Pros and Cons of Cash Settlement

There are certain advantages and disadvantages to settling options contracts with cash that are worth considering when trading options.

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Pros:

• Improves liquidity across derivatives markets

• Does not require delivery coordination and costs in commodities markets or delivery of shares in options trading

• Allows parties to hedge and speculate financially on products that cannot be physically delivered

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Cons:

• May not be available for all asset classes, such as equity options.

• Primarily available on European-style options

• Commodities producers and consumers might prefer physical delivery when the product is needed for use

Advantages of Cash Settlement

There are several advantages to using cash settlement in options trading. First, it can be more convenient for the buyer, as they do not have to worry about physically receiving and storing the underlying asset. Cash settlement can be beneficial for traders who cannot hold the underlying asset, such as those who are trading options on futures contracts of commodities.

Another advantage of cash settlement is that it can be more cost-effective. Since the buyer does not have to take possession of the underlying asset, they do not have to pay any additional fees or expenses associated with holding an asset like gold, oil, wheat, or other commodities. This can help to reduce the overall cost of trading options and make them more accessible to a broader range of investors.

In addition to these advantages, cash settlement can provide greater flexibility for options traders. With physical delivery, the buyer must take possession of the underlying asset when the option is exercised, which could limit their ability to trade the asset in the future. With cash settlement, the buyer could use the funds received from the option to buy or sell the underlying asset in the market, allowing them to potentially take advantage of changing market conditions.

Furthermore, cash settlement allows for a more efficient transaction in the overall derivatives markets — which includes options — adding to its liquidity.

Drawbacks of Cash Settlement

There are some drawbacks to cash settlement compared to physical settlement. For example, some investors may prefer the security and control that comes with physically owning and holding an underlying asset, rather than receiving a cash payment. This is because cash can be more easily lost, stolen, or subject to inflation, whereas physical assets may provide a more tangible form of wealth.

Also, cash settlement may not be available for all asset classes. While it is commonly used for index options and certain derivatives, many equity options and commodity contracts still require physical settlement. This can limit the flexibility of traders or investors who prefer the convenience of cash settlement.

Other cash settlement drawbacks include the fact that it is usually only available to European-style options, where the option holder can only exercise the contract at expiration rather than early like American-style options. Also, physical settlement may be preferred by traders who need the underlying asset for use.

Cash Settlement vs Physical Settlement

There are several important differences between cash settlement and physical settlement.

Definitional Differences

Cash settlement of options is a financial settlement where a cash payment covers the difference between an option’s strike price and the market price of the underlying asset. Physical settlement involves the actual transfer of the underlying asset. A common physical delivery example is a commodity, but it can also take the form of shares of an underlying financial asset, such as stock.

Mode of Payment

Option cash settlement payments are typically processed quickly through the clearing house. They are straightforward financial account transfers of the difference between the underlying asset’s spot price and the strike price of the options contract.

Physical settlement consists of delivery of the option’s underlying asset, which could be delivery of shares or physical delivery of a commodity that may require storage, such as an agricultural product.

Level of Liquidity

Liquidity is better in markets with a cash settlement option versus those with physical settlement only. More market traders — hedgers and speculators — can participate in cash-settled derivative markets since there can be lower capital requirements. Options traders can also engage in rolling options instead of exercising them.

Time Taken

Option cash settlement transactions are generally processed rapidly via electronic clearing systems, whereas physical delivery involves the potentially lengthy delivery time of the underlying commodity.

Level of Risk

Another potential benefit of cash settlement is that the operational and logistical risks are typically lower. Physical settlement often involves transfer certificates and other documents that could be susceptible to manipulation, loss, and theft.

Convenience

It is hard to argue with the convenience of cash settlement. Two parties square up using straightforward price differences rather than figuring out the logistics of the physical delivery of an asset. In some cases, such as with most equity index options, the contracts must be cash-settled. Cash settlement may also involve fewer fees since there’s no need to complete additional trades to manage delivery. However, paying any potential additional fees and holding or storing the underlying asset may well be worth the cost and effort, depending on an investor’s objectives.

Practicality

Due to the potentially lower costs involved and the ease of receiving a quick cash payment, option cash settlement may be more practical than physical settlement. However, the practicality of an investment really depends on what an investor is hoping to achieve and how well it aligns with both their short- and long-term goals.

Costs Involved

Trades with cash settlements can have low or even zero cost until settlement when the buyer and seller reconcile with a payment. With physical delivery, there may be several costs, such as transportation costs, delivery expenses, and broker fees.

Simplicity

One advantage of cash settlement is its simplicity, as it involves a single net payment rather than the logistical steps of transferring assets. However, physical settlement may be preferred by investors who want direct ownership of the underlying asset. Each method has its own benefits and drawbacks, depending on the investor’s goals.

Popularity

Cash Settlement	Physical Settlement
Popular with retail traders who might not want to take large physical deliveries	Popular with commodities firms that use the underlying asset
Popular with exchanges since more traders can transact, leading to more commissions and better liquidity	Popular with large exchanges since a single exchange can become the primary exchange for a certain asset
Popular with large traders since they can quickly settle contracts with low costs	Popular with listed stock options traders if they want to take delivery of shares

The Takeaway

Cash settlement in options trading may provide a convenient and cost-effective way for buyers of options contracts to exercise their rights in relation to the underlying asset. By receiving the asset’s value in cash, traders can avoid the costs and complications associated with physical delivery while still maintaining the flexibility to use the funds they receive to trade the underlying asset in the market.

However, investors should be aware that most equity options are not cash-settled but are settled with the delivery of underlying shares of stock.

Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform offered through SoFi Securities, LLC. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors. Currently, investors can not sell options on SoFi Active Invest®.

Explore SoFi’s user-friendly options trading platform.

FAQ

What is the difference between a physical and cash settlement?

Cash settlement is a financial payment for the value of a stock or commodity underlying an options or futures contract when the holder exercises. Physical settlement entails the actual delivery of the underlying asset. In commodities markets, that means the commodity is delivered to the buyer. With equity options, physical delivery happens when the buyer receives shares of the underlying asset specified in the options contract.

Can you trade with unsettled cash?

Yes. You can use the proceeds from a sale to make another purchase in a cash account while your funds remain unsettled. Unsettled cash from a day trade cannot be used for another purchase until the settlement date.

Which futures are cash settled?

According to the CME Group, equity indexes and interest rate futures are the most common cash-settled markets. Some precious metals and foreign exchange markets also settle in cash, along with agricultural products. In the options market, cash-settled options include digital options, binary options, and plain-vanilla index options. Note: Binary options are considered high-risk and may not be available on all trading platforms.

Photo credit: iStock/FreshSplash

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
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.

SOIN-Q125-110

Apr

2025

Guide to Extending Student Loan Repayment Terms

By Melissa Brock | Fresh Out of School, Student Loans, student_loan | Comments Off

March 26, 2025: The SAVE Plan is no longer available after a federal court blocked its implementation in February 2025. However, applications for other income-driven repayment plans and for loan consolidation are available again. We will update this page as more information becomes available.

Did you know that you may be able to draw out student loan repayment for 20 or 30 years? That means lower monthly payments, but you’ll pay more total interest over the loan term.

But if your payments are a strain, consolidating or refinancing your student loans may allow you to stretch out repayment terms and tame those monthly bills. If you have federal loans, you may also consider an Extended Repayment Plan that increases the term of your loan from 10 to 25 years. While it may make your monthly payments lower in the short term, in the long term, you’ll pay more interest with any of these options.

Ahead, we look at how student loan repayment terms work, the pros and cons of extending your loan term, and other options that might help you make your monthly payments more affordable.

How Long Are Student Loan Repayment Terms Usually?

Federal student loan borrowers are automatically placed on the standard repayment plan of 10 years unless they choose a different plan. They enjoy a six-month grace period after graduating, leaving school, or dropping below half-time enrollment before repayment begins.

There isn’t a standard repayment plan for private student loans, but the general repayment term is also 10 years.

In the case of both private and federal student loans, you may be able to extend your student loan payments.

For example, if you have federal student loans, you can explore the following options:

• Graduated repayment plan: You start with lower payments, and payments increase every two years for up to 10 years, or up to 30 years for Direct Consolidation Loans. Consolidation combines all of your federal student loans into one, with a weighted average of the loan interest rates, and often extends your repayment time frame.

• Extended repayment plan: With this plan, you can extend your loan term to 25 years, though you must have $30,000 or more in Direct or Federal Family Education Loan Program loans.

• Income-driven repayment plan: The four income-driven repayment plans – including the newest plan, SAVE – allow you to make payments based on your income. This is a good option if you’re struggling to pay your monthly bill because your income is low compared with your loan payments. You may be eligible for forgiveness of any remaining loan balance after 20 or 25 years of qualifying payments or as few as 10 years if you work in public service or use the SAVE Plan.

If you have private student loans, you may be able to refinance your loans for a longer term. You can also refinance federal loans, but you’ll lose access to many of the benefits including the chance to consolidate and receive a longer loan term.

💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

What Are the Pros and Cons of Extending Repayment Terms?

Let’s take a look at three pros and three cons of extending your student loan repayment terms:

Pros	Cons
Allows for lower monthly payments	You’ll pay more total interest
Gives you more flexibility	Takes more time to pay off loans
Frees up cash for other things	May have to pay a higher interest rate

Lower monthly payments can give you more flexibility and free up your money to go toward other things. However, you may pay considerably more interest over time. You’ll also spend more time paying off your loans.

Here’s an example of what extending student loan repayment can look like, using a student loan calculator:

Let’s say you have $50,000 of student loan debt at 6.28% on a standard repayment plan. Your estimated monthly payments are $562.16, the total amount you’ll pay in interest will be $17,459, and your total repayment amount will be $67,459.

• Term: 10 years

• Monthly payments: $562

• Total interest amount: $17,459

• Total repayment amount: $67,459

Now let’s say you choose to refinance. Refinancing means a private lender pays off your student loans with a new loan, and you receive a new interest rate and/or term. In this case, let’s say you opt to refinance to a 20-year term and qualify for a 5% rate. Your estimated monthly payments would be $329.98. You’d pay $29,195 in total interest, and the total repayment would be $79,195 over the course of 20 years.

• Term: 20 years

• Monthly payments: $330

• Total interest amount: $29,195

• Total repayment amount: $79,195

In this example, doubling the term but reducing the interest rate results in lower monthly payments — a relief for many borrowers — but a higher total repayment sum. You’ll pay nearly double in interest charges over the life of the loan.

How Long Can You Extend Your Student Loans For?

You can extend your federal student loan repayment to 30 years on a graduated repayment plan if you consolidate your loans.

Most private lenders limit refinancing to a 20-year loan term, but borrowers who are serial refinancers may go beyond that. With consecutive refinances you can stretch a private loan term to 25 to 30 years.

Consecutive Refinances

You can refinance private or federal student loans as often as you’d like, as long as you qualify. Refinancing can benefit you when you find a lower interest rate on your student loans, but be aware of the total picture:

Pros	Cons
May save money every time you refinance	Will lose access to federal programs like loan forgiveness, income-driven repayment, and generous forbearance and deferment if federal student loans are refinanced
May allow for a lower interest rate and lower monthly payments	If you choose a longer loan term, you may pay more interest over the life of the loan
Most student loan providers don’t charge fees for refinancing such as origination fees or prepayment penalties)	You may not qualify for the best rates if you have a poor credit score

How do you know when to refinance student debt? If you find a lower interest rate, you could save money over the life of the new loan.

You can use a student loan refinancing calculator to estimate monthly savings and total savings over the life of the loan.

Refinancing Your Student Loans to a 30-Year Term

You cannot directly refinance your student loans into a 30-year term because almost all refinance lenders offer a maximum of 15- or 20-year terms. But you could take advantage of consecutive refinances to draw out payments for 30 years.

Or you could opt for consolidation of federal student loans for up to 30 years.

Consecutive Refinance Approach

Since there’s no limit on the number of times you can refinance your federal and private student loans, as long as you qualify or have a cosigner, you can refinance as many times as you need to in order to lengthen your loan term.

Direct Consolidation Approach

If you have multiple federal student loans, you can consolidate them into a Direct Consolidation Loan with a term up to 30 years. Because the loan remains a government loan, you would keep federal student loan benefits and may even qualify for loan forgiveness after 20 or 25 years.

While extending your loan term may reduce your monthly payments in the short-term, it’s likely it will cost you more in interest in the long term. If you are struggling to make your federal loan payments, you might be better off choosing an income-driven repayment plan instead of extending your loan term.

Other Ways to Reduce Your Monthly Student Loan Payments

One of the best ways to reduce your monthly student loan payments is to talk with your loan servicer to determine your options.

Some student loan servicers shave a little off your interest rate if you make automatic payments.

More employers are considering offering help with student loan payments as an employee perk.

And through 2025, employers can contribute up to $5,250 per worker annually in student loan help without raising the employee’s gross taxable income.

Ready to Refinance Your Student Loans?

Is a 30-year student loan refinance a thing? It can be, for serial refinancers. Then there’s the 30-year federal student loan consolidation option. The point of a longer term is to shrink monthly payments. To reiterate, though, you may pay more interest over the life of the loan if you refinance with an extended term.

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

About the author

Melissa Brock

Photo credit: iStock/blackCAT

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