Apr
25
2025
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Does It Cost Money to Refinance Student Loans?

By | Debt Payoff, Student Loans, student_loan | No Comments

Typically, it does not cost a borrower money to refinance student loans. Most lenders do not charge origination fees or application fees. However, you can end up paying fees if you don’t make your payments on time.

In the right circumstances, refinancing your student loans could help you save both time and money as you work to pay down your student debt, without costing you any money to do so.

Key Points

•   Most lenders do not charge application or origination fees for refinancing student loans.

•   Refinancing can lower interest rates, simplify repayment, and offer flexible loan terms.

•   Borrowers with federal loans who refinance lose access to income-driven repayment, forgiveness programs, and other federal protections.

•   Late payment or returned payment fees may apply if loan payments are missed.

•   To avoid hidden fees, read the loan terms carefully and consider setting up automatic payments for potential rate discounts.

Student Loan Refinancing Recap

Student loan refinancing is the process of paying off one or more existing student loans with a new loan through a private lender. Depending on the terms of your current loans and your creditworthiness, you may be able to get a lower interest rate or lower monthly payment.

You can typically refinance both federal and private student loans.

Refinancing is different from federal student loan consolidation, which involves combining several eligible federal loans into a Direct Consolidation Loan. While that process can simplify your repayment plan and help you maintain federal loan protections, it typically doesn’t help you save money.

Every situation is different, but with the right refinance loan, you could potentially save money as you pay down your student debt.

That said, there are both benefits and drawbacks of refinancing to consider.

Pros of Student Loan Refinancing

Can Save You Money

If you qualify for a lower interest rate than what you’re currently paying, refinancing your student loans could save you money on interest over the life of the loan. Keep in mind that this includes keeping the loan term the same. If you extend your loan term, you could end up paying more in interest, even with a lower rate.

If you don’t qualify for a lower rate on your own, you may be able to add a cosigner with solid creditworthiness to help improve your chances.

Can Give You More Flexibility

Student loan refinance lenders typically offer a range of repayment terms, allowing you to shorten or lengthen the amount of time you have to pay off your debt.

Simplifies Your Repayment Plan

If you have multiple student loans across more than one servicer or lender, refinancing them all into one new loan can make repayment a little easier.

Cons of Student Loan Refinancing

You’ll Lose Federal Benefits and Protections

If you have federal student loans, refinancing with a private lender will cause you to lose certain benefits and protections, such as access to income-driven repayment plans, federal loan forgiveness programs, and more.

It May Not Save You Money

If your current interest rates are already low, it may be tough to qualify for something even lower. Also, applying for a longer repayment period than what you already have could end up costing you more in interest over the life of the loan.

You May Get Less Help When You’re Struggling

Federal student loans allow you to apply for student loan deferment or forbearance if you’re struggling to make your payments. When you refinance with a private lender, you may not get these same benefits.

Deferment and forbearance options can vary by private lenders. With SoFi, for instance, you may qualify for a deferment if you return to graduate school on a half-time or full-time basis, undergo disability rehabilitation, or serve on active duty in the military.

How Much Does It Cost to Refinance Student Loans?

Refinancing student loans with a private lender typically does not come with any costs to the borrower. Most companies do not charge any fees associated with student loan refinancing. If you are being charged fees (see below), you may want to look elsewhere for your refinance.

Common Fees When Refinancing Your Student Loans

If a lender does charge fees for refinancing, these are some you may run into:

•   Application fee: This fee covers the cost of processing the application and is typically due when you submit your application.

•   Origination fee: Some lenders charge this fee to help cover the costs of processing your loan and disbursing the funds.

•   Late payment fee: Many lenders charge this fee if you miss a student loan payment. Depending on the lender, you may get a grace period between your due date and when the fee is assessed.

•   Returned payment fee: If you try to make a payment but don’t have enough money in your checking account to cover it and no overdraft protection, some lenders may charge you a fee for the failed transaction.

In most cases, you won’t have to pay anything up front to refinance your student loans. With SoFi, there are no application fees, no origination fees, no late fees, and no prepayment penalties.

As you’re shopping around, make sure you read the fine print to understand the cost of refinancing student loans with that particular lender.

Serious savings. You could save thousands of dollars
thanks to flexible terms and low fixed or variable rates.

Reducing the Cost of Refinancing Student Loans

Because many student loan refinance lenders don’t charge upfront fees, shopping around with those costs in mind can help you improve your chances of finding a low- or no-cost lender.

Keep in mind, though, that some lenders may charge what are called “hidden fees.”

Instead of showing up in marketing material, these fees are often buried deep in the terms and conditions of the loan and can be tough to find if you’re not looking for them.

Taking the time to thoroughly read the terms and conditions before refinancing could help you avoid unexpected fees down the line.

If you get approved for the new loan, you might consider setting up automatic payments to help avoid missing a payment and getting charged a late fee. Some lenders, including SoFi, offer an interest rate discount to qualified borrowers using autopay.

Then, you might make it a goal to always have a buffer in your checking account or overdraft protection to ensure a payment doesn’t get returned.

Considering SoFi to Avoid Upfront and Hidden Costs

If you’re considering refinancing your student loans, shopping around can take time. When refinancing with SoFi, you don’t have to worry about paying upfront costs or hidden fees.

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 cost money to refinance loans?

No, it typically does not cost money to refinance student loans. Most student loan refinance lenders do not charge fees associated with refinancing — including application fees and origination fees. If you are being charged a fee to refinance, that could be a red flag and you may want to look elsewhere.

What is a finance charge on a student loan refinance?

On a student loan refinance, a finance charge is what you pay the lender beyond the principal balance. This would include interest and any fees associated with the loan.

How much does it cost to consolidate student loans?

If you want to consolidate your federal student loans, there is no application fee associated with a federal Direct Consolidation Loan. It does not cost the borrower anything to consolidate federal loans.

About the author

Jacqueline DeMarco

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.


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

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.


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

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

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

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

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Apr
25
2025
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How to Start Investing in Utilities

By | Growing Wealth, invest, Investing | Comments Off on How to Start Investing in Utilities

Investors looking for a value investment that typically provides steady income without much volatility might consider investing in utilities. Utility companies provide essential services that the public uses on a daily basis, such as water and electricity, making them generally stable investments. Investing in utilities is considered to be low risk compared to other types of stocks, since utility companies are regulated entities with few competitors.

Plus, their profits and expenditures are very predictable, so they tend to provide steady performance. Utilities are a constant in modern life — people always need them — so utility companies tend to ride out economic downturns without significant volatility. As a result, utility stocks may provide higher dividends than other fixed-income assets, though they may not offer substantial growth potential.

Key Points

•   Utility stocks have the potential to provide a steady income stream through relatively high dividends.

•   These stocks are characterized by stability, regulation, and limited competition.

•   The essential nature of utilities ensures consistent consumer demand.

•   Utility stocks are often considered a safe haven, offering protection during market downturns.

•   Some utility stocks in emerging markets present opportunities for growth.

What Are Utility Stocks?

The utilities sector includes electricity, gas, water, and waste services. Cable and telephone companies used to be placed in the utilities sector, but now they are within the communications sector due to shifts in technology and competition.

The utilities sector includes companies that generate traditional power as well as alternative and sustainable energy (sometimes called green energy), in addition to companies that transmit and distribute power to homes and businesses. Companies that provide natural gas generally buy it from oil and gas drilling companies and distribute it to customers. Water companies provide clean water to customers and collect and treat dirty water.

There are government regulations protecting utility companies, making it difficult for competitors to enter the market. Regulations also control the prices that utility companies charge for goods and services, making their earnings predictable and creating even more stability in the market.

It’s also extremely expensive to build the infrastructure needed to provide utilities. This allows utility companies to establish themselves in a region and grow steadily over time without significant competition.

Who Should Invest in Utilities Stocks?

Utility stocks are generally considered to be income stocks rather than growth stocks, since they provide consistent dividends but don’t tend to significantly increase in value.

Some people might be tempted to think of utility stocks as similar to bonds, since they provide consistent income and tend to be stable and safe. But they are not the same. One difference is that the yields from utility stocks tend to be higher than those of bonds and other fixed-income investments. These factors make them popular as a safe haven asset, and among retirees and conservative investors.

Choosing Utilities Stocks to Invest In

There are a number of ways to evaluate a stock in a utility company before buying it — here’s what investors might want to consider.

New Utility Companies and Emerging Markets

Since utility stocks have high dividends (making them popular monthly dividend stocks) and tend to be established companies, they don’t have the opportunity for significant growth. But some stocks in emerging markets or those of new utility companies can be an exception. Growth investors tend to gravitate towards these types of utility stocks, use utilities as a safe haven during market downturns, or as a way to diversify.

Companies with Moderate Dividend Payouts

Investors can look at a company’s dividend payout ratio to see how much of its profits it retains and how much it pays out to shareholders. If a company pays out less to shareholders, it may have more potential for growth since it keeps those revenues to invest back into the business and won’t need to borrow as much money.

Undervalued Utility Companies

Technical analysis can help both growth and value investors pick out which utility stocks might be undervalued and those which have the most potential for growth and income.

Utilities with Healthy Credit Ratings

Another tool investors can look at when choosing utility stocks is their credit rating. A higher credit rating means a company will be able to borrow more money, which is important for utility companies that need to continue investing in and maintaining infrastructure. However, too much debt isn’t a good sign, so investors should look at the company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) and debt-to-total-capital ratios when comparing potential utility stock investments.

Other factors to consider when choosing utility stocks:

•   The region in which the company operates

•   The regulatory market in that region

•   The utility the company provides and its business model

•   The dividend rate

•   The company’s financial performance

Investors who want to gain exposure to a broad cross-section of the market rather than choosing individual stocks might choose to invest in utility ETFs and mutual funds.

Benefits of Investing in Utilities Stocks

There are several reasons investors choose to add utility stocks to their portfolio:

•   They tend to pay out higher dividends than other fixed-income assets and stocks.

•   They are considered safe and stable investments. There will always be a demand for utilities, investors tend to sell off higher-risk investments first, they are under government regulation, and they have few competitors.

•   They tend to have high dividends and stability. Even though they don’t always see significant growth, their high dividends and low volatility make them a popular investment, so they do continue to grow over time.

•   They can be less volatile during economic downturns. Utilities provide essential services, making them a good way to diversify a portfolio.

•   They have little competition. Government regulations create the opportunity for utility companies to essentially become monopolies within their operating region, reducing the ability for competitors to enter the market.

•   Certain utility stocks may provide tax benefits. This can include lower capital gains rates for qualified dividends.



💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

Downsides of Investing in Utilities

Although there are many reasons to invest in utilities, like any investment, they come with some downsides:

•   They are riskier than bonds. Since they are still part of the stock market, their values do fluctuate along with market trends. Utility stocks lost about half of their value (not including dividends) in both of the major market downturns in the past decade.

•   They don’t often provide opportunities for significant short-term growth. Here, their stability can be seen as a negative.

•   Rising interest rates can negatively affect utility stocks. That’s because utility companies tend to hold a lot of debt since their businesses require significant capital investment. As interest rates rise, companies have a higher debt burden. Also, when interest rates rise, stock prices tend to decrease, thereby decreasing their amount of equity funding and causing some investors to shift funds into other types of assets.

•   Utility companies are affected by changes in government policy. Regulations can also make it challenging for companies to grow, since they can’t easily increase their prices.

•   Not every utility company has high returns. The best choices for investors are the ones that show visible potential for both growth and high-yield dividends. Since utility infrastructure is expensive to build and maintain, companies need to show that they will be able to continue running and growing while still earning enough profit to pay out dividends.

The Takeaway

Investing in utility stocks can be a good way to diversify a portfolio by adding low-volatility assets that typically have high dividends. The public will always need utilities like water, gas, electric and renewable energy — and that allows utility companies to weather economic downturns relatively well.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.


¹Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

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Apr
25
2025
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How Does Student Loan Deferment in Grad School Work?

By | Fresh Out of School, Student Loans, student_loan | No Comments

If you’re thinking about attending graduate or professional school, you may be wondering how to handle your undergraduate student loans. One question many potential grad students have is, if I go to graduate school, will my loans be deferred?

You could defer loans while in grad school for temporary relief, but other options like loan refinancing or an income-driven repayment plan could bring longer-term help.

Read on to learn more about how to defer student loans while in grad school, and other measures to consider.

Key Points

•   Federal student loans are automatically deferred for up to 36 months if you’re enrolled in graduate school at least half-time. Other circumstances that may qualify for deferment include economic hardship, cancer treatment, and unemployment.

•   Interest does not accrue on subsidized federal loans during deferment, but it does accrue on unsubsidized and Direct PLUS loans.

•   To apply for federal loan deferment, submit a request to the student loan servicer with required documentation.

•   An alternative option to deferment for federal loans is Income-Driven Repayment plans, which offer lower monthly payments based on discretionary income and family size over an extended repayment period.

•   Private student loans may or may not offer deferment, and terms and conditions vary by lender.

Deferment vs Forbearance

Graduation from undergrad or graduate school is followed by a payment grace period of six months for most federal student loans. But if you hit a snag at some point and can’t afford payments, both deferment and forbearance are designed to allow you to apply to postpone payments.

The main difference between deferment and forbearance: Interest accrues on only some federal student loans during deferment, whereas it accrues on nearly all of them in forbearance.

In forbearance, any unpaid interest is capitalized, or added to your loan balance, at the end of the payment pause, increasing the total amount you end up repaying.

To answer the question of, if I go to graduate school, will my loans be deferred?, it is possible to do, as long as you qualify for deferment.

Deferment, for up to 12 months at a time, for a maximum of 36 months, may be a better choice than forbearance if:

•   You have subsidized federal student loans and

•   You’re dealing with substantial financial hardship

If you apply to defer student loans while in grad school and don’t qualify, and your financial hardship is temporary, forbearance is an option.

If you have private student loans, many lenders will allow you to apply for a payment pause during hardship, too, though the terms and fees may be less borrower-friendly than is the case with federal student loans.

Do I Qualify to Defer My Payments?

Here’s how to defer student loans while in grad school: For federal student loans, you’ll need to submit a request to your student loan servicer, usually with documentation to show that you meet the eligibility requirements for the deferment. For private student loans, you’ll need to check the rules directly with the lender.

Besides in-school deferment, an automatic deferment that you are eligible for if you’re enrolled in school at least half time, a variety of circumstances may qualify you for federal student loan deferment. These are several of them.

Economic Hardship Deferment

You:

•   Are receiving a means-tested benefit, like welfare

•   Work full-time but have earnings that are below 150% of the poverty guideline for your family size and state

•   Are serving in the Peace Corps

Unemployment Deferment

You receive unemployment benefits or you are unable to find full-time employment.

Graduate Fellowship Deferment

You’re enrolled in an approved graduate fellowship program that provides financial support while you pursue graduate studies and research.

Military Service and Post-Active Duty Student Deferment

You are on active duty military service in connection with a war, military operation, or national emergency; or you’ve completed active duty service and any grace period.

Rehabilitation Training Deferment

You’re enrolled in an approved program that provides mental health, drug abuse, alcohol abuse, or vocational rehab.

Cancer Treatment Deferment

You may qualify for deferment while undergoing cancer treatment and for six months afterward.

When Interest Accrues in Deferment

If you’re looking into defer student loans while in grad school, you’ll want to check how interest would be handled on the loans during the payment pause. And if unpaid interest is capitalized, you’ll need to make sure you’re prepared to take on a higher overall cost of the loan.

During deferment, you are generally not responsible for paying interest on:

•   Federal Direct Subsidized Loans

•   Federal Perkins Loans

•   The subsidized portion of Federal Direct Consolidation Loans

•   The subsidized portion of Federal Family Education Loan (FFEL) Program Consolidation Loans

With deferment, you are generally responsible for paying interest on:

•   Federal Direct Unsubsidized Loans

•   Federal Direct PLUS Loans

•   FFEL PLUS Loans

•   The unsubsidized portion of Federal Direct Consolidation Loans

•   The unsubsidized portion of FFEL Consolidation Loans

•   Private student loans (if the lender allows deferment)

If you’re starting graduate or professional school or are in the thick of it, your federal borrowing options are Direct PLUS Loans (commonly called Grad PLUS Loans when borrowers are graduate students) and Direct Unsubsidized Loans (also available to undergrads).

As noted above, those loan types accrue interest during a deferment.

Direct loans for graduate students carry a 9.08% rate for loans disbursed after July 1, 2024 and before July 1, 2025 (the rates are set by federal law for each academic year), with a loan fee of 4.228%.

Private lenders such as banks, credit unions, and online lenders may offer private graduate student loans, sometimes with a fixed or variable rate and no loan fee.

Something to consider: If you pursue deferment on loans that you’re responsible for paying interest on during the deferment period, it’s a good idea to at least consider making interest-only payments during the deferment to manage costs while in grad school.

Options to Deferment in Grad School

There are at least two other ways, beyond forbearance, to get a handle on student loan payments in grad school.

Income-Driven Repayment

Some graduate students who have federal student loans might want to consider switching, even temporarily, to an income-driven repayment (IDR) plan.

Your monthly payment would be tied to family size and discretionary income, which may be low for a graduate student enrolled full time.

The three income-driven repayment plans currently in effect (as of late March 2025) stretch your payments over 20 or 25 years. On one of the plans, the Income-Based Repayment Plan, any remaining balance is typically forgiven after that time. (Forgiveness has been paused on the other IDR plans.) After graduation, you could switch the student loan repayment plan back to the standard 10-year plan if you wanted to.

Though borrowers often pay less each month using one of these plans, they’ll generally pay more in total interest over the duration of the drawn-out loan.

Refinancing

Another way to potentially lower your monthly payments without deferring your loans is to refinance your student loans. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

With student loan refinancing, a private lender pays off your loans with one new loan, ideally with a lower interest rate.

A decrease in an interest rate while maintaining the loan’s term is a way to save money each month and over the life of the loan. To understand how a change of even 1% can affect how much interest you’ll pay on a loan over time, you can use this student loan refinance calculator.

One thing to consider regarding federal loans: Should you refinance these loans, you’ll lose access to federal programs such as income-driven repayment and loan forgiveness. Be sure to consider this carefully before refinancing.

Private lenders may or may not have a deferment option.

Lenders that offer student loan refinancing typically require a good credit history and a steady income, among other factors. A student loan refinancing guide can help you learn more about the process.

The Takeaway

Student loan deferment before or during grad school could bring temporary relief from monthly loan payments. However, it could also add unpaid interest to loans and create a bigger balance to pay off. Those looking to manage payments long term may want to look into alternatives such as income-driven repayment plans and 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

What does grad school deferment mean?

If you’re attending graduate school at least half-time, in most cases, your federal student loans will automatically be put in deferment. That means your payments will be postponed for 12 months at a time up to 36 months. If you have subsidized federal student loans, you are generally not responsible for paying interest on the loans while in deferment. You typically are responsible for paying interest on unsubsidized and Direct PLUS loans, including Grad PLUS loans.

How does student loan deferment work?

Student loan deferment allows you to temporarily pause your federal loan payments for 12 months at a time up to a maximum of 36 months. You may be eligible for deferment if you are facing such circumstances as unemployment, financial hardship, cancer treatment, or if you’re in an approved graduate fellowship program. Also, if you are enrolled in school at least half-time, your loans are automatically placed in deferment.

Depending on the type of federal loans you have, such as subsidized federal loans, you may not be responsible for paying the interest on them during deferment.

What are the disadvantages of deferring student loans?

The main disadvantage of deferment is that interest may accrue on your student loans while they are in deferment. That means your loan balance will increase and you will pay more over the life of the loan. You are generally responsible for paying the interest on federal unsubsidized loans and Direct PLUS loans, among others, while in deferment.

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

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.


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

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

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

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

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

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25
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Guide to Grad PLUS Loans

Guide to Grad PLUS Loans

By | Fresh Out of School, Going to College, Student Loans, student_loan | Comments Off on Guide to Grad PLUS Loans

Grad PLUS loans are federal student loans for graduate and professional students. Although Grad PLUS loans have higher interest rates and fees than some other types of federal student loans, they also have a major benefit — virtually no borrowing limits. You can borrow up to the full cost of attendance of your school, minus any other financial aid you’ve already received.

Read on for more on how Grad PLUS loans work, including their eligibility requirements, interest rates, and repayment options.

Key Points

•   Grad PLUS loans are federal student loans for graduate and professional students that allow borrowing up to the full cost of attendance, minus other financial aid.

•   These loans have a fixed interest rate of 9.08% and a 4.228% disbursement fee for loans disbursed between July 1, 2024, and July 1, 2025.

•   Borrowers must pass a credit check, but those with adverse credit may be able to qualify with an endorser or by appealing based on extenuating circumstances.

•   Grad PLUS loans are eligible for federal repayment plans, including income-driven repayment and Public Service Loan Forgiveness.

•   Alternatives to Grad PLUS loans include Direct Unsubsidized Loans, grants, scholarships, and private student loans, which may offer lower interest rates and no origination fees.

What Are Grad PLUS Loans?

If you’re planning to attend a graduate or professional program, a Grad PLUS loan (also known as a Direct PLUS loan) could help cover costs. Issued by the Department of Education, Grad PLUS loans are student loans designed for graduate and professional students.

PLUS loans are not the only federal loans available to you as a graduate student — you can also borrow federal Direct Unsubsidized loans. Direct Unsubsidized loans have lower interest rates and fees than PLUS loans, but they come with borrowing limits.

If you’ve hit your limit and need additional funding, a Grad PLUS loan could cover the gap. As mentioned above, you can borrow up to the full cost of attendance of your program, minus any other financial aid you’ve already gotten. This flexibility can be helpful for students who are attending pricey programs.

Recommended: How Do Student Loans Work? Guide to Student Loans

What Can Grad PLUS Loans Be Used for?

Grad PLUS loans can be used for tuition, fees and other education-related expenses. These expenses include,

•   Housing

•   Food

•   Textbooks

•   Computers and other supplies

•   Study abroad expenses

•   Transportation

•   Childcare costs

A Grad PLUS loan will first be disbursed to your financial aid office, which will apply the funds toward tuition, fees, room and board, and any other school charges. The financial aid office will then send any remaining funds to you.

Recommended: What Can You Use Student Loans For?

Who Is Eligible for Grad PLUS Loans?

To be eligible for a Grad PLUS loan, you must be a graduate or professional student enrolled at least half-time at an eligible school. What’s more, your program must lead to a graduate or professional degree or certificate.

You’ll also need to meet the eligibility requirements for federal financial aid (more on this below), as well as submit the Free Application for Federal Student Aid (FAFSA®).

Typical Grad PLUS Loan Requirements

Besides being enrolled in an eligible graduate or professional program, you need to meet a few other requirements to take out a Grad PLUS loan:

Meet the Requirements for Federal Student Aid

Since Grad PLUS loans are part of the federal student aid program, you must be eligible for federal aid to borrow one. Here are some of the criteria:

•   Be a U.S. citizen or eligible noncitizen

•   Have a valid Social Security number (with some exceptions)

•   Have a high school diploma, General Educational Development (GED) certificate or other recognized equivalent

•   Maintain satisfactory academic progress while in school

•   Not already be in default on a federal student loan or owe money on a federal grant

If you’re a non-U.S. citizen or have an intellectual disability or criminal conviction, additional requirements might apply.

Submit the FAFSA

You’ll need to submit the FAFSA before you can borrow a Grad PLUS loan. After applying to grad school, you can submit this form, free of charge, on the Federal Student Aid website or by mail. Since the FAFSA only applies to a single academic year, you’ll need to submit it every year you’re in school and want to receive financial aid.

Complete the Grad PLUS Loan Application

Along with submitting the FAFSA, you’ll also need to fill out a separate application for the Grad PLUS loan. You can find and submit the GRAD Plus loan application on the Federal Student Aid website, though some schools have separate processes. Your financial aid office can advise you on the steps you need to take.

If your application is approved, you’ll need to agree to the terms of the loan by signing a Master Promissory Note. If you haven’t borrowed a Grad PLUS loan before, you’ll also be required to complete student loan entrance counseling.

Not Have Adverse Credit History (or Apply With an Endorser)

While you don’t need outstanding credit to qualify for a Grad PLUS loan, you can’t have adverse credit. According to the Department of Education, you have adverse credit if one of the following applies to you:

•   You have accounts with a total balance greater than $2,085 that are 90 or more days delinquent

•   You’ve experienced a default, bankruptcy, repossession, foreclosure, wage garnishment, or tax lien in the past five years

•   You’ve had a charge-off or write-off of a federal student loan in the past five years

If you have adverse credit, you have two options:

•   Appeal the decision due to extenuating circumstances. For example, you could provide documentation showing that you paid off a delinquent debt on your credit report.

•   Apply with an endorser who does not have adverse credit. Your endorser will be responsible for repaying the loan if you fall behind on payments.

💡 Quick Tip: New to private student loans? Visit the Private Student Loans Glossary to get familiar with key terms you will see during the process.

Grad PLUS Loans Interest Rates

Grad PLUS loans come with fixed interest rates that will remain the same over the life of your loan. They also have a disbursement fee, which is a percentage of your loan amount that gets deducted from your loan.

Congress sets rates and fees on federal student loans periodically. These are the current Grad PLUS loan interest rates and fees:

Interest Rate (for loans disbursed on or after July 1, 2024 and before July 1, 2025) Disbursement Fee (for loans disbursed on or after Oct. 1, 2020 and before Oct. 1, 2025)
9.08% 4.228%

Repaying Your Grad PLUS Loans

Grad PLUS loans are eligible for a variety of federal repayment plans:

•   Standard repayment plan, which involves fixed monthly payments over 10 years.

•   Income-driven repayment, including Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). These plans adjust your monthly student loan payments to a percentage of your discretionary income while extending your loan terms to 20 or 25 years. If you’ve made on-time payments but still have a balance at the end of your term, it may be forgiven on the IBR plan only, as of late March 2025. (Forgiveness on the other IDR plans is currently paused.) The amount forgiven may be considered taxable income by the IRS.

•   Extended repayment, which extends your repayment term to 25 years and lets you pay a fixed or graduated amount.

•   Graduated repayment, which lowers your student loan payments in the beginning and increases them every two years. You’ll pay off your loan over 10 years, and your final payments won’t be more than three times greater than your initial payments.

Grad PLUS loans are also eligible for certain federal forgiveness programs, such as Public Service Loan Forgiveness.

Other Options to Pay for Grad School

Grad PLUS loans aren’t the only way to pay for graduate school. Here are some alternative options:

Direct Unsubsidized Loans

You can borrow up to $20,500 per year in Direct Unsubsidized loans as a graduate student with an aggregate loan limit of $138,500, including any loans you borrowed as an undergraduate.

Here are the interest rate and disbursement fee for graduate students:

Interest Rate (for loans disbursed on or after July 1, 2024 and before July 1, 2025) Disbursement Fee (for loans disbursed on or after Oct. 1, 2020, and before Oct. 1, 2024)
8.08% 1.057%

Grants and Scholarships

Besides student loans, you can also pursue grants and scholarships for graduate school. You can find grants and scholarships from a variety of sources, including the Department of Education, your state, your school, or a private organization. By earning grants and scholarships, you might not need to borrow as much in student loans.

Private Student Loans

You can also explore your options for private graduate student loans from banks, online lenders, or credit unions. Some lenders offer interest rates that start lower than Graduate PLUS loan interest rates and don’t charge an origination fee.

Although private student loans aren’t eligible for federal repayment plans or programs, some lenders offer flexible repayment options or deferment if you need to pause payments. But, because private student loans aren’t required to offer the same borrower benefits as federal student loans, they are generally borrowed as a last resort option after all other sources of financing have been exhausted.

The Takeaway

If you’re looking for ways to pay for graduate school, a Grad PLUS loan could help. You can use this flexible loan to cover your school’s cost of attendance, as well as choose from a variety of federal repayment plans when it comes time to pay it back.

Alternative options to paying for school include federal Direct Unsubsidized loans, scholarships and grants, and private student loans.

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

SoFi private student loans offer competitive interest rates for qualifying borrowers, flexible repayment plans, and no fees required.

FAQ

What kind of loan is Grad PLUS?

The Grad PLUS loan is a federal student loan issued by the Department of Education. It is designed specifically for graduate and professional students.

Is there a max on Grad PLUS loans?

There is virtually no limit on the amount you can borrow with a Grad PLUS loan. You can borrow up to your school’s cost of attendance, minus any other financial aid you’ve already received.

Can Grad PLUS loans be used for living expenses?

Yes, you can use Grad PLUS loans to cover your living expenses while at school. You must use your loan for education-related expenses, which can include housing, food, supplies, transportation, and other costs related to attending school.

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