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Making monthly mortgage payments can feel like chipping away at an iceberg, especially in the beginning. Savvy homeowners take heart that each payment earns them a little more ownership in their property. But do you know exactly how much ownership, commonly called “equity,” you currently have? Understanding how to calculate home equity can help you feel a growing sense of satisfaction as you make those mortgage payments.

Simply put, home equity is the difference between the value of a property and the outstanding balance of all mortgages, liens, and other debt on the property. Read on to determine how to calculate equity in your home, what you can do to increase your equity, and how you can leverage that equity to make it work harder for you.

Calculating Your Home Equity in 3 Steps

As noted above, home equity is the difference between your home’s current value and the outstanding balance of your mortgage and other debt on the property. It’s a simple equation:

Home Equity = Home Value – Home Debt

1. Find Your Home’s Value

To estimate your home value, you can use the purchase price of your home, but that doesn’t account for any appreciation in value. You can build equity in your home by paying down your mortgage, but also by making renovations. Or it may build naturally over time as home values in your area increase.

For a precise calculation of your home equity, you’ll need to know your home’s current value with appreciation. You can get an estimate of your home’s value with an online property tracking tool. These calculators approximate the appreciation of your home by comparing it with similar properties in the area. While helpful, these tools can’t provide an exact measure.

To determine your real-time home value, you’ll need to request an official appraisal. You might do this through a mortgage lender if you are thinking about borrowing with your home as collateral. The lender will order an inspection and evaluation of what your home is worth in the current market. The appraiser may ask you for documentation of any work you’ve done on your home to come to a more exact figure.

2. Determine How Much Is Left on Your Mortgage

Calculating home equity also involves knowing what you owe on your current home mortgage loan. You can find your mortgage payoff amount (which is different from your balance) on your lender’s online portal. Add to that the outstanding amount you owe on any second mortgages, liens (for unpaid taxes or child support, for example), home equity lines of credit, and any other loans that use your home for collateral. The sum of these items is your home debt, the last figure in the equity equation.

3. Subtract Remaining Debt from Your Home’s Value

The final step is to subtract your home debt from your home value. The result is how much equity you have. To convert this dollar amount to a percentage of home equity, divide it by the estimated value of your home.

Using the Loan-to-Value Ratio to Represent Home Equity

The loan-to-value ratio (LTV) is the percentage of your home’s value that is borrowed — it’s like the opposite of equity. You can calculate your LTV by dividing your outstanding home debt, discussed above, by your home’s appraised value:

LTV = Home Debt ÷ Home Value

For example, if your home is worth $375,000, and you still owe $200,000, your LTV is 53%. (200,000 ÷ 375,000 = .53) This means you still owe 53% of the equity in your home. Subtract 53 from 100 to see how much equity you have built in your home: Your available equity is 47%.

Why LTV Ratio Matters for Borrowing and Refinancing

Knowing your LTV ratio is important because lenders set maximum LTVs, typically 80%, for home equity loans. This means homeowners cannot borrow — through a mortgage and loans secured by the home — more than 80% of their home’s value.

Examples of Home Equity Calculations After 1, 3, 5, 10 Years

The table below shows how much equity a fictional homeowner accumulates over the first 10 years of their mortgage. Your initial home equity is determined by your down payment. The average down payment among American homebuyers is currently 14.5%. This table assumes an initial home value of $300,000 and a down payment of 20%, with annual appreciation of 10%, a mortgage APR of 7.50%, and a monthly payment of $1,678.11. The LTV is rounded to the nearest whole percentage. (The actual annual appreciation for American homes over the last 10 years on average was 7.4%.)

Year	Home Value	Loan Balance	Home Equity	LTV
0	$300,000	$240,000	$60,000	80%
1	$330,000	$237,596	$92,404	72%
2	$363,000	$235,196	$127,803	65%
3	$399,300	$232,611	$166,689	58%
4	$439,230	$229,825	$209,405	52%
5	$483,150	$226,822	$256,327	47%
6	$531,470	$223,587	$307,882	42%
7	$584,620	$220,101	$364,519	38%
8	$643,080	$216,343	$426,736	34%
9	$707,380	$212,294	$494,085	30%
10	$778,120	$207,931	$570,188	27%

Recommended: How Much Will a $300,000 Mortgage Cost You?

What Is a Good Amount of Home Equity?

Common wisdom says that it’s smart to keep at least 20% equity in your home. This is why many lenders limit your LTV to 80%. To borrow against your home, then, you’ll typically need more than 20% equity. (That’s also why lenders usually require private mortgage insurance when a homebuyer doesn’t put down a 20% deposit on a home before purchasing.)

Fortunately, that’s not a problem for most homeowners. Research firm Black Knight estimated that as of 2023, Americans have $195,000 of “accessible” home equity on average, over and above the recommended 20%. This is mostly due to rising home values.

Recommended: How Home Ownership Can Help Build Generational Wealth

How Much Home Equity Can You Take Out?

The amount of equity you can take out depends on the lender and the type of loan. However, most lenders will allow you to borrow 80%-85% of your home’s appraised value. The other 15%-20% remains as a kind of financial cushion.

A homeowner who doesn’t want to take out a home equity loan but needs cash might consider a Home Equity Line of Credit (HELOC). A HELOC allows owners to pull from their property’s equity continually over time. Borrowers can take only what they need at the moment. HELOCs use the home as collateral, which might not appeal to all borrowers. Some lenders allow HELOC borrowers to borrow slightly more against their home’s value, up to 90%.

Homeowners looking to fund renovations often explore home equity loans or HELOCs to access funds at more competitive rates than they would get with a home improvement loan, allowing for flexible financing of their projects.

Pros of Borrowing from Home Equity

As noted above, homeowners often find borrowing against their home equity to be an attractive way to obtain funds for a large expense such as home improvement or a child’s college education. Home equity loans and HELOCs often have lower interest rates than unsecured loans, such as personal loans or credit cards.

Cons of Borrowing from Home Equity

Of course, the most obvious downside of borrowing using your house as collateral is that if you fall behind on your payments, you risk losing your home. Another factor to consider: Adding a large home equity loan to your credit report can reduce your credit score by increasing your credit utilization.

The Takeaway

Calculating home equity involves subtracting your mortgage payoff balance (found on your lender’s website) from your home’s current value. To get the most accurate idea of your home’s market value, you’ll need an appraisal, which can cost $300-$450. Knowing how to calculate equity in your home can be a first step in determining how to use that equity to fund renovations or another important expense.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

Can you access home equity without refinancing?

You don’t have to refinance to tap into your home equity — you can apply for a home equity line of credit (HELOC) or a home equity loan. A HELOC provides a flexible credit line that you can borrow against as you need it, usually with a variable interest rate. A home equity loan provides a lump sum with a fixed interest rate, perfect for big, one-time expenses.

Does home equity increase automatically as property value rises?

Your equity rises as the value of your home increases, provided you don’t borrow additional funds using your home as collateral.

Is it a good idea to take equity out of your home?

Whether it’s smart to take equity out of your home with a home equity loan or a cash-out refinance depends on how you use the funds and how diligent you are about repaying what you borrow. For example, some homeowners use a home equity loan or home equity line of credit to fund renovations that increase their property’s value. Others use an equity-based loan to pay off higher-interest debt. Both of these can be a good move, provided you continue to make timely payments on the loan.

Do I need to put 20% down as a down payment?

A 20% down payment isn’t essential for a home purchase. For qualified first-time homebuyers, especially, down payments can start as low as 3% to 5%. The larger your down payment, the lower your monthly mortgage payments, however. And if you put down 20% you do avoid having to pay for private mortgage insurance (PMI). But if you can’t hit the 20% mark, homeownership is still within reach.

Is home equity a hedge against inflation?

Owning real estate can be an inflation hedge, as property values and rental income generally tend to increase with inflation (though not in every local market). But owning a home also involves work, and homes aren’t always easy to sell quickly. Putting money into a real estate investment trust (REIT) can offer exposure to real estate without the need to own a physical property.

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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

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.

SOHL-Q225-007

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A high-risk personal loan can be a source of funding for people who have a low credit score or no credit history and need to access cash. It is considered “high-risk” because the borrower is seen as more likely to default on the loan. For this reason, the interest rate is likely to be significantly higher than what a borrower with a more creditworthy profile would be offered via a conventional personal loan.

Here, learn the details of high-risk personal loans, their pros and cons, and alternatives if you need a quick infusion of cash.

What Are High-Risk Personal Loans?

High-risk personal loans make cash available to those with a poor credit score or without a credit history. Some points to consider:

•   Most personal loans require a credit score of 580 or higher, but if you have a low credit score (typically between 300 and 579) or lack a robust credit history, you may be able to tap into a high-risk personal loan.

•   These loans can give you access to cash, but they often come with higher interest rates, higher fees, strict repayment terms, and limits on the amount of money you can borrow.

•   While some of these are unsecured personal loans, others may be secured. This means you may be required to put up collateral, or an asset, to be approved for the loan. In this situation, if you default on the loan, the lender can seize your asset.

•   Personal loans typically come with fixed interest rates, and you must repay them in fixed monthly installments over a specified period, usually up to seven years. High-risk personal loans may have much shorter terms, however.

It’s worth noting that personal loans don’t usually have any restrictions on their usage. You could use them to pay for a car repair, travel, credit card debt, a new kitchen appliance, and almost any other legal purchase or service.

Recommended: Personal Loan Glossary

Types of High-Risk Loans

Here are some options you might consider for high-risk personal loans.

High-Risk Unsecured Loan

With this loan, you will not need to put up collateral to obtain funding. Typically, the lender will offer you a lump sum of cash; perhaps up to $10,000. While this may supply a quick cash infusion, keep in mind that the “high risk” cuts both ways. The lender is taking a gamble on you, as the odds of you defaulting may be high. But you are also probably securing a loan at a high interest rate and with significant fees and limitations.

High-Risk Secured Loan

In the case of a high-risk secured loan, you will be required to put up a form of collateral (such as real estate or a savings account) to gain access to funding. If a lender offers you this kind of loan, keep in mind that if you default, you could lose your collateral.

Payday Loan

Payday loans are short-term, high-cost loans, usually due on your next payday. Typically they provide a small amount of money, such as $500, that needs to be repaid within two to four weeks, and are offered online or at retail locations of payday lenders.

Here’s how they often work: You write a post-dated check for the amount borrowed plus fees, and the lender debits the funds from your account on the day the loan is due. Or you might grant the lender permission to pull the funds from your bank account electronically. If you can’t pay off the loan on time, it could roll over with more interest and fees accruing.

Note that these loans can involve an annual percentage rate (APR) of up to an eye-watering 400%. For this reason, they are considered a last resort.

Car Title Loan

Not all states offer them, but a car title loan lender lets you borrow between 25% to 50% of your car’s value, typically starting at $100 with 15- to 30-day repayment periods. In exchange, you put your car up for collateral. This means the lender can take possession of your car if you don’t repay the loan. (In one review, the Consumer Financial Protection Bureau found that one in five borrowers of this kind of funding winds up losing their vehicle.)

Lenders who offer car title loans typically have very low or no credit requirements, and you can get funding fairly quickly, even in a day. They also likely come with extremely steep interest rates, up to 300% APR.

Pawn Shop Loan

With a pawn shop loan, you hand over an item as collateral (such as jewelry, a musical instrument, or a computer), and the pawn shop offers a loan based on the item’s appraised value.

The shop may lend 25% to 60% of the resale value of the item, but note that if you fail to repay the loan, the pawn shop can keep and then sell the item. The pawn shop may give you 30 to 60 days to repay the loan.

Here’s the risky part: The APRs are high, around 200%, and vary based on your state.

Recommended: Using a Personal Loan to Pay Off Credit Card Debt

Figuring Out if You’re a High-Risk Borrower

Here are signs that you would be considered a high-risk borrower by lenders:

•   You have a non-existent or thin credit history, meaning you don’t have a proven record of handling debt responsibly

•   You have a low credit score (generally, below 580)

•   You have made repeated late payments on loans or credit cards

•   You have defaulted on a loan in the past

•   You have a high debt-to-income ratio (DTI); typically, this means your debts add up to more than 35% of your income

•   You are unemployed

•   You have declared bankruptcy in the past seven to 10 years

Each lender will have its own guidelines regarding to whom they lend, how much, and at what rate and fees. It’s therefore important to check with your lender about the requirements for their personal loans and their terms.

Why Choose a High-Risk Loan?

If you have poor credit or no credit and want to borrow money, a high-risk loan may offer you the best (or only) option to access a loan, particularly if you have an urgent need for cash. You can often access high-risk loans with a lower credit score or minimal credit history than you would need to qualify for traditional loans.

You might seek this kind of loan vs. dipping into an emergency fund you just started or into a college or retirement fund. It could help you preserve those assets if, say, you need quick cash for a move.

It’s important to consider both the pros and the cons of these personal loans so you make the right choice about whether to pursue this type of funding.

Disadvantages to High-Risk Loans

High-risk loans come with several downsides, including the following:

•   Higher interest rates and fees: High-risk loans typically have higher APRs and fees, meaning that you’ll pay more over the loan term. An example: Some have a 400% APR vs. the average APR of 12.38% for conventional personal loans as of August 2024. Some people can get caught in a debt cycle of taking out high-risk loans continually (particularly in the case of payday loans).

•   Risking collateral: You may have to put up an asset as collateral for your loan. If you fall behind on payments, you may lose the asset because your lender will seize it.

•   Lower amounts: You may not get to borrow as much as you prefer, because many lenders will only pay out small amounts to high-risk borrowers. For instance, some payday loans max out at $500.

How to Qualify for a High-Risk Personal Loan

Here’s how you might qualify for a personal loan as a high-risk borrower. Personal loan lenders will want you to see that you’ll likely be able to cover a new loan payment. Among other factors, lenders may use your credit score, your income, and your DTI to assess your ability to repay a loan. In terms of a target DTI, lenders like to see you keep it below 35% for a standard personal loan. With a high-risk loan, you may qualify with a significantly higher figure.

Next, you’ll gather the documents, including:

•   Your ID

•   Social Security number

•   Pay stubs

•   W-2 forms

•   Federal income tax forms

•   Bank account statements

You can apply online for a high-risk personal loan in just a few minutes once you have your materials ready. Your lender will let you know if you need to submit more documentation. In most cases, you’ll have a loan decision fairly quickly (some lenders advertise approval in minutes). If approved, you’ll likely have funds within one to three business days.

Alternatives to High-Risk Loans

You can also consider alternatives to high-risk loans, including:

•   Payday alternative loans: Credit unions may offer their members short-term loans as an alternative to payday loans. Payday alternative loans (PALs) are divided into PALs I and PALs II. PALs 1 offer between $200 and $1,000 with a maximum APR of 28%, and one- to six-month repayment terms. PALs II offer up to $2,000, a maximum 28% APR, and one- to 12-month repayment terms.

•   Family or friend loan: Family members or friends may be willing to lend you money. However, ensure that you can repay the loan in a timely manner so you don’t risk damaging the relationship.

•   Get a cosigner: You can approach someone you know who has good credit to become a cosigner on your application to help you qualify for a standard personal loan. Make sure, however, that both parties involved understand that the cosigner is responsible for taking over your monthly payments if you default on repaying the loan. That’s a major commitment on your cosigner’s behalf.

•   Look for “buy now, pay later” offers: These allow you to purchase an item and then pay it off on an installment plan, which may or may not charge interest.

•   Build your credit: Perhaps it seems obvious, but building your credit can play a key role in helping you qualify for more favorable loans in the future. You might work on positively impacting the factors that determine your credit score or meet with a qualified credit counselor to learn strategies.

Recommended: Guide to Personal Loans

The Takeaway

High-risk personal loans can be a source of quick cash for people with a low credit score or a thin credit history. They can be risky for the lender, because there is a fair chance the borrower might default. They can also be risky for the person seeking the money because the interest rate, fees, and other terms may prove very expensive and/or involve potentially losing any collateral that might be put up.

If you are a high-risk borrower, it’s important to fully understand what these loans involve and the downsides if you cannot repay them on time. It may also be wise to review what options exist before you decide to apply for a high-risk personal loan.

If you’re seeking a standard personal loan, see what SoFi offers.

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 NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What is considered a high-risk loan?

High-risk loans are funds offered to individuals who may have bad or no credit. In exchange for accepting a higher-risk applicant, lenders typically charge higher APRs and fees and/or may require the borrower to put up collateral.

What type of bank offers high-risk loans?

Banks typically don’t offer loans to high-risk borrowers, though it may be worth checking with them before moving on to another type of lender. Those who do offer high-risk personal loans could be online lenders or a retail payday loan provider, for example.

What two types of loan should you avoid?

There are several types of loans you may want to avoid if possible, including car title loans and payday loans. Why? You will pay high interest rates which can trap you in a cycle of debt. Also, with a car title loan, you are using an asset as collateral, which means you risk losing your vehicle if you can’t repay the loan on time.

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

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 .

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.

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A bachelor’s degree is an undergraduate degree that usually requires you to take 120 credit hours of courses, typically around 40 classes. There are several types of bachelor’s degrees, including Bachelor of Arts, Bachelor of Science, and Bachelor of Fine Arts degrees. When you pursue a bachelor’s degree, you can major in a wide variety of focus areas, including arts, sciences, and humanities.

You may consider a second bachelor’s degree due to a change in career (such as switching from teaching to engineering — the number of classes you have to take for a master’s may encourage you to get a second bachelor’s degree instead). Taking advantage of career opportunities, adapting to job changes, or getting credit for specific skills may also be reasons you dive in again.

But can you get financial aid for a second bachelor’s degree?

Yes, you can! Read on to learn more about how to get financial aid for a second bachelor’s degree and the type of financial aid you might want to pursue for your second go-round.

Is It Possible to Get Financial Aid for a Second Bachelor’s Degree?

Yes, it’s possible to receive financial aid for a second bachelor’s degree, which can include federal student aid like federal grants, work-study, and federal student loans. We’ll detail the definitions of these types of federal student aid below when we explain how adult learners pay for college.

It’s important to note that you will be limited to a certain amount of financial aid in certain situations. For example, the aggregate federal student loan limit for dependent students (those claimed by their parent(s) on their parents’ taxes) is $31,000 and no more than $23,000 can be in Subsidized Student Loans.

Independent students (students who are at least 24 years old, married, veterans, members of the armed forces, who have their own legal dependents, who are homeless, and/or meet other qualifications) cannot borrow more than $57,500. No more than $23,000 of this amount may be in Subsidized Loans. In other words, if you’ve already borrowed the maximum amount for your first undergraduate degree, you could not borrow any more.

Certain grants also impose limits on what you can receive for a second bachelor’s degree.

Recommended: Can You Negotiate Financial Aid?

Can a Student Receive a Pell Grant for a Second College Degree?

A Pell Grant is a type of need-based federal grant. Grants are a type of aid that you don’t have to repay.

You cannot receive a Pell Grant if you’ve already received an undergraduate degree.

In some cases, students enrolled in a post-baccalaureate teaching program may be eligible to receive the Pell Grant. However, there are more stipulations — you cannot receive an unlimited amount of Federal Pell Grant funds, according to federal law. The Federal Pell Grant limit you can receive over your lifetime — Federal Pell Grant Lifetime Eligibility Used (LEU) — is limited to six years.

During a single award year, you can receive up to 100% of a scheduled Pell Grant Award, though it is possible to receive up to 150% of your scheduled award. For example, you may take classes during the fall, spring, and summer and therefore receive more than the scheduled 100%. However, you can receive the Pell Grant for no more than 12 terms, or about six years, because the six-year percentage equals 600%.

Using Funding From Financial Aid for Second Bachelor’s Degree

Financial aid for a second bachelor’s degree can include work-study, scholarships, federal student loans, and student aid for military spouses. You can think of your financial aid award as a jigsaw puzzle — these individual pieces fit together to form your award. Let’s take a look at the types of aid you might receive.

Work-Study

When you file the Free Application for Federal Student Aid (FAFSA®), you may receive a work-study award — yes, even if you’re working toward earning a second bachelor’s degree. As long as you apply for part-time work-study jobs for a second degree on campus (sometimes off-campus jobs are available) you may work up to the amount you receive on your work-study award. The amount you can make depends on factors including your level of need and the funds your school has available for work-study.

It’s important to remember that work-study is not “automatic money” — you must apply for a job and work toward the number of hours shown on your award.

Scholarships

Scholarships have a diverse eligibility requirements and some may be open to learners seeking a second bachelor’s degree. Scholarships may come from a wide variety of sources, including the institution you apply to. It’s a good idea to ask the financial aid office at each school for more information about the types of scholarships available to you because each college and university has various requirements for earning scholarships. For example, some may be based on merit and others may be based on financial need.

Other organizations, such as clubs, foundations, charities, businesses, local and state governments, and individual philanthropists, may also offer scholarships.

Recommended: Scholarship Search Tool

Federal Student Loans

You may qualify for federal student loans as long as you are under the aggregate federal student loan limit for dependent students of $31,000, with no more than $23,000 in subsidized student loans. Independent students are limited to $57,500 and cannot go over more than $23,000 in subsidized loans.

Undergraduate students can take advantage of Direct Subsidized Student Loans or Direct Unsubsidized Loans, which must be repaid with interest. Subsidized student loans are need-based federal student loans in which the government pays the interest while you’re in school (though you’ll pay the interest after school). Unsubsidized student loans are non-need-based federal student loans in which the government does not pay the interest while you are in school.

For loans disbursed during the 2023-2024 academic year, undergraduate students can take advantage of both Direct Subsidized or Unsubsidized Loans for an interest rate of 5.50%.

Recommended: Types of Federal Student Loans

Student Aid for Military Spouses

If you are the spouse of a military member, you may be able to have your military member transfer Post-9/11 GI Bill benefits to you based on your loved one’s military service, particularly if they are on active duty or in the Selected Reserve.

Your loved one must have completed at least six years of service, agreed to add four more years of service, and must also be enrolled in the Defense Enrollment Eligibility Reporting System (DEERS). Your active duty military member must use a Transfer of Entitlement (TOE) before you can apply for benefits.

What Do I Need to Do to Use Financial Aid for a Second Bachelor’s?

You can file the FAFSA for second bachelor’s degree financial aid and accept the aid award that comes from the school of your choice. Let’s go over each of these steps. Don’t forget to check out SoFi’s FAFSA guide.

Applying for FAFSA

You must file the Free Application for Federal Student Aid, commonly known as the FAFSA, to qualify for federal student aid. The FAFSA form online asks you to report on your personal financial information, including tax information and your savings and checking account balances. The FAFSA information also helps colleges, universities, and private financial aid providers decide how much state and institutional aid you may receive.

Once you file the FAFSA, you’ll get a Student Aid Report (SAR), which summarizes the information you’ve entered on the FAFSA. The SAR reports a variety of information including:

•   Your Student Aid Index (SAI), a number that determines your eligibility for student aid

•   Your eligibility for federal student loans

•   Your eligibility for Federal Pell Grants

•   Whether you’ve been selected for verification, which is a process that some students undergo to confirm that all the information is accurate on the FAFSA. Students may get selected randomly for verification and the school may also select them for verification. They may also get selected if the Central Processing System found problems with the FAFSA. The financial aid offices at the schools on your list can help you through the verification process.

Once you complete everything, you’ll receive a financial aid award from the schools on your shortlist.

Accepting Financial Aid

After receiving your financial aid award, it’s important to go through your full award to make sure you understand it, line by line. If you don’t understand a portion of your award, call the financial aid office of the school that sent it to you. They should be able to explain your full award to you in detail.

The school will generally explain how to accept your financial aid award in the email or packet that you receive. You can go through each type of loan, grant, and scholarship and accept or decline the awards you want. You can also accept the entire award. The financial aid office will let you know about your next steps after your award acceptance and after you pay your enrollment deposit.

Recommended: Ca$h Course: A Student’s Guide to Money

Ways to Pay for a Second Bachelor’s Degree

You can pay for your education using financial aid for a second bachelor’s degree using the types of aid described above (through grants, scholarships, and federal student loans). You may also want to pay for college using some money you’ve saved or that you are currently earning through a part- or full-time job.

Learners can also take advantage of private student loans, which are student loans that don’t come from the federal government. They typically offer higher interest rates than federal student loans but are a great way to fill in the gaps that other financial aid for second bachelor’s doesn’t cover.

Before you choose a private student loan lender, ask questions about interest rates, terms, and repayment options. Note that you’ll lose the option to tap into federal student loan benefits like income-driven repayment plans and loan forgiveness options if you go the private student loan route.

The Takeaway

If you’re wondering, “Can I get financial aid for a second bachelor’s degree?” you now know that the answer is a resounding “Yes!”

But will financial aid pay for a second bachelor’s degree? The answer is that federal financial aid and scholarships may not fully cover all your education expenses, which is why you might consider looking into private student loans.

Let SoFi help you fill the gap. For example, you may want to lean on a combination of scholarships, federal student loans, the money you’ve saved, and private loans. If you borrow too much, you might even be eligible for refund checks from financial aid.

SoFi offers zero origination fees and no prepayment penalties, and you can choose between a fixed or variable rate loan.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. 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., 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 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).


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

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

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Whether you’re in the market for a new student loan or looking to lower your current student loan payments, there may be a federal loan program available to help.

Student loan programs sponsored by the federal government are available to any eligible borrower (not just federal employees) and don’t always require a credit check. They also come with some advantages over private student lending options, such as income-based repayment plans, forgiveness programs, and (in some cases) lower interest rates.

Whatever stage you’re at in your education or borrowing journey, here’s what you need to know about federal student loan programs.

Why Consider Federal Loan Programs?

The federal government offers student loan programs for undergraduate students, graduate students, as well as those who are in the repayment phase of their student loan journey. These programs include:

•   Direct Subsidized Loans With Direct Subsidized Loans, which are available to students who demonstrate financial need, the government pays all the interest that accrues on the loan during school and for six months after graduation.

•   Direct Unsubsidized Loans Direct Unsubsidized Loans are available to eligible undergraduate, graduate, and professional students and are not based on financial need. With these loans, students are responsible for repaying all interest that accrues on the loan.

•   Direct PLUS Loans Graduate or professional students (and parents of undergraduate students) can tap into Direct PLUS Loans. Eligibility isn’t based on financial need, but you must undergo a credit check. These loans have higher interest rates and fees than Direct Unsubsidized Loans, but you can borrow more money — up to your total cost of attendance, minus other aid received.

•   Direct Consolidation Loans Direct Consolidation Loans allow you to combine your eligible federal student loans into a single loan with one loan servicer. This can simplify repayment. However, it won’t lower your interest rate.


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

Benefits of Federal Loan Programs for Students

Federal loan programs offer a number of benefits for college students. Here are some to keep in mind.

•   Payments not due until six months after graduation: Students don’t need to make any payments on their student loans while they are in school at least half-time or during the post-graduation grace period, which is six months.

•   Fixed interest rates: Federal student loans have fixed interest rates that are often lower than student loans from private lenders. For federal loans first disbursed on or after July 1, 2023, and before July 1, 2024, the rate is 5.50% for undergraduate Direct Subsidized and Unsubsidized Loans; 7.05% for Direct Unsubsidized Loans for graduate students; and 8.05% for Direct PLUS Loans.

•   Subsidized options: If you have financial need, the government may offer you a subsidized loan, which means the government pays the interest while you’re in school at least half-time and for six months after you graduate.

•   No credit checks for certain loans: You don’t need a credit check to qualify for Direct Subsidized or Unsubsidized Loans.

Federal Loan Programs to Consider After You Graduate

Once you graduate and need to begin paying back your federal student loans, the government offers a number of programs that can make repayment more manageable. Here’s a look at some of your options.

Federal Student Loan Repayment Plans

The Education Department offers a number of different repayment plans, including long-term plans that can last up to 30 years. You may be able to lower your monthly payment if you opt for a longer repayment term. Extending your repayment term generally means paying more in interest overall, though.

Fixed repayment plans include the Standard, Graduated, and Extended plans. Here’s a look at how they compare.

Fixed Repayment Plan	Eligible Loans	Monthly Payment Amount
Standard Plan	Direct Subsidized and Unsubsidized Loans; Subsidized and Unsubsidized Federal Stafford Loans; PLUS loans, Consolidation loans	Payments are a fixed amount that ensures your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans)
Graduated Plan	Direct Subsidized and Unsubsidized Loans; PLUS loans; Consolidation Loans	Payments start out lower and then increase, usually every two years. Payment amounts ensure you’ll pay off loans within 10 years (within 10 to 30 years for Consolidation Loans)
Extended Plan	To qualify, you must have more than $30,000 in outstanding Direct Loans (or FFEL Program loans)	Payments can be fixed or graduated and will ensure that your loans are paid off within 25 years

Income-Driven Repayment Plans

Income-driven repayment (IDR) plans aim to make student loan payments more manageable by tying them to the borrower’s income. They allow you to pay a percentage of your discretionary income toward federal loans for 20 to 25 years, at which point the remaining loan balances are forgiven.

The Saving on a Valuable Education (SAVE) Plan is the newest and one of the most affordable repayment plans for federal student loans. For some borrowers, payments can be as low as $0 per month.

Here’s a look at how the four IDR federal loan payment programs stack up.

Income-Driven Repayment Plan	Eligible Loan Types	Monthly Payment Amount
SAVE	Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans (that do not include parent PLUS loans)	10% of discretionary income
PAYE	Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans (that do not include parent PLUS loans)	10% of discretionary income but never more than what you would pay under the 10-year Standard Repayment Plan
IBR	Direct Subsidized and Unsubsidized Loans; Subsidized and Unsubsidized Federal Stafford Loans; Direct and FFEL PLUS Loans (made to students); Direct or FFEL Consolidation Loans (that do not include parent PLUS loans)	Either 10% or 15% of discretionary income but never more than what you would pay under the 10-year Standard Repayment Plan
ICR	Direct Subsidized and Unsubsidized Loans; Direct PLUS Loans (made to students); Direct Consolidation Loans	Either 20% of your discretionary income or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income (whichever is lower)

Student Loan Forgiveness Programs

In addition to the loan forgiveness associated with IDR plans, the federal government offers other federal loan forgiveness programs, including Public Service Loan Forgiveness (PSLF), which is for public-sector workers. The PSLF program allows you not to repay the remaining balance on your Direct Loans as long as you’ve made the 120 qualifying monthly payments under an accepted repayment plan and worked for an eligible employer full-time.

There is also a separate forgiveness program just for teachers, as well as one borrowers with permanent disabilities.

Federal Student Loan Consolidation Program

If you have multiple federal student loans, you can consolidate them into a single new loan (called a Direct Consolidation Loan) with new repayment terms. This can simplify the repayment process, since you’ll only have one payment and one loan servicer to keep track of.

Federal loan consolidation also allows some borrowers (such as those with Federal Family Education or Perkins Loans) to access repayment and forgiveness programs that they otherwise are ineligible for.

The federal student loan consolidation program does not lower your interest rate, however. Your new fixed interest rate will be the weighted average of your previous rates, rounded up to the next one-eighth of 1%.

Your new loan term could range from 10 to 30 years, depending on your total student loan balance. If you extend your loan term, it can lower your monthly payments but the total amount of interest you’ll pay will increase.

It’s also important to note that when loans are consolidated, any unpaid interest is added to your principal balance. The combined amount will be your new loan’s principal balance. You’ll then pay interest on the new, higher balance. Depending on how much unpaid interest you have, consolidation can cost you more over the life of your loan.

Recommended: Student Loan Consolidation vs Refinancing

Factors to Evaluate Before Refinancing

Refinancing is the process of taking out a new student loan from a private lender (ideally with better rates and terms) and using it to pay off your existing federal and/or private student loans. Generally, refinancing only makes sense if you can qualify for a lower rate. Here are some things to consider before you explore refinancing your student loans.

Current Interest Rates and Loan Terms

Refinancing can potentially allow you to lower your monthly payment by getting a lower interest rate than what you currently have, extending your loan term, or both. Keep in mind, though, that lengthening your loan term may mean paying more in interest over the life of the loan.

Credit Score Requirements

Not every borrower is eligible for refinancing. To get approved, you typically need a credit score of at least 650. A score in the 700s, however, gives you a much better chance of qualifying.

Your credit score also helps determine your new interest rate. Generally, the better your credit score is, the more competitive your interest rate will be. If you can’t qualify for an attractive refinance on your own, you might want to recruit a cosigner who has excellent credit.

Potential Savings Through Refinancing

One of the main reasons people refinance their existing student loans is because they can find a lower interest rate through a new lender. This can help you save money, potentially thousands over the life of your loan. A lower rate can also help you pay off your loan faster, or lower the amount you pay each month.

While student loan interest rates have been on the rise in the last couple of years, you may still be able to do better if your financial situation has considerably improved since you originally took out your student loans or you have higher-interest federal student loans.

Impact on Loan Forgiveness Options

Refinancing federal loans makes them ineligible for federal forgiveness and protections. If you think you may benefit (or are currently working towards) public service, teacher, IDR, or other federal forgiveness program, it may not be a good idea to refinance your federal student loans. Doing so will bar you from getting your federal loans forgiven.

Refinancing also makes your loans ineligible for government deferment and forbearance programs, which allow you to temporarily postpone or reduce your federal student loan payments. However, many private lenders offer their own deferment and forbearance programs.

💡 Quick Tip: It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.

The Takeaway

Federal loan programs, including loan consolidation, graduated repayment plans, income-driven repayment plans, and forgiveness programs can make repaying your federal student loans more manageable after you graduate.

If you have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans, however, it can also be worth looking into private student loan refinancing.

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

Does it make sense to refinance student loans?

Refinancing student loans can make sense if you are able to qualify for a lower interest rate through a new lender. This can help you save money, potentially thousands over the life of your loan. A lower rate can also help you pay off your loan faster, or lower the amount you pay each month.

Keep in mind that refinancing federal student loans with a private lender means giving up federal protections and relief programs.

Under what circumstances would you want to consider refinancing a debt?

You might consider refinancing a debt if your financial situation has improved since you originally got the loan and can now qualify for a lower rate. Refinancing also allows you to extend your loan term, which can lower your payments. Keep in mind, however, that a longer term generally means paying more in overall interest.

Which is a downside of refinancing out of federal student loans?

The biggest downside of refinancing your federal student loans is forfeiting federal protections, such as income-driven repayment plans and loan forgiveness options.

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Photo credit: iStock/Drazen Zigic

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 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).

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

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

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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