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It’s hard to argue against the value of a good internship and how it can prepare a student for life after college.

A few weeks or months spent working in the real world can help build connections and confidence, further develop skills learned in class, and—perhaps most critically—bolster a new graduate’s chances of getting a job. An internship also can help students decide if they’ve chosen the right major and want to continue on the career path they’re on.

That may explain why many universities are pushing for more academic internships and are requiring them for an increasing number of degree programs. Not just for doctors, dentists, accountants, and teachers, but for those seeking careers in sports or hospitality management, communications, technology, and the arts.

Internship Stats

According to internship research conducted by Zippia, students who interned during college are 35% more likely to receive at least one job offer after graduation than those that didn’t intern. And a whopping 70% of interns receive a job offer from the company they interned at.

If there’s a specific company or industry you have your heart set on, interning can be a fantastic way to get your foot in the door and hopefully receive a job offer down the line.

The Cost of College Credit Internships

Close to 40% of all internships are unpaid. Which means that often, the students who take those internships are forgoing full-time, part-time, or seasonal employment to take an internship that doesn’t come with a paycheck.

Instead, that unpaid internship could add to their debt, especially if they have to relocate temporarily (maybe to a larger city or even overseas), buy a car, pay for gas or some other form of transportation, put together a work wardrobe, and pay for food.

Some students who take internships—paid or unpaid—can choose to or are obligated to enroll for course credit. Depending on how many credit hours their internship entails (the average is three but it could be more), they could end up paying hundreds of dollars in tuition.

Of the internships that are unpaid, most are in nonprofit or government sectors. Nearly all paid internship positions are with private and for-profit companies.

Advocacy groups are pushing for more paid internships, especially because low-income students often cannot afford to take on unpaid work, creating barriers to equal opportunity. To combat these barriers, the White House Internship Program started paying their interns for the first time in history in fall 2022.

Interns want to and are supposed to be doing relevant work, not making copies, fetching coffee, and running other errands that paid employees would be doing if the interns weren’t there.

How Much Do Paid Internships Pay?

Paid interns aren’t getting rich, but they are at least making minimum wage. For interns that are getting paid, the average hourly rate is $15.03, according to Zippia. Those wages help pay some expenses, but not all—making an internship an opportunity many students and their parents simply can’t afford or they must struggle to pay for.

If you’re thinking, “Well, that’s what student loans are for,” you’re technically correct. Student loan are meant to cover educational expenses, so you can use the money from the government and (possibly) private student loans to pay for the expenses that go along with your academic internship just as you would if you were in a class at school. That could include room and board, travel costs if you have to relocate, transportation, and equipment you need for the internship.

Of course, the debt you take on to get that internship experience could come back to haunt you when you’re out of school and those loans come due. So it’s important to weigh the costs of the internship against its benefits.

Particularly if it’s an unpaid internship, or if you’re required to complete an internship for college credit, you might consider doing some research to find companies that are known for offering applicable career skills and have a positive impact on your resume.

Ask your internship coordinator what tangible benefits you could see—is the internship approved for college credit? Will you get meaningful references? Will there be consequential networking opportunities?

Will the company offer you more than a form letter as a reference? How will this internship help you stand out from others hoping to get similar employment?

Before you commit, you also may want to create a financial plan, starting with figuring out where you’ll live and then working through your budget from there. And you might want to consider asking whether taking a side gig outside your internship is feasible and ok with the company.

Paying Back the Money You Owe

Before you graduate, you may want to begin educating yourself about the best student loan payback options for your situation (depending on what types of student loans you have), look at interest rates, and think about whether you would be interested in consolidating or refinancing your loans.

If you can’t find a better interest rate than you already have on your federal loans, you might want to leave things as they are. Federal student loans offer protections and benefits that won’t transfer to a private loan if you refinance. But you may find you can get a lower rate by refinancing with a private lender, which also could allow you to combine your loans into one manageable payment.

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.

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.

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If you’re considering refinancing some or all of your student loans, you may wonder what comes next on your financial to-do list.

On June 3, President Biden signed the debt ceiling bill into law, ending the three-year federal student payment pause. Payments are expected to resume in October.

Refinancing student loans can often result in a lower monthly student debt payment, either due to a lower interest rate, a longer loan term, or both. A lower monthly payment can be a big relief to borrowers who are still reeling financially from the effects of Covid-19 and higher inflation.

Lower payments can also free up some of your income for other key financial goals. That’s what we’ll look at here.

What Happens When You Refi Student Loans?

Understanding what happens after a refinance is key to planning your next steps.

As mentioned above, when you refinance, you may find a more favorable interest rate or more flexible loan terms that will help reduce your monthly payment. The SoFi Student Loan Refinancing Calculator can help determine how much refinancing could save you.

Keep in mind, when you refinance a federal student loan into a private loan, you lose the benefits and protections that come with a federal loan, like deferment and public service-based loan forgiveness (PSLF).

What Is Your Next Financial Goal?

As you consider refinancing, it’s a good idea to keep your other financial goals in mind. How can refinancing student debt — and perhaps lowering the percentage of income dedicated to repayment — help you achieve those goals? Take a look at the following scenarios that might apply to you.

1. Pay Down High Interest Debt

Once your student loan debt is under control, turn your attention to any high-interest debt you may be carrying on credit cards. There are two common ways people approach paying down debt. Which one you choose depends on your financial situation.

•  The Debt Avalanche. With this system, you start by paying your highest interest rate card first, with payments above the monthly minimum. You do this while still keeping up with minimum payments on any other debt. When you eliminate your highest rate debt first, you can more quickly lower your overall debt picture.

•  The Debt Snowball. In this scenario, you pay off your debt in order of the smallest to the largest balances, regardless of interest rate. This way you see some of your smallest debts paid off quickly and get a psychological boost from doing so. As you pay off each debt, you assign the amount of the payment you were making on that balance to the next debt. Your debt repayment builds momentum, known as “the snowball effect.”

Recommended: Which Debt to Pay Off First: Student Loan or Credit Card?

2. Start an Emergency Fund

Having money saved for unexpected expenses is a vital part of financial wellness.

But saving for emergencies is a challenge for many Americans. According to Bankrate’s 2023 annual emergency fund report, less than half (43%) of U.S. adults could pay for an unexpected emergency expense from their savings.

Starting or boosting your emergency fund with money saved on student loan payments is a great way to help keep your budget intact and stay out of debt.

How much should you save in your emergency fund? At least three to six months of living expenses (or take-home pay) is the rule of thumb. That way, if you lose your job, have an accident, or get sick, you’re likely to have enough to see you through until your situation improves.

3. Increase Retirement Contributions

Are you putting as much as you can away for retirement? Starting early can pay off big down the line, thanks to the magic of compound interest — and the fact that earnings grow tax-free in most retirement accounts such as IRAs and 401(k)s.

If your employer offers a matching contribution benefit, upping your game may be even more important. This is free money. Whenever possible, contribute the amount necessary to qualify for the full match so you take the best advantage of this key benefit.

4. Save for the Next Stage of Life

Life goes on well after student loans. Now with less student debt burden, you’re probably looking at what’s next. That may mean buying a car, saving for a down payment on a home, starting a family, or expanding a business.

Careful budgeting means you can put the difference between your old student loan payment and your new one toward other important life goals.

Once you establish the goal you’re saving for, consider opening a high-yield savings account dedicated to that purpose. You’ll earn interest while your nest egg accumulates but still have liquidity so your money is available when you’re ready to pursue your goal.

5. Invest

Starting an investment account outside of retirement savings can be an important financial goal in and of itself. The reason? Long-term stock market returns consistently outperform many other types of investments. Over the past decade through March 2022, the average annual return for the Standard & Poor’s 500 Stock Index was 14.5%.

Returns vary, of course, depending on the years you are invested and the economic environment. But over the long haul, investing in stocks early — even small amounts — can pay off in the future.

Mutual funds and exchange traded funds (ETFs) are two easy ways to start investing. A mutual fund is a collective investment which pools funds from many investors to invest in stocks, bonds or other securities. ETFs work much the same way but unlike mutual funds, ETFs can be bought and sold like a stock as the price goes up or down during the day.

How to Pay Off Student Loans Ahead of Schedule

As we’ve seen, a refinance can help lower your monthly payments and perhaps bring some much-needed wiggle room to the rest of your finances.

That may motivate you to keep the momentum going and look at ways you can repay your remaining student debt faster. Here are two tried and true strategies.

Pay More Than the Monthly Amount

Your monthly payment amount isn’t set in stone. You can always pay more than the minimum amount, and in most cases you probably should. Payments over the minimum monthly amount owed are applied directly to the principal. So even a little bit extra can lower the amount of your loan and help you save on interest over the life of the loan.

Recommended: Why Making Minimum Student Loan Payments Isn’t Enough

Dedicate a Windfall to Student Loans

Another strategy for paying student debt faster: Whenever you get a windfall, use some or all of it to make a lump sum payment toward your student loan principal. Think tax refunds, cash gifts, work bonuses, or income from a side gig or inheritance.

What to Avoid After Refinancing Student Loans

After refinancing student loans, be careful not to fall into a common trap: It’s called “lifestyle creep,” and it happens when you spend all of your discretionary income instead of directing some of it to financial goals.

To avoid creep, mindfully adjust your budget to account for any increase in income — such as lower student loan payments. That way the money will be put to good use instead of being frittered away.

Recommended: Living Below Your Means: Tips and Benefits

The Takeaway

Refinancing your student loans may help you lower your monthly payments, freeing up funds to put toward other financial goals. You might choose to pay down high-interest credit card debt, boost your emergency fund or retirement account, or even pay off your student loans faster. With the end of the federal student loan payment pause in sight, now may be a good time to consider refinancing all or part of your student 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.

Photo credit: iStock/RossHelen
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.

If you’re working and want to continue school but aren’t sure how to fund it, your employer may offer assistance.
It’s called tuition reimbursement, and it’s how many companies help employees pay for continuing their education. Tuition reimbursement programs are growing in popularity as companies work to attract and retain employees.

What is tuition reimbursement? It’s when companies such as Starbucks, Amazon, Target, and more offer programs to help employees pay for a portion of their educational costs. These programs vary by company. Some may only cover course costs if the path of education is related to your job. Others may require employees to remain with the company for a certain period of time after completing their degree.

If you’re wondering, how does tuition reimbursement work?, read on to learn the tuition reimbursement meaning and to find out the requirements involved.

What Is Tuition Reimbursement?

Tuition reimbursement, or tuition assistance, is an arrangement where an employer pays for part or all of an employee’s continuing education whether undergraduate degrees or graduate school.

How does tuition reimbursement work? Your employment contract may lay out the terms of the tuition reimbursement: how much of your tuition your company will cover, what courses qualify, any minimum GPA requirements, and the minimum time period of employment.

Tuition reimbursement is often offered as an employee benefit on top of a salary package, along with other benefits like health insurance, a 401(k), or transportation expenses.

This is different from student loan repayment assistance, when your company provides some amount of money toward student loans you already have.

Not every company offers tuition reimbursement, but many large ones do provide reimbursement or financial support for continuing education. Some companies may stipulate that courses must relate to your current work.

Recommended: What Are College Tuition Payment Plans and How Do They Work?

Why Companies Offer Tuition Reimbursement

Tuition reimbursement is a perk that helps a company attract and retain employees, while also benefiting the company itself, since the courses you take may provide skills or knowledge you can put into practice at work.

Some companies are upping their educational benefits as a way to stay competitive. They may offer a range of benefits to their employees like refinancing student loans and student loan contributions.

Not sure if your employer offers tuition reimbursement? Check with your HR representative to see what options are available.

Tuition Reimbursement Requirements

The specifics of each company’s tuition reimbursement policy are likely laid out in an employment contract, but it’s common for a company to offer a tuition reimbursement only in accordance with certain eligibility requirements.

You’ll probably have to sign up and pay for the courses yourself first, so you’ll want to budget appropriately. In most cases you’ll need to pay for your courses out of pocket and then provide proof of completion and your grades in order to be reimbursed.

Program requirements

Your employer may limit its reimbursement program to certain institutions. For example, they may provide a list of accredited institutions you can choose from. Or they require that you attend a four-year program.

Coursework Requirements

Your company may reimburse you only for classes pertaining to your current job description.

Other times, companies will approve courses focused on moving you into a management role or on gaining skills you can put toward other future roles or assignments. For example, if you work in project management for a large corporation and are interested in learning how to use data visualization, you might be able to take community college courses in data production and visual graphics.

After understanding what courses qualify for tuition reimbursement, you could then look over the other requirements. For example, there may be minimum GPA or attendance requirements.

Timeframe Requirements

Sometimes a company will also require you to continue working with them for a set amount of time, since they’ve invested in your education and don’t want you to take those new skills to a competitor.

Tuition Reimbursement And the FAFSA®

An employer’s tuition reimbursement program doesn’t preclude you from filling out the Free Application for Federal Student Aid (FAFSA). In most scenarios, an employer is unlikely to cover 100% of tuition costs, and you may still qualify for aid in the form of federal loans and grants.

That said, you will be asked to note how much you are reimbursed for, which may have an effect on how much financial aid you’re offered.

Is Tuition Reimbursement Taxable?

While you should always consult with a licensed tax professional regarding the current tax law, and in no way should any of this information be considered tax advice, the IRS’ website currently states that employers can deduct the cost of tuition reimbursement (up to $5,250 annually). It’s a business expense for them. The IRS website also states that the first $5,250 of tuition reimbursement isn’t considered taxable income for employees. However, anything above that counts as part of your taxable wages and salary. Again, talking to a tax professional is always recommended.

The IRS does have some requirements on tax-free educational assistance benefits — which are not necessarily the same requirements your employer has.

Typically, for the IRS to consider tuition assistance as tax-free, it should be used to pay for tuition, fees, textbooks, supplies, or equipment.

And typically, it can’t be used for meals, lodging, transportation, or any equipment you keep after the course. It’s also not applicable to sports, games, or hobbies — unless they’re a degree requirement or you can prove they’re related to your employer’s business.

Again, consult with an accountant or tax attorney to get the complete picture.

What Are Other Options to Lower Education Costs?

The average cost of attending a four-year public college as an in-state student during the 2022-23 school year was $10,950, and that price tag only goes up for private schools and out-of-state students.

Federal Student Aid

For those who do not qualify for employer offered tuition reimbursement, there are other options that could be worth considering. As mentioned above, students can fill out FAFSA® annually. This allows them to apply for all types of federal student aid, including scholarships and grants, work-study, and federal student loans.

Private Student Loans

Beyond that, some may consider private student loans.

While one of the basics of student loans is that they offer students the opportunity to finance their education, private student loans don’t always have the same borrower protections, like income-driven repayment plans, that are afforded to federal student loans. For this reason, they are most often considered only after all other options.

Recommended: Private Student Loans Guide

Refinancing Existing Student Loans

If you already have student loans, when it comes time to repay you could consider refinancing to a lower interest rate. One of the advantages of refinancing student loans is that it could help you reduce the amount of money paid in interest over the total life of the loan; refinancing at a lower monthly payment could help with budgeting in the short term. However, lowering monthly payments is frequently the result of extending the loan term, which will result in increased cost over the life of the loan.

It’s important to know that there are various federal student loan repayment options and borrower protections (such as deferment or forbearance options). Refinancing federal loans eliminates them from these programs.

The Takeaway

Employers who offer tuition reimbursement programs will cover a portion of tuition costs if the employee meets specific program eligibility requirements. These requirements vary by company, but may include things like maintaining a minimum GPA, doing certain coursework, and stipulations around the length of employment.

Refinancing is another method that might help you lower your education costs. If you’re looking to refinance your student loans now, prequalifying online with SoFi takes just two minutes. SoFi offers student loan refinancing with low fixed and variable rates, flexible terms, and no fees.

Learn more about refinancing your student loans with SoFi.

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

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.

If you’re wondering “do you have to pay back FAFSA®?”or “do you have to pay back financial aid?,” what you really want to know is whether you have to pay back the federal student loans you’re eligible for after filling out your Free Application for Federal Student Aid (FAFSA).

You will have to pay back those loans, but other types of student aid you get through FAFSA likely won’t need to be repaid. Aside from federal student loans, you can also use FAFSA to apply for grants and scholarships as well as work-study jobs, for which you’d get funds you usually don’t need to pay back.

If you have loans through FAFSA and need to pay them back, read on for information on the three general types of federal student loans and your repayment options for each.

Direct Subsidized Loans

With Direct Subsidized Loans, the government (more specifically, the U.S. Department of Education) pays the interest while you’re still in school at least half-time. That’s what makes them “subsidized.”

The maximum amount you can borrow depends on whether you are a dependent or an independent student, as well as what year of school you are in. However, it is ultimately up to your school how much you are eligible to receive each academic year.

Not everybody qualifies for a subsidized loan. You have to be an undergraduate (not a graduate student) demonstrating financial need and attending a school that participates in the Direct Loan Program. Additionally, the academic program in which you’re enrolled must lead to a degree or certificate.

You also should check how your school defines the term “half-time” because the meaning can vary from school to school. Contact your student aid office to make sure your definition and your school’s match. The status is usually based on the number of hours and/or credits in which you are enrolled.

Direct Unsubsidized Loans

As you’re thinking about “do I have to pay back FAFSA?,” it’s good to know that you will have to pay back all the interest that accrues with Direct Unsubsidized Loans while you’re in school, because these loans are “unsubsidized.” That means the government doesn’t cover your interest while you’re in school like they do with a subsidized loan.

You don’t have to prove a financial need in order to qualify for a Direct Unsubsidized Loan. Additionally, these loans are available to graduate students as well as undergraduate students. Again, you need to be enrolled at least half-time in a school that will award a degree or certificate.

Direct PLUS Loans

There are two types of Direct PLUS Loans:

•   Grad PLUS Loans: These are for graduate or professional degree students

•   Parent PLUS Loans: Parent PLUS Loans can be taken out by parents for as long as their qualifying child is a dependent or undergraduate student

Unlike most other federal loans, PLUS loans require a credit check, and you cannot have an adverse credit history. If you or your parents have bad credit, a cosigner on the loan application may be an option.

With Direct PLUS Loans, you can borrow as much as you need for the cost of school attendance, subtracting the other financial aid you’re getting. However, the interest rate for PLUS loans is generally higher than it is for the other types of federal student loans.

Do I Get a Grace Period on My Federal Student Loan Repayment?

Whether you get a grace period — time after you graduate (or drop below half-time enrollment) during which you do not have to make loan payments — depends on what type of federal student loan you have. Not all federal student loans offer a grace period. Direct Subsidized and Unsubsidized Loans offer a grace period of six months, whereas Direct PLUS loans don’t offer a grace period at all.

Grace periods are meant to give you time to find a job and organize your finances before you have to start making loan payments. They are usually one-time deals; in most cases, you often can’t get a second grace period ​once the initial one ends.

Additionally, not all grace periods are exactly alike. Different loans may offer different grace periods. Policies vary. Check with your loan servicer so that you know for sure when your grace period begins and ends.

Keep in mind that grace periods are usually not interest-free. Some loans accrue interest during grace periods. Many students subscribe to the strategy of making interest payments even during the grace period. Doing this to put money toward student loans can ultimately lower the amount you owe, and interest payments are generally more affordable to handle than principal payments.

Also remember that loan servicers are paid by the Department of Education to handle billing and other services for federal loans. This is one of the basics of student loans. The government gives you a loan servicer; you don’t get to choose one yourself. The loan servicer you get is the one you should contact if you have questions regarding your loan.

Federal Student Loan Standard Repayment Plan

Once you graduate, your repayment plan will depend on various factors, but most of the time the government will place you on its Standard Repayment Plan. The general rule here is that you’re expected to pay off your loan over the course of a decade, and your payments will remain the same for the duration.

Before you are placed on that Standard Repayment Plan, the government gives you a chance to choose a few other repayment options (which we’ll discuss below). If you don’t choose one of those, you’ll automatically be placed on the Standard Repayment Plan.

Additional Repayment Options

Here are a couple of your other repayment options beyond the Standard Repayment Plan:

•   The Extended Repayment Plan: The Extended Repayment Plan can extend your term from the standard 10 years to up to 25 years. To qualify, you must have at least $30,000 in outstanding Direct Loans. As a result, your monthly payments are reduced, but you could be paying way more interest.

•   The Graduated Repayment Plan: Another option, the Graduated Repayment Plan lets you pay off your loan within 10 years, but instead of a fixed payment, your payments start low and increase over time. This may be a good option if your income is currently low but you expect it to increase over time.

Keep in mind that although you can choose these repayment options, you cannot refinance a federal student loan with the government on your own (you can, however, consolidate them). That’s because those interest rates are set by federal law, and they can’t be changed or renegotiated.

Difference Between Refinancing & Consolidating Student Loans

While you can’t refinance your federal loans with the government, you can do so with a private loan company. Before you consider refinancing, be sure to know the difference between refinancing and consolidating student loans:

•   Refinancing means taking out a brand new loan so that you can pay off your existing loans. To refinance, you’ll choose the loan company you feel is best, with (hopefully) better interest rates and repayment terms. Refinancing student loans can be done via a private lender and can be used for both federal and private loans. Keep in mind that when you refinance federal loans with a private lender, you lose access to federal benefits and protections like loan forgiveness programs and repayment plans.

•   Consolidation means placing all of your current loans into one big loan. Doing this typically extends your loan term so that your monthly payment is lowered. The problem with consolidating student loans is that it could mean you wind up paying additional interest. This is because when you consolidate multiple federal student loans, you’re given a new, fixed interest rate that’s the weighted average of the rates from the loans being consolidated.

Refinancing (as opposed to consolidating) your school loans may be a good option if you have high-interest, unsubsidized Direct Loans, Graduate PLUS loans, and/or private loans. One of the advantages of refinancing student loans with a longer term can reduce your monthly payments. Note: You may pay more interest over the life of the loan if you refinance with an extended term. Alternatively, you may be able to lower your interest rate or shorten your term.

Before you apply for that refinancing plan, it’s a good idea to check your credit score, as it is an important factor that lenders consider. Many lenders require a score of 650 or higher. If yours falls below that, you may consider a cosigner on the loan.

Lenders typically offer fixed and variable interest rates, as well as a variety of repayment terms (which is often based on your credit score and many other personal financial factors). The loan you choose should ultimately help you save money over the life of the loan or make your monthly payments more manageable.

The Takeaway

To answer the question, do you have to pay back FAFSA?, if you only got grants, scholarships, or work-study funding through FAFSA, you don’t have to worry about paying FAFSA back, so to speak. But if you got federal student loans through filling out FAFSA, you will have to pay those loans back.

Luckily, you have a number of options to do so. If you have high-interest loans, consider looking into student loan refinancing to see if you can reduce your monthly payments. SoFi offers loans with low fixed or variable rates, flexible terms, and no fees.

Check your rate for student loan refinancing in just two minutes with SoFi.

FAQ

If you fail a class, do you have to pay back your FAFSA financial aid?

In general, failing a class doesn’t mean you’ll have to pay back your FAFSA financial aid. However, if you don’t make Satisfactory Academic Progress (SAP), you could lose your future eligibility for financial aid. Your risk for losing eligibility for future financial aid might be greater if the class you failed is an important component of your major.

If you have leftover credits after financial aid is applied, do you have to pay it back at the end of the semester?

You won’t lose any money that may be left over (called a credit balance) after financial aid is applied to your tuition and other school expenses. The credit balance must be refunded to you within 14 days. That is, unless you direct the school to keep the credit balance and apply it to charges for the next semester.

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.

Yes, student loans can be refinanced if you’re looking to combine multiple loans into one, lower your interest rate, or lower your monthly payment. You can refinance both federal and private student loans, but refinancing federal loans with a private lender will remove access to federal protections and benefits.

Here’s a detailed look at student loan refinancing so you can decide if it’s the right decision for you.

How to Refinance Student Loans

When you refinance your student loans, you’re essentially taking out a new loan and using it to pay off your existing student loans. Refinancing may allow you to secure a lower interest rate or reduce your monthly payments.

Student loan refinancing may also allow you to change your repayment term. If you took out a private student loan to pay for your education, the repayment terms were set when you borrowed the loan.

If you borrowed federal loans, there are student loan repayment plans you can choose from, including the Standard 10-year Repayment plan or one of four income-driven repayment plans. If you refinance, you can choose a shorter or longer repayment term, but you will lose access to the federal repayment options.

A shorter repayment term will mean that your monthly payments will increase, but that you’ll most likely pay less in interest over the life of your loan. In contrast, a longer repayment term will mean that your monthly payments will decrease, but you might pay more in interest overall.

Can I Refinance Student Loans?

Yes, you can technically refinance your student loans at any time. However, while in school, federal loans (and most private loans) do not require you to make payments. Unless you’re able to start making payments and can lock in a lower rate with a refinance, it may make sense to wait until you graduate, leave school, or drop below half-time enrollment.

Recommended: How Soon Can You Refinance Student Loans?

When you refinance student loans with a private lender, the lender is going to look at your credit profile and debt-to-income ratio to qualify you and determine your interest rate. It may make sense to build your credit and have a stable job prior to applying for a refinance. You can also choose to refinance your loans with a cosigner to secure a better interest rate.

Is It Worth It to Refinance Your Loans?

You might be wondering if it’s worth it to refinance your student loans. The answer to that will depend on your personal financial situation, but using a student loan refinance calculator can help you see if and how much you could save by refinancing.

Depending on how much you have in student debt, reducing your rate by just a few percentage points could save you thousands of dollars over the life of your loan if you keep your loan term the same. If you’re hoping to lower your monthly payment, you most likely will have to extend your loan term, which could result in paying more in interest overall.

Also note that refinancing federal student loans with a private lender removes federal student loan benefits and protections, such as income-driven repayment plans, deferment, and student loan forbearance.

What Types of Student Loans Can Be Refinanced?

Both federal and private student loans can be refinanced with a private lender. All types of loans can be refinanced, including Direct Loans, Direct PLUS Loans, Direct Consolidation Loans, and private student loans.

If you want to combine federal loans only into one loan with one monthly, you could consider a student loan consolidation. A student loan consolidation won’t save you money in interest, as it’s the weighted average of the loans you’re consolidating rounded up to the nearest one-eighth of a percent, but it could lower your payment if you extend your loan term.

Consolidating your federal loans allows you to keep access to federal benefits and protections. If you’re using them now or plan to in the future, this could be an excellent option to simplify your loan repayment.

If you don’t plan on using federal benefits and want to reduce your monthly payment or lower your interest rate, a student loan refinance could be the right choice for you.

Recommended: Pros and Cons of Student Loan Refinancing

What to Look for in a Student Loan Refinance Company

When it comes to refinancing student loans, consider finding a lender that doesn’t charge origination fees or prepayment penalties. Usually, you’ll have the choice between a fixed or variable rate loan.

Other things to look for in a student loan refinance company include excellent customer service ratings, an easy online application process, and possible member benefits, such as career coaching, financial advice, and rate discounts on loans.

Refinancing Student Loans With SoFi

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.

FAQ

Is it legal to refinance student loans?

Yes, it is legal to refinance student loans. You can refinance both federal and private student loans with a private lender. You may be interested in refinancing if you’re wanting to lower your monthly payment or lower your interest rate. Keep in mind that refinancing federal loans will eliminate federal protections and benefits.

What happens when you refinance a student loan?

When you refinance your student loans, you pay off one or more of your existing student loans and have a new loan with a new interest rate, new terms, and a new monthly payment. You will then make your monthly payment to your new lender until it is paid off or you refinance it again with another company.

Why would you refinance student loans?

You may choose to refinance your student loans to lower your monthly payment, lower your interest rate, extend or shorten your loan term, and/or simplify your repayments.

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.