8 States That Will Help Pay off Student Loans

Americans owe more than $1.6 trillion in federal student debt, and the average graduate leaves college owing $29,400. Fortunately, your state may be able to help. There are a number of states that pay off student loans through student loan repayment assistance programs. Some of these plans are meant to entice people to move to the state, while others are available to residents who work in certain professions. If you can qualify for one of these programs, you could get a major chunk of your student loan debt repaid for you.

Overview of State Loan Repayment Programs

State loan repayment programs (LRAPs) offer student loan assistance to eligible borrowers who are paying back student loans. Some programs act as an incentive to encourage people to move into certain areas or become homeowners in the state. Others are available to residents who work in a certain field, such as health care or law.

Unlike federal loan forgiveness programs, which only forgive federal student loans, some states that pay off student loans through LRAPs will help you repay both private and federal student loan debt. However, like most other student loan repayment options, there are stipulations. For instance, you may have to commit several years to living or working in an area in order to receive the maximum benefits.

State-by-State Loan Repayment Assistance

Here are some of the states offering repayment assistance to qualifying student loan borrowers, which could help you pay off student loans early. This list is not exhaustive, so check with your state to find out if it offers LRAP opportunities.

California
The California State Loan Repayment Program offers assistance to primary care physicians, dentists, dental hygienists, physician assistants, nurse practitioners, certified nurse midwives, pharmacists, and mental/behavioral health providers who practice in designated California Health Professional Shortage Areas. Award amounts can equal $100,000 or more, depending on whether you work full-time or half-time and how many years you serve.

Kansas
Kansas offers up to $15,000 in student loan assistance over five years to new residents who move to one of its Rural Opportunity Zones (ROZ). You must have a newly established permanent residence in an eligible ROZ and live there for the five years of repayment to qualify for the full amount.

Maine
Maine offers several perks for student loan borrowers, including three LRAPs and a tax credit:

•   Maine Dental Education Loan Repayment Program: This program offers repayment assistance up to $100,000 to dentists and dental health professionals working in underserved areas.

•   Maine Health Care Provider Loan Repayment Pilot Program: Designated for health care providers who live and work in Maine for at least three years, this program offers up to $75,000.

•   Nursing Education Loan Repayment Program: Established and new Maine residents who work as registered nurses or nurse educators for at least three years are eligible to receive up to $40,000 through this program.

•   Student Loan Repayment Tax Credit: Student loan borrowers who earned at least $12,917 in Maine could claim a student loan tax credit up to $2,500 annually with a lifetime limit of $25,000.

Recommended: How to Get the Student Loan Interest Deduction

Maryland
Maryland has a SmartBuy 3.0 program to help student loan borrowers become homeowners. To qualify for this program, you must owe at least $1,000 in student loans, purchase a home that meets the Maryland Mortgage Program guidelines, and borrow a mortgage from an approved Maryland SmartBuy lender. The program can provide up to 15% of the home purchase price (for a maximum of $20,000) for you to use to pay off your student loans.

Massachusetts
Health care providers in Massachusetts could receive as much as $50,000 in student loan repayment in exchange for working two years in an underserved community. You’ll need to be licensed to work as a primary care physician, dentist, physician assistant, clinical social worker, marriage and family therapist, or other qualifying health care profession.

Michigan
Michigan’s State Loan Repayment Program offers up to $300,000 in student loan assistance to health care providers who work in a designated shortage area. You must commit to a service term of at least two years to qualify for this program.

Ohio
The city of Hamilton in Ohio has a program to incentivize new residents to move to the area. The Hamilton Talent Attraction Program Scholarship offers up to $15,000 to borrowers who move to an area in the Hamilton city limits. It prefers graduates with a degree in science, technology, engineering, arts or mathematics.

Texas
The Texas Student Loan Repayment Assistance Program offers up to $6,000 per year to attorneys paying back student loans who work for a Texas legal aid program that’s receiving a grant from the Texas Access to Justice Foundation (TAJF). You also must have been licensed to practice law for fewer than 10 years and make no more than $80,000 per year.

Requirements and Eligibility

The requirements for state-provided LRAPs vary by program. Some are open to current residents, while others offer benefits to new residents who move to or buy a home in a certain area.

Programs that are designated for specific professionals often require you to work in a designated shortage area or with an underserved community. You’ll also generally need to commit to a certain service term, such as two or three years. Read over the fine print of a program’s requirements to see if it could be a good match for you.

If you can’t find a program that fits your specific situation, there are other ways to make it easier to repay your student loans. For instance, you might consolidate all your loans into one loan or refinance your student loans, ideally for a lower interest rate or better loan terms if you qualify. (Just be aware that refinancing federal student loans makes them ineligible for federal programs and protections like income-driven repayment.)

Application Process and Deadlines

The application process and deadlines also vary by loan repayment assistance program, and you can usually find this information on the official state or program website. You may need to fill out an application with details about your educational background and student loan debt. Often, a program requires you to commit to working half-time or full-time for a certain number of years.

These programs can be competitive, so make sure to get your application in well ahead of the stated deadline. Some programs also pay out a certain amount per month or year, so find out whether you need to submit additional applications to maintain your eligibility.

Loan Repayment vs Loan Forgiveness

Both loan repayment assistance programs and student loan forgiveness programs can help you pay off your education debt. However, loan repayment programs may offer assistance sooner, as some of these programs only require two or three years of service.

By contrast, the Teacher Loan Forgiveness program requires five years of service, while Public Service Loan Forgiveness requires 10. And income-based student loan repayment forgiveness requires 20 or 25 years of payments until your balance may be forgiven.

Loan repayment programs might also help you pay off both private and federal student loans, whereas only federal student loans are eligible for loan forgiveness programs.

Finally, loan repayment and loan forgiveness programs may have different tax implications. The loan forgiveness you get from PSLF is not taxable, for instance, whereas assistance you get from an LRAP could be treated as taxable income.

The Takeaway

When it comes to paying back your student loans, your state may be able to help. Several states offer loan repayment assistance programs to eligible borrowers who move to a certain area or work in a qualifying profession. By taking advantage of one of these programs, you may be able to get a major portion of your student loans paid off.

Even if your state doesn’t offer an LRAP, there are other ways to potentially make your payments easier, including student loan forgiveness, loan consolidation, and student loan refinancing for more favorable rates and terms for those who qualify. Carefully consider all your options for repaying student loan debt.

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 types of loans qualify for state repayment assistance?

State repayment assistance programs generally pay off federal student loans, and some will pay off private student loans as well. Check with each individual program to find out what types of loans qualify for repayment assistance.

Can you receive assistance from multiple state programs?

You may be able to receive assistance from multiple state programs — if, for instance, you live in one state and get assistance and then move to another state and get assistance there — but you likely can’t do this simultaneously. Most programs require you to live and work in-state to be eligible for student loan repayment benefits.

How much student loan debt can state programs cover?

State programs can cover a significant portion of your student loan debt. The LRAP for health care workers in Massachusetts offers up to $50,000, while Michigan’s health care worker LRAP can provide up to $300,000. However, the amount will depend on the program and the field you work in.


Photo credit: iStock/zimmytws

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


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.


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

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

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

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

SOSLR-Q324-019

Read more

What Is an Institutional Student Loan?

An institutional student loan is a type of student loan you borrow from your college or university. Institutional loans are non-federal student loans, and the loan terms vary from school to school.

Institutional loans can help fill in the gaps other financial aid doesn’t cover. But it’s important to understand how these loans work to make sure they’re right for you.

Definition and Overview

Institutional loans are considered to be a type of private student loan. But unlike traditional private student loans, they are offered by your school rather than a private lender. Students may use these loans to help pay for college costs. However, some schools only allow the use of institutional loans for tuition and fees, and not for other education-related expenses.

Institutional loans are non-federal student loans. That means they don’t offer the same benefits that federal loans do, including deferment, forbearance, and student loan repayment options such as income-driven repayment plans.

How Institutional Student Loans Work

Institutional loans typically come in two types — short-term and long-term loans.

Short-term institutional loans generally have a low interest rate, but they may have a processing fee. These loans sometimes involve a credit check, and you’ll typically need to pay back student loans that are short-term within a few months. Check with your school about the specific repayment terms for the short-term institutional loans they offer.

Long-term institutional loans allow for longer repayment terms, such as 10 years, and payments may be deferred while you’re in school. The interest rates on these loans are usually higher, and the rate you get may depend on your creditworthiness.

Eligibility Criteria

To qualify for institutional student loans, borrowers typically must file the Free Application for Federal Student Aid (FAFSA). The eligibility criteria for these loans vary from institution to institution, so your best bet is to check with your school’s financial aid office.

Interest Rates and Fees

Interest rates for institutional loans range widely, depending on the school and whether the loan is short-term or long-term. Some colleges offer short-term loans with rates as low as 0% or 1%, while interest rates on long-term institutional loans may be 3% to 10%. Check with your school about the interest rates on these loans.

Repayment Terms and Options

The repayment term on an institutional loan is the amount of time the institution gives you to pay off your loan. Short-term loans typically need to be repaid quickly — in 90 days, say — while long-term loans have a repayment term of 10 years. Your school may offer different options for repayment, so be sure to inquire.

One option that you may not have with institutional loans is refinancing. With student loan refinancing, you replace your old student loans with a new loan that ideally has a lower interest rate or better terms. Refinancing might not be possible with institutional loans.

Pros and Cons of Institutional Student Loans

Institutional student loans may be a solution for students who need to bridge gaps in financial aid, but these loans have benefits and drawbacks to consider.

Pros of institutional loans:

•   Quick payoff: Short-term institutional loans typically require repayment in several months. If you need financial assistance now and expect to have funds to repay the loans at the end of the term, they might be an option for you. By comparison, paying off federal student loans can take 10 years or more.

•   Low interest rate: Some institutional loans have lower interest rates than federal or private student loans. But before committing to one of these loans, explore the different undergrad private student loan rates available to make an informed decision.

•   May not require a credit check: You might not need to undergo a credit check to be approved for an institutional loan, especially if it’s a short-term loan.

Cons of institutional loans:

•   No federal benefits. Institutional loans don‘t provide the same benefits that come with federal student loans, such as income-driven repayment plans and student loan forbearance.

•   May require a credit check. With long-term institutional loans, your school may require a credit check to qualify. That could make these loans more difficult to obtain.

•   May be tough to repay. Short-term loans typically need to be repaid in a few months. As a college student, that may not be feasible for you. In that case, you might want to consider low-income student loans instead.

•   Refinancing might not be possible. Federal and private student loans can be refinanced, but institutional student loans may not be eligible for refinancing.

The Takeaway

Institutional student loans are offered by colleges and universities to help cover school costs like tuition and fees. They may be helpful to students who have reached their financial aid allotment for the semester or those who need financial help immediately and can repay the loan quickly.

But institutional loans do have drawbacks. Repaying them quickly can be challenging for college students. And borrowers may need to undergo a credit check to qualify for them. Before choosing an institutional loan, you may want to look into other financial aid options, such as grants and scholarships, or consider private student loans, which have the option of refinancing in the future, if that’s something you might be interested in. Weigh all the different choices to make the best decision for your situation.

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 are the benefits of institutional student loans?

Institutional loans offered by colleges and universities can help you cover school costs like tuition and fees if you’re coming up short. They may also offer low interest rates, quick repayment, and no credit check. However, make sure you can repay an institutional loan on time — the repayment term might be as short as three months.

Can institutional student loans be used for living expenses?

Whether an institutional loan can be used for living expenses depends on the institution. Some colleges and universities require borrowers to use institutional loans for tuition and fees. Check with your school to find out what their requirements are.

How do institutional student loans compare to federal loans?

Federal student loans offer more repayment options than institutional loans, and they also come with federal programs and protections you may want or need, such as deferment and forbearance. In comparison, short-term institutional loans typically take less time to pay off, which could make them appealing to those looking to avoid long-term student loan debt. The interest rates for some institutional loans may be lower than the interest rates for federal loans, but others may have higher rates.

It’s wise to explore the different requirements, terms, and benefits of each type of loan before you opt for one over the other.


Photo credit: iStock/dusanpetkovic

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


SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.


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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

SOSLR-Q324-015

Read more

Why Is College So Expensive in the United States?

In 2023-2024, the average cost of attendance for full-time undergraduate students living on campus at four-year institutions was as follows:

•   Private nonprofit institutions: $60,420

•   Public four-year, out-of-state institutions: $46,730

•   Public four-year, in-state institutions: $28,840

Multiply that amount by at least four years, and you’re looking at a sizable investment in your future. But why is college so expensive, exactly?

Keep reading to learn five reasons why college is so expensive, what contributes to the rising cost of college, efforts to control costs, and more.

Factors Contributing to Rising College Costs

Several factors contribute to rising college costs, including faculty salaries and benefits, campus facility construction and maintenance, student services and amenities, administrative costs, and technology integration. We’ll dive into the details of each of these.

Increase in Faculty Salaries and Benefits

Faculty salaries increased an average of 4% between 2021-2022 and 2022-2023, which was a fairly substantial increase.

Faculty also receive benefits like employer contributions to retirement plans and health insurance, college tuition, Social Security contributions, disability income protection, unemployment insurance, group life insurance, workers’ compensation premiums, on-campus parking, and fringe benefits, like athletic event tickets. Non-salary benefits can amount to up to one-quarter of faculty member compensation.

Recommended: How to Pay for College

Construction and Maintenance of Campus Facilities

Studies have found that prospective students reach their decisions within the first ten minutes of walking on campus. Therefore, campuses must do more than just satisfy the basic needs of their students. They must convey emotion, create positive reactions, and offer “extras,” like aesthetics, all of which results in high construction costs to create a lasting positive environment for faculty, staff, and students, which can include:

•   Code requirements, including stair towers, fire-rated corridors, fireproofing, fire alarm systems, sprinklers, and more.

•   Legislative mandates related to the ADA, EPA, OSHA, and ASHRAE, which dictate accessibility, dust control, occupancy, ventilation, air filtration, and more.

•   Institutional requirements, like minimal disruption to campus life, job site cleanliness, limiting noise, complex phasing-in schemes, and more.

•   Short timelines that protect athletic event schedules, residence hall occupancy, and other conditions.

•   State-of-the-art facilities, such as high-occupancy performance and athletic venues, technology-infused learning environments, and highly functional classrooms, labs, meeting rooms, offices, and other complex mechanical systems.

•   Higher-quality finishes, including hardware, carpets, flooring, restroom fixtures, and more to maintain durability.

•   Sustainability requirements, such as Leadership in Energy and Environmental Design (LEED) metrics based on campus sustainability commitments.

•   Technological advances and other additions, such as hearing loops in public assembly spaces, gender-neutral restrooms, prayer rooms, locking systems, security cameras, motion sensors, and more.

Many smaller pieces go into creating a great environment for students now and into the future.

Student Services and Amenities

Student services programs create an additional expense. These programs support students in overcoming barriers, including underrepresented groups, first-generation or low-income students, those with limited English proficiency, and students with disabilities or learning differences. Services can include:

•   On-campus events and workshops

•   Guest speakers

•   Tutoring services

•   Academic resources, including those in the library

•   Technology rentals

•   Career services

•   Academic advising

•   Mental and physical health services

•   Transportation

College costs may also go up due to various amenities on campuses, which can include extravagant campus gyms with lazy rivers, whirlpools, and saunas; fancy student unions and dining options; movie theaters, arcades, ski resorts, swanky condo-like residence halls, and more.

Recommended: Colleges That Offer Free Tuition

Administrative Costs and Staffing

Administrative costs and staffing are another reason why U.S. colleges are so expensive. Administrative costs refer to institutional support for those who operate the day-to-day functions of the institution, which could include the following:

•   Executive management

•   Legal department

•   Fiscal operations

•   Public relations

•   Development office

The American Council of Trustees and Alumni survey found the following per-student administrative costs:

•   Oklahoma: $1,970

•   Hawaii: $2,230

•   Tennessee: $2,450

•   New Jersey: $4,982

•   Alaska: $6,224

•   Wyoming: $7,830

Colleges and universities must also cover auxiliary expenses (including parking facilities, housing, and food services).

Cost of Technology Integration

The pandemic increased the costs of student information systems after declining in previous decades. A large university with 20,000 or more full-time students might spend between $30 million and $100 million during the first five years of a new system.

Naturally, the cost of implementation depends on a few factors, including:

•   School size

•   Data processing

•   Hiring requirements to manage the technology

•   Data migration and implementation

•   Customization preferences

•   Third-party integrations

Recommended: Paying for College With No Money in Your Savings

Role of State Funding Cuts

State funding cuts for higher education are a key factor in rising college costs. While state appropriations for colleges saw overall gains year over year, 28 states have in fact cut their support for higher education.

As states reduce financial support for public universities, institutions raise tuition to cover budget shortfalls. This shift places more of the financial burden on students, contributing significantly to the overall expense of college.

Additional Expenses for Students

Students also pay for additional expenses, such as the costs of living on campus, textbooks, course materials, and tuition increases. We’ll walk through each cost below.

Recommended: What Is the Cost of Attendance in College?

Cost of Housing and Living

Housing and living costs vary depending on whether you choose to live on or off campus. Here are the differences between living off-campus versus on-campus:

•   Off-campus: The median monthly cost of rent surpassed $2,000, and the average college-aged male spends an average $374.10 per month on food. Don’t forget to factor in transportation, utilities, internet, and furniture to get the full costs of living off campus.

•   On-campus: The average cost of housing and food for full-time undergraduates at a public two-year in-district college was $9,970. On average, it also cost $12,770 for both public four-year in-state and out-of-state institutions and $14,650 for private, nonprofit four-year institutions.

Ultimately, you may pay far more for on-campus housing, but consider the tradeoff between living on campus vs living off campus. Living off campus can have its disadvantages, despite the cost savings.

Textbooks and Course Materials

Unfortunately, textbooks and course materials have gone up dramatically over the past two decades. Textbook costs have increased 162%. Students paid the most at public two-year colleges ($1,470) versus at public and private four-year colleges ($1,250).

Students might also avoid buying course materials due to these steep prices and might even choose different classes based on high textbook or supply costs.

Tuition and Fee Increases Year-Over-Year

Tuition and fees usually increase from year to year, and scholarships often don’t increase to match.

The average 2023-2024 tuition and fees for college students increased by the following percentages for full-time students:

•   Public four-year colleges for in-state students: 2.5%, for an average of $11,260

•   Public four-year colleges for out-of-state students: 3%, for an average of $29,150

•   Public two-year colleges (in district): 2.6%, for an average of $3,990

•   Private nonprofit four-year colleges: 4%, for an average of $41,540

There’s nothing students can do to change the tuition increases, so you must learn other ways to compensate, including applying for more scholarships or having parents pay more.

Recommended: Paying for College: A Parent’s Guide

Efforts to Control College Costs

The government has attempted efforts to control college costs. The House Committee on Education and the Workforce passed the College Cost Reduction Act to change college costs for the better by adjusting the student loan and Pell Grant programs. The bill would save students at least $150 billion over a decade.

In addition, colleges themselves have tried to slow down the cost increases. However, many colleges say they can no longer afford to cut costs due to inflation (food, services, labor, and more). Therefore, many colleges use third-party consultants to identify where they can cut costs, including looking deep into their institutional operations.

The Long-Term Impact of High Costs

Many colleges have begun to see the long-term impact of high costs, including overall decreased enrollment. The U.S. has seen a waning public belief in the importance of college.

In an Edge Research survey of 1,700 high school juniors and seniors and more than 3,100 non-enrolled adults aged 18 to 30, the majority of respondents still see the benefits of college. However, compared to results from last year, the rate of perceived importance has gone down by as much as six percentage points. Adults not currently enrolled in college were less likely to believe in the benefits of college than high schoolers.

The Takeaway

Asking why colleges are so expensive opens up a whole Pandora’s box of reasons — it’s impossible to pinpoint just one. College administrative offices must work hard to balance and manage costs.

Unfortunately, families bear the brunt of the costs, but learning how to pay for college can go a long way in helping you understand what to do. Options for paying for college include cash savings, scholarships, grants, and federal and private student loans. Federal loans should be pursued first, as they come with federal benefits, protections, and income-driven repayment plans.

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


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

FAQ

What is the most expensive part of going to college?

Tuition, the price you pay for teaching or instruction from a college or university, is the most expensive part of going to college. According to the Education Data Initiative, the average cost of tuition at a public, four-year institution is $9,750. At a four-year out-of-state institution, students spend an average of $28,386 on tuition, and at a four-year nonprofit private institution, that number averages $38,421.

Why do private colleges cost more than public?

Private colleges cost more than public universities because they rely on donations, an endowment, and tuition to keep them running. However, most private colleges offer generous financial aid awards for students to bring costs down. Public institutions, on the other hand, rely on state government funding, which can help alleviate the cost burden for families.

How can students reduce the cost of college?

Students can reduce college costs by applying for merit-based and institutional scholarships and by looking for other types of aid, such as grants. Scholarships and grants are free money that you don’t have to repay, unlike loans, which you do need to repay after you graduate.

Students can also look into jobs that pay for your degree, which offer a huge benefit because some jobs will completely take care of your tuition bill.

Are online degrees a cheaper alternative?

Online degrees can be a cheaper option, but it’s important to figure out what kind of college experience you’re looking for. Getting an online degree is a vastly different experience from attending college in person. Therefore, sometimes it’s worth paying extra to get the experience you desire, rather than just “getting through college.”


Photo credit: iStock/Ibrahim Akcengiz

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.


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.


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

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

SOISL-Q324-032

Read more

Can You Use a 529 Plan for Private School?

A 529 plan is a popular way to help pay for college. But it can also be used for private school to help cover the cost of tuition.

There are rules and restrictions about 529 private school use, and where you live can make a difference. If you’re considering private education for your child, here’s what you should know about 529 plans.

Saving for Private School Tuition


The cost of private school is substantial: The average K-12 tuition is $12,350 a year, according to the Education Data Initiative.

A 529 savings plan is an investment account that’s designed to help families pay for a student’s education expenses. Although a 529 is primarily meant to be used for college expenses, up to $10,000 from a 529 can be applied to K-12 private school tuition, as long as your state considers it a qualifying expense. This is one of the many 529 plan benefits that families can take advantage of.

Recommended: Prepaid College Plans by State

When to Establish a 529 Plan for Private Education


If you’re expecting your child to go to college, you may want to open a 529 savings plan for them. Parents, relatives, and friends can all make contributions to the plan. 529 plans can help students pay for college tuition and related qualifying expenses so they won’t need to take out as much in federal and private student loans.

One of the advantages of a 529 is that money in the account can grow over time, especially if you open it when your child is young. As of mid 2023, the national average account balance for 529 savings plans was $27,741, according to the Education Data Initiative.

Another perk of a 529 plan is the tax benefits that come with it. There is no federal income tax on earnings and qualified withdrawals from the plan. In addition, your state might also offer income tax benefits on contributions to a 529.

However, using a 529 for private school means you may end up depleting some of the funds that would otherwise go toward your child’s college expenses, so it’s wise to be strategic about this option. For example, if your oldest child decides they don’t want to go to college after all and they’re currently in private school, you could use the 529 account to help cover their private school cost. Or if you’re at risk of overfunding the account beyond your state’s 529 contribution limits, using some of the money in the 529 for private school can make sense.

If you use a 529 for private school and your child then has less money for college costs, there are financial aid options that can help. You can explore scholarships and grants, and federal and private student loans.

Recommended: SoFi Scholarship Search Tool

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1


1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

How to Use a 529 Plan for Private School


There are rules about using a 529 to fund a child’s private school tuition. Make sure you understand the following:

State Eligibility Restrictions


Your ability to use a 529 tax-free for private school depends on the state you live in. Not all states consider elementary and secondary private school tuition as a qualifying education expense. If your state treats private school tuition as a non-qualifying expense, you might face additional tax on any withdrawals you make.

States that don’t consider distributions for private school as a qualifying expense include California, Nebraska, and New York to name a few. Check the rules for your state.

529 Plan Qualified Expenses


When 529 withdrawals are used for college costs, the list of qualified expenses (meaning those that don’t incur taxes or penalties) is broad. Tuition and fees, textbooks, school computers, lab equipment, and room and board are all considered qualifying college expenses by the IRS. But with private schools, qualified expenses are restricted to tuition fees only.

Tax Considerations


A 529 plan is a federal tax-advantaged savings vehicle. Earnings grow tax-free and 529 distributions up to $10,000 annually for private school tuition are not taxed.

However, non-qualified withdrawals, such as using 529 funds to pay for private school uniforms or taking out more than the $10,000 limit for tuition, are subject to federal income taxes and might incur other 529 plan penalties.

Some states offer tax deductions or credits on 529 contribution amounts, but a number of states do not. California, for example, doesn’t consider private school tuition a qualifying 529 expense. The earnings portion of a 529 withdrawal used for private school is subject to California income tax, and an additional 2.5% tax applies.

To be eligible for contribution-related tax benefits in certain states, you must have opened the state-sponsored 529 plan. If you opened an out-of-state 529 plan, you might not be able to claim your state’s 529 tax perks.

529 Withdrawal Checklist to Pay for Private School


Before using a 529 to pay for K-12 private school tuition, take the following steps.

1. Verify Your State’s Rules


It’s important to understand your state’s rules and restrictions regarding 529 withdrawals for private school tuition. For example, you may need an in-state plan to qualify for tax benefits.

Also, find out if your state treats private school tuition as a qualifying expense for tax deductions or not.

2. Discuss the Withdrawal With a Tax Professional


Speak to a trusted tax professional to review how using a 529 for private school might impact your taxes. They can offer guidance based on your specific financial situation and state’s rules so you’re not caught off-guard with a greater tax liability than you expected.

3. Initiate a 529 Withdrawal


Some 529 plans let you request a withdrawal online. Others might require you to contact the plan’s administrator to start the withdrawal process. Typically, the funds can be disbursed directly to your child’s private school, but there may be an option to disburse them to the account owner.

The Takeaway


A 529 plan allows you to invest in your child’s education. While these plans are a popular way to help save for college, you can use 529 savings to help pay for your child’s K-12 private school education with certain caveats. The funds can only be used for private school tuition, and no more than $10,000 can be withdrawn tax-free. Some states don’t consider private school tuition as a qualifying expense, which could result in an added tax liability on your state tax return. Double-check your state’s 529 rules.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

FAQ


Can you use a 529 to pay for private K-12 and college education?


A 529 can generally be used for private schools, including religious K-12 schools. Up to $10,000 of your 529 savings can be used toward K-12 tuition each year.

Can you use a 529 plan to pay private student loans?


Yes, you can use a 529 plan to repay private student loans. However, a lifetime cap of $10,000 of qualified student loan repayments can be repaid using 529 funds.

Can 529 plans only be used at in-state schools?


You can use a 529 for private school tuition as long as the institution is an accredited private college, university, trade school, or graduate or professional school.


Photo credit: iStock/FG Trade Latin

SoFi Invest®

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

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


Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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

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

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.

SOIN-Q324-062

Read more

529 Annual Plan Contribution Limits by State in 2024

A 529 plan allows you to save money for a child’s education costs. This tax-advantaged plan can be an effective way to build a college fund. However, there are rules regarding 529 plans you should know about, including 529 contribution limits, which differ based on where you live.

Learn how a 529 works and the max contributions to 529 plans in each state.

What Is a 529 Plan?

529 plans, also known as qualified tuition programs, are tax-advantaged savings plans that are designed to be used for qualified education expenses like tuition, housing, and books at postsecondary institutions such as college or trade school. Parents can also withdraw up to $10,000 of 529 funds annually to use for a child’s elementary or secondary school education at a public, private, or religious school.

Each 529 plan has a named beneficiary (the child the plan is for), and the account holder — usually a parent or grandparent — contributes savings to the plan up to the allowable 529 limits. Once contributions are made, you typically have a range of investment options to choose from, including mutual funds or exchange-traded funds (ETFs). Earnings and qualified withdrawals are not subject to federal taxes.

There are some 529 plan withdrawal penalties, however. For instance, any amount of money from the plan used for something other than qualified expenses for the beneficiary’s education incurs an income tax liability and a 10% penalty upon withdrawal.

Why Are There Max Contribution Limits?

While there are no yearly contribution limits to 529 plans, there are aggregate max contribution limits that apply to the total contributions to the plan. States sponsor and operate their own 529 education savings plans and set their own aggregate max contribution amounts. Many states have a total allowable contribution limit of $500,000 per beneficiary, though some states have lower or higher 529 limits. These limits are generally based on the cost to attend a four-year undergraduate or graduate program within the state.

Students who don’t have enough funds in a 529 plan to cover the cost of college can turn to other forms of financial aid, including scholarships, grants, and federal and private student loans.

529 Plan Max Contribution Limits by State

The max contributions to 529 plans vary based on the state plan you’re enrolled in. Below is a list of 529 contribution limits for 2024 in every state.

State Contribution Limit
Alabama $475,000
Alaska $550,000
Arizona $575,000
Arkansas $500,000
California $529,000
Colorado $500,000
Connecticut $550,000
Delaware $350,000
Florida $418,000
Georgia $235,000
Hawaii $305,000
Idaho $500,000
Illinois $500,000
Indiana $450,000
Iowa $420,000
Kansas $475,000
Kentucky $450,000
Louisiana $500,000
Maine $545,000
Maryland $500,000
Massachusetts $500,000
Michigan $500,000
Minnesota $425,000
Mississippi $400,000
Missouri $550,000
Montana $396,000
Nebraska $500,000
Nevada $500,000
New Hampshire $596,925
New Jersey $305,000
New Mexico $500,000
New York $520,000
North Carolina $550,000
North Dakota $269,000
Ohio $541,000
Oklahoma $450,000
Oregon $400,000
Pennsylvania $511,758
Rhode Island $520,000
South Carolina $575,000
South Dakota $350,000
Tennessee $350,000
Texas $500,000
Utah $560,000
Vermont $550,000
Virginia $550,000
Washington $500,000
Washington D.C. $500,000
West Virginia $550,000
Wisconsin $567,500
Wyoming N/A (the state does not offer a 529 plan)

States with Highest Aggregate Limits

The states with the highest allowed aggregate 529 contribution limits include:

•   Arizona

•   New Hampshire

•   South Carolina

•   Utah

•   Wisconsin

These states have a maximum contribution limit greater than $550,000, with New Hampshire allowing the highest 529 limit in the U.S. at $596,925.

States with Lowest Aggregate Limits

State 529 programs that have the lowest total contribution limits of $350,000 or lower include:

•   Delaware

•   Georgia

•   Hawaii

•   New Jersey

•   North Dakota

•   South Dakota

•   Tennessee

Georgia’s 529 savings plan has the lowest aggregate contribution limit nationwide at $235,000, while Wyoming doesn’t offer a state-sponsored 529 plan at all.

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1


1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

Tax Benefits for 529 Plans

The advantages to 529 plans go beyond saving for your child’s college education. A 529 might unlock certain tax benefits. For example, earnings in the account grow tax-free and there is no federal income tax liability for qualified withdrawals. In some states, qualified 529 withdrawals might not be subject to state income tax either.

A number of states allow you to deduct your 529 contributions up to a certain limit from your taxable income on state income tax returns. For example, West Virginia lets state residents with an in-state 529 plan deduct up to $550,000 in annual contributions per beneficiary from their state income taxes. In Louisiana, residents are allowed a state income tax deduction for in-state 529 contributions of $2,400 ($4,800 if filing jointly) per beneficiary.

But not all states allow you to deduct 529 contributions. For example, California, Kentucky, and Hawaii don’t offer a state tax deduction or credit for 529 contributions on their state income tax returns. However, qualified 529 distributions are exempt from income tax in all three states.

Nine states (Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming) have no state income tax so there is no 529 deduction in those states. (As a reminder, Wyoming has no 529 plan.)

Tax deduction limits and rules vary by state, so check with yours.

529-to-Roth IRA Rollover

Traditionally, a downside to saving money in a 529 plan has been the 10% penalty and potential tax liability incurred on earnings for non-qualifying withdrawals. This might come up if you over-saved in the account, or if your child chooses not to go to college.

The SECURE 2.0 Act of 2022 has addressed these concerns. Beginning in 2024, unused 529 funds can be rolled over into a Roth IRA under the original beneficiary’s name without penalty or tax implications.

There are some guidelines for a 529 to Roth IRA rollover. The 529 plan must have been active for at least 15 years, and the rolled over funds must have been in the account for at least five years. Finally, the maximum annual rollover contribution permitted for 2024 is $7,000, based on Roth IRA 2024 contribution limits (IRA contribution limits typically change annually). Despite these rules, the ability to do an IRA rollover gives 529 account holders a penalty-free option, if needed.

How to Maximize Your 529 Contributions

If you’re considering a 529 for your child, you are not limited to choosing a 529 plan from the state you reside in. Many states allow out-of-state residents to open a 529 account. Here are some tips on how to maximize your savings in a 529.

•   Explore plans from multiple states and compare their tax benefits and fees to potential tax benefits and fees of your state’s plan.

•   Check to see if your company offers 529 plan employee benefits. Some employers now provide these benefit plans, which allow you to contribute directly from your paycheck.

•   Many states offer direct-sold plans in which you select the investments in the plan yourself, and broker-sold plans in which a broker selects investments for you. Broker-sold plans typically come with more fees. Consider enrolling in a direct-sold 529 plan to help save on fees.

•   Anyone, including grandparents and family friends, can contribute to a 529 plan, so make sure loved ones are aware that you have a 529 for your child to save for college. They may want to make a contribution to the plan as a birthday gift, for instance.

•   You can open a 529 as soon as the beneficiary has a Social Security number. Start saving early and set up automatic contributions to the plan. The longer the money is invested, the more time it has to grow.

The Takeaway

A 529 can be a good way to save for your child’s education. The earlier you open a 529, the more time you have to contribute and save, and the more time the money in the plan has to grow. Just be sure to find out the 529 maximum contribution limits for the state in which you have the plan.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What happens if you contribute too much to a 529 plan?

Contributing more than a 529 plan allows might result in taxes and penalties. If you over-contribute to a 529 account beyond the 529 limit, one option is to change the primary beneficiary of the plan to another child to be used for their education savings. You can also consider rolling the funds into a Roth IRA for the original beneficiary. Either option can help you avoid a taxable event.

What is the 5-year rule for 529 plans?

You’re allowed to contribute up to $18,000 ($36,000 if filing jointly) per beneficiary in 2024 without paying a gift tax. This amount is not counted against your lifetime gift tax exemption. To contribute more in one year to a single 529 recipient without impacting your lifetime gift tax exemption, you can front-load up to five years of contributions (up to $90,000 in 2024) into the 529. Doing so avoids impacting your lifetime gift tax exemption, but it also means that you can’t make additional contributions to the same beneficiary for the next five years.

What happens to a 529 plan if your child doesn’t go to college?

If your child doesn’t go to college, you have a few options for a 529. You can consider rolling the funds into a Roth IRA for the beneficiary, for instance. Or you could change the primary beneficiary to another family member, like a younger sibling.


Photo credit: iStock/Melpomenem

SoFi Invest®

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

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


Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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

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

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

SOIN-Q324-063

Read more
TLS 1.2 Encrypted
Equal Housing Lender