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Graduate school can be expensive and students who graduate with a master’s degree carry an average debt of $71,287, according to the Education Data Initiative. There are numerous ways to finance your advanced degree (even ways without taking out loans), and investing in graduate education is frequently worth it; the right degree has the potential for a massive return on investment.

The complicated part is determining what options are available to you and figuring out how to hack your way through grad school with the smallest bill. If you’re considering going to grad school, we’ve laid out some key financing options. Read on to learn how to formulate a plan to pay for your graduate education.

Ways to Pay for Grad School Without Taking on Debt

Things like filling out the FAFSA, applying for scholarships and grants, or working for an employer who offers tuition reimbursement while you are going to school can all help you lower your tuition bill during grad school. Continue reading for even more strategies to pay for grad school without taking on debt.

Fill Out The FAFSA

If you received financial aid or federal student loans during undergrad, you’re probably familiar with the Free Application for Federal Student Aid, usually called by its friendlier name: the FAFSA®. The FAFSA is an application to determine what types of federal financial assistance you might qualify for.

Many students who are applying for grad school are considered “independent,” for FAFSA purposes. This means that even if your mom is supplementing your monthly groceries with weekly homemade lasagnas and you’re still using your parents’ password to binge watch Netflix, you may not need to include their financial information on your FAFSA application.

Your FAFSA will determine your eligibility for federal student loans, federal work-study, and federal grants. In addition, your college may use your FAFSA to determine your eligibility for aid from the school itself. Here’s a closer look at the federal options, excluding federal student loans which will be discussed in detail in a later section.

Federal Grants

Unlike student loans, federal grants do not need to be repaid. It may be possible to receive some grant funding to help you pay for graduate school. Filling out the FAFSA is the first step to determine whether you’re eligible. Federal grant programs include the Pell Grant, which is generally only available to undergraduate students who demonstrate exceptional financial need.

Recommended: What Are Pell Grants?

Another federal grant that may be available to graduate students is the TEACH grant, or Teacher Education Assistance for College and Higher Education grant. This grant has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduating.

Federal Work-Study Program

Just like undergrad, you might be eligible for work-study jobs during grad school. Eligibility for work-study jobs is also based on your FAFSA. These jobs often pay you to work at your university for a set number of hours.
They can oftentimes be doubly beneficial because in addition to earning money, you can sometimes secure a work-study position that is relevant to your field of study. You usually have to go through an application process in order to secure a work-study job.

Work-study is a type of financial aid available to students who qualify based on their financial need. You can apply for the program when you fill out your FAFSA. If you qualify for work-study it will be part of your federal financial aid award.

Even if you receive your work-study award you may still have to find a job that qualifies. Many schools have online databases where you can look for and apply to jobs.

Typically, financial aid is awarded on a first-come, first served basis, so the earlier you file your FAFSA the better chance you’ll likely have of securing work-study as a part of your financial aid award.

Figuring out What Your University Can Offer You

After narrowing down your federal options, make sure to consider what university-specific funding might be available. Many schools offer their own grants, scholarships, and fellowships. Your school’s financial aid office likely has a specific program or contact person for graduate students who are applying for institutional assistance.

Many schools will use the FAFSA to determine what, if anything, the school can offer you, but some schools use their own applications.

Although another deadline is the last thing you need, seeking out and applying for school-specific aid can be one of the most successful ways to pay for grad school: Awards can range from a small grant to full tuition remission.

Employer Tuition Reimbursement

It might sound too good to be true, but some employers are happy to reimburse employees for a portion of their grad school costs. Employers that have tuition reimbursement plans set their own requirements and application process.

Make sure to consider any constraints your employer puts on their tuition reimbursement program, including things like staying at the company for a certain number of years after graduation or only funding certain types of degree programs.

If your employer doesn’t already have a program in place, don’t despair. It is almost always worth asking your company if they offer any benefits to employees pursuing a higher degree.

Some employers might offer professional development funding that can be used to help you pay for school or let you keep a more flexible work schedule to accommodate your classes.

Becoming an In-State Resident

If you’re applying for graduate school after taking a few years off to work, you might be surprised to find how costs have changed since your undergraduate days. Graduate students interested in a public university can save tens of thousands of dollars by considering a university in the state they already live in.

Each state has different requirements for determining residency, so if you are planning on relocating to attend grad school be sure to look into the requirements for the state the school you are planning to attend.

Certain states require only one year of full-time residency before you can qualify for in-state tuition, while others require three years. During that time, you could work as much as possible to save money for graduate school. More savings could mean fewer loans.

Becoming an Resident Advisor (RA)

You probably remember your undergrad Resident Advisor (RA). They were the ones who helped you get settled into your dorm room, showed you how to get to the nearest dining hall and yelled at you for breaking quiet hours.

RAs may be under-appreciated, but they’re often compensated handsomely for their duties. Students are typically compensated for a portion or all of their room and board. Some schools even include a meal plan and sometimes even reduced tuition or a stipend. The compensation you receive will depend on the school you are attending, so check with your residential life office to see what the current RA salary is at your school.

While there are plenty of perks to being an RA, don’t underestimate the responsibility that comes with the position. It can be a time-intensive position, requiring round-the-clock supervision.

Still, the perks of being an RA may be measured in saving money each year. By having a free place to live and a free meal plan, you could save more and eat a diet that doesn’t just consist of ramen and stale pizza. RAs rarely have to share a room, so you’ll also have more privacy than you would in an apartment with roommates.

Because RAs receive so many benefits, competition for the job can be fierce and selective. Polish your resume and hone your interview skills before applying. The difference between working as an RA and having to take out loans for rent could affect your life for years to come.

Finding a Teaching Assistant Position

If you’re a graduate student, you can often find a position as a Teaching Assistant (TA) or Research Assistant (RA) for a professor. The position will be related to your undergrad or graduate studies and often requires grading papers, conducting research, organizing labs, or prepping for class. You probably had several TAs during your undergraduate classes and didn’t even realize they were students too.

TAs can be paid with a stipend or through reduced tuition depending on which school you attend. Not only can the job help you to potentially avoid student loans, but it also gives you networking experience with people in your field.

The professor you work with can recommend you for a job, bring you to conferences, and serve as a reference.
Being a TA may help boost your resume, especially if you apply for a Ph.D. program or want to be a professor someday. According to PayScale.com, the average TA earns around $13 an hour, as of September 2022.

Similarly to a job as an RA, securing a TA position can be competitive. Apply early and get to know the professors who will make the decisions.

Applying for Grants and Scholarships

Do you remember all those random essay contests and company scholarship applications your classmates fired off senior year of high school? Well, grad school is no different. There are private scholarships out there, you just need to find them.

Scholarship for the unusually tall? Check. Essay contest on automatic sprinkler systems? You betcha. In addition to the weird and wonderful one-off scholarships, there are industry-specific scholarships that are intended to help graduate students pursuing your specific field of study.

An easy way to search for scholarships is through one of the many websites that gather and tag scholarships by criteria. Keeping all your grad school and FAFSA materials handy means that you’ll have easy access to the information you’ll need for scholarship applications.

Recommended: Guide to Unclaimed Scholarships

As we mentioned at the top of this post, grad students have to submit the Free Application for Federal Student Aid (FAFSA®) in order to potentially qualify for federal grants — just as undergrads do. Grants and scholarships are a great source of financing for graduate school because they don’t need to be repaid.

Grants are available from both the federal and state governments, as well as from the university itself (again, many universities use the FAFSA to determine their own institutional aid, so filling it out is essential). Some companies provide their own grants or scholarships, and many private organizations sponsor grants.

It never hurts to apply for a grant or scholarship, no matter how small it might seem. Think of it this way — every dollar received is one less dollar you need to borrow or earn.

Recommended: Scholarship Search Tool

How to Pay for Grad School With Student Loans

Grad students may rely on a combination of financing to pay for their education. Student loans are often a part of this plan. Like undergraduate loans, graduate students have both federal and private student loan options available to them.

Federal Loans for Graduate School

Depending on the loan type, payments on these student loans can be deferred until after graduation and sometimes qualify you for certain tax deductions (like taking a tax deduction for interest paid on your student loans).
There are different types of federal student loans, and each type has varying eligibility requirements and maximum borrowing amounts. Graduate students may be eligible for the following types of federal student loans:

•   Direct Unsubsidized Loans. Eligibility for this loan type is not based on financial need.

•   Direct PLUS Loans. Eligibility for this loan type is not based on financial need. A credit check is required to qualify for this type of loan.

•   Direct Consolidation Loans. This is a type of loan that allows you to combine your existing federal loans into a single federal loan.

Federal Student Loan Forgiveness Programs

Federal student loan forgiveness programs either assist with monthly loan payments or can discharge a remaining federal student loan balance after a certain number of qualifying payments.

One such program is the Public Service Loan Forgiveness (or PSLF) program. The PSLF program allows qualifying federal student loan borrowers who work in certain public interest fields to discharge their loans after 120 monthly, on-time, qualifying payments.

Additionally, some employers offer loan repayment assistance to help with high monthly payments. While loan forgiveness programs don’t help you with the upfront cost of paying for grad school, they may offer a meaningful solution for federal student loan repayment. (Unfortunately, private student loans don’t qualify for these federal programs.)

Private Loans for Graduate School

If you’re not eligible for scholarships or grants, or you’ve maxed out how much you can borrow using federal student loans, you can apply for a private student loan to help cover the cost of grad school.

Private graduate school loan rates and terms will vary by lender, and some private loans have variable interest rates, which means they can fluctuate over time. Doing your research with any private lender you’re considering is worth it to ensure you know exactly what a loan with them would look like.

Make sure to consider several different types of private student loan lenders before you make your decision. Private student loans are one area where it pays to be a savvy shopper. You’ll want to consider origination fees, payment schedules, and interest rates.

Steps to Take Before Applying to Graduate School

Before applying to graduate school it’s important to consider things like the earning potential offered by the degree in comparison to the cost. At the end of the day, only you can decide if pursuing a specific graduate degree is worth it. Here are a few steps to take before applying to grad school.

1. Research Potential Earnings by Degree

Perhaps you are already committed to one degree path, like getting your JD to become a lawyer. In that case you should have a good idea of what the earning potential could be post-graduation.

If you’re considering a few different graduate degrees, weigh the cost of the degree in contrast to the earning potential for that career path. This could help you weigh which program offers the best return.

2. Complete the FAFSA

Regardless of the educational path you choose, filling out the FAFSA is a smart move. It’s completely free to fill out and you may qualify for aid including grants, work-study, or federal student loans. Federal loans have benefits and protections not offered to private loans, so they are generally prioritized over private loans.

3. Explore Financing Options

As mentioned, you may need to rely on a combination of financing options. When scholarships, grants, and federal student loans aren’t enough — private loans can help you fill in the gaps.

When comparing private lenders be sure to review the loan terms closely — including factors like the interest rate, whether the loan is fixed or variable, and any other fees. Review a lender’s customer service reputation and any other benefits they may offer too.

The Takeaway

Grad school is a big investment in your education, but the good news is there are grants and scholarships that you won’t have to pay back. Some employers may also offer tuition reimbursement benefits, or you could find work as a resident advisor or teaching assistant to supplement your tuition costs. If you need more funding to cover the cost, there are federal and private student loans.

Taking the time to find the best combination of loans and funding is crucial. Taking it one step at a time can help you to assess all the options available and make the best financial decision for you. If you’re interested in private student loans, consider SoFi. Interested applicants can easily apply online and SoFi private student loans have zero fees.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. 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.

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

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

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With all the talk of a possible recession, you may be thinking this is a good time to get an advanced degree. You can wait out the tough times and unpredictable job market while learning new skills that put you in a better position in the future.

You’re not alone. Historically, times of economic turmoil have seen big upticks in graduate school enrollment. But is this the right move for you now?

We hope the following information will help you decide whether the cost of earning a master’s will pay off in greater career opportunities — and higher salary — down the line.

Why People Go Back To School During Recessions

Periods of decline in economic activity (aka recessions) are commonly accompanied by corporate layoffs, rising unemployment, and dwindling wage growth. Because there are fewer employment opportunities, job hunting and career advancement become more competitive. Many workers decide a return to school, often to earn a master’s degree, makes sense in a tough employment market.

Earning an advanced degree can boost your earning power in your chosen field (more on that below) or provide an opportunity to change fields. Career changers may gravitate to growing, “recession-proof” industries and fields that they are passionate about.

Who Should Get a Master’s Degree?

The answer depends on your professional and academic goals. The first level of graduate study, a master’s degree indicates a high level of knowledge in a profession or research area. It takes anywhere from one to three years of full-time study to complete a master’s. A bachelor’s degree is required to apply for a master’s program.

For academics, a master’s is usually a stepping stone to a Ph.D. or other doctoral degree. Professional master’s degrees can also be the first step toward advanced degrees required for doctors, pharmacists, and lawyers, and are a necessary part of education for those careers.

Master’s degrees can also be required or particularly helpful in education, social service, healthcare, business, and STEM fields (science, technology, engineering and mathematics).

Recommended: What Should I Do After My Master’s Degree?

Pros of Getting a Master’s Degree in a Recession

For many people, a recession is a good time to go back to school, either full- or part-time. Here’s why.

Potential Salary Boost

In many careers, a master’s degree will command a higher salary and increase job security. According to the Bureau of Labor Statistics (BLS), workers with graduate degrees (master’s, professional, and doctoral) have the highest earnings.

The median weekly earnings for full-time workers over 25 with a master’s degree is $1,574, compared to $1,334 for employees with a bachelor’s degree only.

Increased Job Security

Workers with graduate degrees also experience lower levels of unemployment, according to BLS data. The unemployment rate in 2021 for people with a master’s was 2.6%, compared to 3.5% for workers with bachelor’s degrees.

People who have been negatively affected by a recession — either laid off or unemployed for an extended period — often find that an advanced degree can lead to more job security and advancement. As mentioned above, recessions can also be a good time for workers in hard-hit industries to gain skills and knowledge through a master’s in a fast-growing field.

Many grad school students find that networking with other students, faculty, and alumni helps them find new opportunities, especially in a competitive job market.

Easy Access To High Quality Programs

Hundreds of high-quality MBA, MSW, engineering, and other in-demand graduate degree programs are now available online from prestigious colleges and universities. Remote learning makes these programs accessible to students anywhere in the country. Online programs often cost less than in-person learning and can offer more flexibility for students who need to continue working full- or part-time.

Cons of Getting a Master’s Degree in a Recession

Grad school isn’t right for everyone, and making this move demands careful consideration.

Costs and Potential Debt

The average cost of a master’s degree is $66,340, according to a 2021 report from the Education Data Initiative. That does not include living expenses or lost wages from taking time off work. And people with a master’s degree carry an average of $46,798 in student loan debt.

Determining whether taking on federal or private student loan debt is worth the increased earning potential or career satisfaction is an important step in your decision-making process.

Increased Competition for Admissions

You’re not the only one debating whether to ride out tough economic times by going back to grad school. That can mean increased competition for the best programs. If a degree from a particular college or university is part of your career plan, carefully consider your timing.

Missed Work Experience

If you’re considering leaving a job to attend grad school, keep in mind that you may miss valuable work experience that can put you in a better position when the recession ends. Working part-time can help pay for grad school and sometimes alleviates missed work experience, but not always. That’s because part-time employees don’t always encounter the same opportunities to gain valuable experience as full-time staffers.

Recommended: Undergraduate vs. Graduate Student Loans: How They Differ

How Much Does a Master’s Degree Cost?

Depending on the field of study and institution, master’s programs range from $12,000 to $75,000. Unlike many doctorate programs that waive tuition and fees and even offer a stipend, master’s degrees are not fully funded.

Ways To Pay for a Master’s Degree

Most students rely on a combination of savings, scholarships, grants, federal loans, private loans, and help from employers to pay for graduate school.

Federal Grants

Federal grant programs include the Pell Grant, which is generally available only to undergrads who demonstrate exceptional financial need. However, it may be possible to receive some grant funding to help you pay for graduate school. Remember, this time around you’re an independent student, and you won’t be tied to your family’s income to determine need.

Another federal grant that may be available to graduate students is the Teacher Education Assistance for College and Higher Education, or TEACH grant. This grant has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduation.

Filling out the Federal Application for Student Aid (FAFSA) is the first step to determine whether you’re eligible for federal grants.

Scholarships

The FAFSA also gives you access to many scholarships. There are scholarships offered in every field imaginable. Start your search with these online tools:

•   Graduate School Scholarship Search at Sallie Mae

•   Scholarship Search Engine at CollegeScholarship.org

•   SoFi’s State Scholarship Search

Recommended: Finding and Applying to Scholarships for Grad School

Federal Student Loans

Grad students may be offered loans as part of their financial aid offer. A loan is money you borrow and must pay back with interest. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources.

The lifetime limit for Direct Subsidized and Unsubsidized student loans is $138,500 for graduate or professional students. Of this amount, no more than $65,500 can be in subsidized loans. This includes student loans borrowed during undergraduate study.

Private Student Loans

Many students also rely on private student loans to help pay for graduate school. The maximum amount that students can borrow with a private student loan varies by lender, but can’t exceed the cost of attendance.

The “cost of attendance” is the combined total of tuition and fees, books and supplies, living expenses, transportation, and miscellaneous expenses. This estimate may also include dependent care, study-abroad, and costs related to disabilities.

The Takeaway

Pursuing a master’s degree can be a great way to enhance your skills and career opportunities. Taking advantage of a slow or troubled economic time to do so can help ensure your job security in the future. That said, it’s important to consider the tuition costs associated with a graduate degree, the potential for taking on debt, and the effects of missed earnings and opportunities if you take time off work to go back to school.

SoFi can help students manage the cost of tuition with its private student loans for grad students. SoFi private student loans offer competitive interest rates for qualified borrowers, flexible repayment plans, and no fees. SoFi makes it fast and easy to pay for a grad degree – and now, even a grad-level certificate — so you can focus on what matters the most: your education.

FAQ

Is grad school a good place to ride out a recession?

It can be. Recessions are usually accompanied by high unemployment and layoffs. For many people, gaining new skills and expertise in a graduate program can be a good way to make yourself recession-proof in the future.

Do more people head for grad school during a recession?

Yes, historically more people apply to and attend graduate school during a recession. The Great Recession starting in 2008 is a good example of that trend.

What are worthwhile master’s degrees to get during a recession?

Master’s degrees that give you the credentials and skills to move forward in your career can be well worth the cost through future salary increases and advancement opportunities. But pursuing a passion that will give you career satisfaction for years to come can be just as worthwhile.

Photo credit: iStock/izusek

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.

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

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

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When your high schooler starts thinking about college, one of the best things you can do is to have The College Talk: a frank discussion about education, career, and life goals. The College Money Talk — the dollars and cents of the process — should be a part of the conversation. This will help you and your child stay on the same page during the college search.

We’ve assembled a list of topics you may want to include, such as how much you, as parents, can contribute toward college. We’ll also guide you through how to structure the conversation, explain financial aid, and more.

Figure Out How Much You Can Afford

First and foremost, parents should look at their finances as a whole: retirement savings, other investment accounts, monthly budget, upcoming large expenses, etc. Also think about the current economy, especially inflation and the bear market.

“Parents need to keep in mind their own financial security first and foremost,” says Brian Walsh, senior manager of financial planning at SoFi. “We don’t want parents to take on too much debt or put themselves in a sticky situation because they helped their kids too much.”

Walsh adds that it’s essential for parents to figure out on their own how much they can contribute before talking to their kids. One way to do that is to see how their retirement savings stack up against suggested amounts:

Recommended: Inflation and Your Retirement Savings

Consider the Timing

You may wonder when, and how often, you should have the college and money talk. Walsh says you can relax during the early high school years.

“Things will heat up junior and senior year,” Walsh says. “That’s when you’re looking at schools the kids are interested in, and determining how realistic it is they’ll get into those schools and secure financial aid. Senior year is when everything comes together — making decisions about where to go and ultimately coming up with a plan for how to pay for college.”

Consider blocking out time to have the conversation freshman year in high school, then intermittently throughout junior and senior year. Use your best judgment in broaching the conversation, and choose a time when your kids seem receptive.

Structure the Conversation

Walsh suggests beginning with a discussion of the paths available to your child after college. This may involve different professions and careers and how to attain them, even jobs that don’t require a college education. Your child may also have no idea about the potential earning power of various professions — a great segue into the cost of college.

According to Walsh, it’s best to have this talk in an environment where everyone feels comfortable. That may be a favorite coffee shop or the living room couch. If you’re not sure, ask your student what they prefer.

If you want to make it a more collaborative process, you can give your child assignments. For example, you may work with your child to search for colleges, look up financial concepts, debate the trade-offs of a big-name school vs. a lesser-known institution, and more.

Your student may also want to research the graduation rates of colleges. Walsh suggests having students identify the schools where students tend to graduate in four years or close to that.

When you start the money conversation, consider bringing up the average “net cost.” That’s a college’s cost of attendance (which factors in tuition, fees, books and supplies, and living expenses) minus any grants and scholarships. According to the College Board, the average net cost for 2022-2023 of a private college was $32,800. The average net cost for public college was $19,250.

Avoid looking at the sticker price, or what school websites say tuition and room and board will cost. Instead, kick off the affordability conversation based on net price.

Explain About Financial Aid

Financial aid can come from various sources: colleges and universities, the government, and private lenders. Financial aid can include grants, scholarships, work-study, and loans:

•   Grant: A type of need-based aid that you don’t have to repay.

•   Scholarship: A financial award based on academics, athletics, other achievements, or diversity and inclusion. It may or may not be based on financial need, and doesn’t have to be repaid.

•   Work-study: An on-campus job that helps cover the cost of school. You must file the Free Application for Federal Student Aid (FAFSA) to qualify for work-study.

•   Federal Student Loan: A loan is money you borrow to pay for college or career school. You must pay back loans with interest. Federal student loans come from the federal government by filing the FAFSA.

•   Private Student Loan: These loans come from a private bank or online lender. Private student loans do not offer the same federal protections that come with federal student loans, such as loan forgiveness and income-driven repayment plans. Consider these factors before you decide to pursue private student loans.

For detailed information on all available financial aid options, reach out to the guidance office or college office at your child’s high school. Online resources, like StudentAid.gov and SoFi’s FAFSA Guide, are also helpful.

“When you’re down to the final couple of colleges, work with the admissions and financial aid offices at those schools,” Walsh says. “They will be the best resources during senior year and going forward.”

Recommended: Scholarship Search Tool

Talk About Debt (and Debt Repayment)

Many high school students don’t have experience with loans or understand them at all.

“One of the risks of student loan debt is that it can feel like Monopoly money — it’s not real,” Walsh says. In your discussion, try to make student debt more concrete for your child.

Walsh recommends going through a sample budget based on the average starting salary of a career related to your child’s preferred major. (Also check out our guide to ROI by bachelor’s degree.) Calculate the amount your child may earn each month. Estimate what they may pay for rent, utilities, groceries, transportation, student loans, and more. How much will they have left over after those expenses?

Although it may feel awkward, it’s worth talking to your kids about student loans to help them understand how to handle them.

Discuss Parent / Child Contributions

“Be transparent with the student so they know what to expect when they look at different schools,” Walsh says. He urges parents not to overextend themselves or feel guilty if they can’t contribute as much as they’d like. Just 29% of parents say they plan to foot the entire bill for their kids to go to college, down from 43% in 2016.

Look for Ways to Cut Costs

During your college money talk, you may want to explore strategies for cutting expenses. Walk through a sample college budget, and look for ways to save on living arrangements, transportation and travel, Greek life, computers, books and supplies, dining out, and Wi-Fi. Doing all this ahead of time allows you to pick and choose what’s important and plan how parents and kids will spend their money.

You might also suggest that your child begin at a two-year school to save money, then transfer to a four-year institution.

Recommended: Money Management for College Students

The Takeaway

Paying for college often involves an emotional tug-of-war between a student and their parents. Walsh urges families to use The College Money Talk as a teaching moment. “It’s an opportunity for your child to learn valuable lessons on how debt and savings work,” he says. “And that can help them make better financial decisions in the future.” Parents should examine their finances and agree on their family contribution before discussing it with their student. Because high schoolers have little experience with money, parents can make it more concrete by walking through sample budgets: one for their expenses while in college, and another that projects their income and student loan debt after graduation.

SoFi private student loans can help families bridge the gap between financial aid and the cost of college.

FAQ

How do you tell your kid you can’t afford their dream college?

It may come as a surprise to your child when The College Money Conversation takes a turn and you reveal that you cannot pay for their dream school. However, it’s best to answer the question early on in high school while they can still consider other, more affordable colleges.

Do most parents pay for their kids’ college?

About 29% of parents plan to pay the full college costs. However, that doesn’t mean you must follow suit, particularly if it will put a strain on your finances. Consider all aspects of your financial situation before deciding how much you can put toward the cost of college.

How do middle class families pay for college?

Paying for college involves planning and research, and that’s the case for families at any income level. Most families cover the cost of attendance through a combination of personal savings, need-based grants, scholarships, work-study, and student loans. This involves filing the FAFSA to see the amount of need-based financial aid your child may receive. You can also arrange to set up a payment plan, in which you make payments over the course of 10 or 11 months during each school year.

Photo credit: iStock/SDI Productions

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.

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

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Nearly two-thirds of students graduate college with some debt. The average student loan debt, including federal and private loans, is $37,338. The key to paying down that debt quickly is to stay organized. If you have a mix of federal and private loans (with different payment plans, interest rates, and due dates), however, that’s easier said than done.

Unfortunately, lenders are not very forgiving. One late payment can tarnish your credit history. Before you get into any trouble, it is a good idea to put together a system and a plan for making payments and keeping track of your loans. The following tips and strategies can help.

Understanding Your Student Loans

If you’re like many borrowers, you may have a combination of different types of student loans. Each type has different benefits and features, so it’s important to differentiate between federal and private student loans, and to take note of each loan’s amount, interest rate, and payment requirements.

If you’re not sure what type of federal student loans you have, you can log on to StudentAid.gov and select “My Aid” in the dropdown menu under your name. There you can find:

•   Your student loan amounts and balances

•   Your loan servicer(s) and their contact information

•   Your interest rates

•   Your current loan status (e.g., repayment, in default, etc.)

The government’s database won’t tell you about private loans, though. For that, you can get details from the bank or lender where you obtained the loan. If you completely lost track of what private loans you have, you can check your credit report. You can get a free credit report at AnnualCreditReport.com.


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

Understand Loan Repayment Options

Federal student loans offer multiple payment options. If you don’t choose a specific plan, you’ll automatically be placed on the 10-year standard repayment plan, which can be a good choice if you’re looking to save on interest. Other options include the Extended Payment Plan and Graduated Repayment Plan.

If you want low monthly payments and student loan forgiveness, you might want to apply for an income-driven repayment plan. With these plans, your payment amount is a percentage of your discretionary income (typically 10% to 20%). After making payments for 20 or 25 years, any remaining loan balance is forgiven.

Private student loans generally offer less flexibility, but you likely had a choice of a few different repayment plans when you initially borrowed the loan. Typically, lenders will let you choose a loan term between five and 20 years when you first sign for a student loan.

Organizing Your Loan Information

If you’re feeling overwhelmed by your student loans, these tips can help you get organized and make the repayment process simpler and less stressful.

Gather Your Documents

An important first step toward keeping track of your student loans is to gather all of your documents and keep them in one place (such as a three-ring binder or file folders). These documents may include:

•   Financial aid award letters

•   Promissory notes (legal contracts detailing the terms that you received when you originally signed for your student loans)

•   Disclosure documents (which include information about rates, fees, disbursement dates, and amounts)

•   Monthly billing statements and emails from your loan servicers
As any mail comes in regarding your loans, be sure to add it to your binder or file system.

Create a Spreadsheet

A spreadsheet allows you to have all of the details of your student loans summarized in one place. You could use something like Microsoft Excel or Google Sheets, or just a regular computer document. Details you may want to include in your master spreadsheet:

•   Name of the federal loan and whether it is subsidized or unsubsidized

•   Name of the private lender (if applicable)

•   Name and contact details of the lender or loan servicer

•   Total amount borrowed

•   Term of the loan

•   Interest rate (this can help you decide which loans you should pay off first)

•   Payment due date

•   Current loan balance (this will go down as you update your spreadsheet)

With all your loan details in one place, you’ll likely find it easier to stay on top of your student loans. It’s also a good idea to take a few minutes every month to update the columns to reflect the latest status of every loan.

Recommended: Tips to Lower Your Student Loan Payments

Sign Up for Autopay

If you have a job with a steady income, you may want to set up autopay for all of your loan payments. Since your payments will be automatically taken from your bank account, you won’t have to worry about missing a payment or getting hit with a late fee. Plus, you’ll receive a 0.25% interest rate deduction on your federal loans. Many private lenders will also lower your interest rate by .25% to .50% when you enroll in autopay. This can add up to substantial savings over the life of your loan.

You’ll want to be careful, however, that you have sufficient funds in your bank account. If you don’t, you will have to manually adjust your payment amount accordingly.

Organize Your Login Details

Organizing your login details for each student loan website can save you a lot of time and frustration in the coming years. It also makes it quick and easy to check in on your loans and track your repayment progress.

You can go old school and simply write down all of your usernames and passwords on a piece of paper and store the document in a secure place. Or, you might choose to go more high-tech and use a password manager app or website (such as Dashlane or 1Password) or a built-in manager like Apple’s Keychain. This can save you the headache of repeatedly trying — and failing — to access your accounts.

Utilize Online Tools and Apps

There are free websites and online student loan trackers that can help you stay on top of your student loans. There are also apps that specialize in managing and paying off loans easily. Some you might want to check out:

•   Undebt.it This free app can help you eliminate all debt, not just student loans. Once you enter your loan information, you can see how quickly you can pay them off using the debt snowball strategy, as well as the amount that you’ll save on interest over the life of each loan.

•   Debt Payoff Assistant This free iPhone app lets you view all of your debts in one place. Simply enter your loan information and the dashboard will break down your different types of debts and your total amount of debt. You can then use the app to see how much you’ll save using the debt snowball payoff method.

•   Changed You link your credit or debit card to the app and every time you make a purchase, the app rounds it up to the nearest dollar and puts the change into your Changed account. Once you reach a certain threshold, that money gets deposited to your student loan provider. The app also offers a dashboard that lets you see all your loans in one place. (There is a $3/month fee.)

Recommended: 6 Strategies to Pay off Student Loans Quickly

Simplify Your Loans by Refinancing

When you refinance your student loans, you combine your federal and/or private loans into one private loan with a single monthly payment. This can simplify repayment and might be a smart move if your credit score and income can qualify you for lower interest rates.

With a refinance, you can also change your repayment terms. You might choose a shorter term to pay off your student loans faster. Or, you might go with a longer repayment term to lower your monthly payments (note: you may pay more interest over the life of the loan if you refinance with an extended term).

If you’re considering a refinance, keep in mind that refinancing federal loans with a private lender disqualifies you from government benefits and protections, such as income-driven repayment plans and generous forbearance and deferment programs.


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

The Takeaway

When it comes to paying off your student loans, knowledge is power. So a great first step is to take inventory of all the loans you have, noting the loan amounts, interest rates, payment amounts, and due dates. Other ways to stay organized include: storing all of your loan paperwork and mail in one place, creating a master student loan spreadsheet, and using technology (like apps and loan platforms) to help you track your progress and pay off your loans faster.

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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College is a major expense. Even with years of thoughtful saving and planning, the costs can add up quickly. Prepaid college plans are one option families are choosing to work out a smoother financial process for students and parents alike. These plans used to be more readily available in the past. Still, it’s worth looking at prepaid college plans, where you can get one, and whether they’re a smart financial decision.

What Are Prepaid College Tuition Plans?

If you have a student who definitely plans on going to college someday, a prepaid college tuition plan can help set them up for success. You, as a parent, guardian, or relative, can start paying for college now, long before the student actually attends. This locks in the current tuition rate. Even as tuition costs go up in subsequent years, these plans allow you to keep paying the tuition rate you initially locked in.

You can think of it as a loan of sorts. You pay up front, and the state earns money off of those payments. When it comes time for your student to attend college, the state pays the tuition out of the funds you provided.

Of course, you need to be confident in your student’s plans for this to work. You will probably need to live in the same state as the college the student will attend since these plans tend to apply only to in-state tuition.

Pros and Cons of College Prepaid Plans

Obviously, locking in a lower tuition rate can be a tremendous financial benefit. With college costs constantly on the rise, a prepaid tuition plan offers the potential of a steep discount. And you might even enjoy some tax breaks if you choose this approach, such as a deduction based on your contribution to a prepaid plan, depending on where you live.

However, this sort of plan can be somewhat inflexible. You may be limited in the choices you have in terms of schools. While you can get a refund if your student chooses a different school than you all expected, you may end up feeling some pressure to stay the course when investing in a plan like this.

And you can’t use the money freely. There are restrictions to how you can use the funds in a prepaid college plan. For example, room and board probably aren’t covered. These plans generally focus specifically on tuition and fees.

Despite this, many choose prepaid college plans to lock in a rate. They also enjoy the high contribution limits and tax benefits. Here are the major pros and cons of these plans.

Prepaid College Plans vs 529 Program

College prepaid plans and 529 college savings plans are similar. They serve the same basic function. However, when you look closer, they can be quite different. Prepaid tuition plans are a type of 529 plan, in fact, but 529 savings plans have distinct features that might sway your decision about investing in one or the other. Here are three of the biggest differences.

The National Prepaid College Plan

While many prepaid college plan options are state-run, there is also a national program called the Private College 529 Plan. Unlike other prepaid college plans, there’s no state residency requirement to join this plan. It applies to nearly 300 colleges and universities. However, they are all private institutions, not public. They span 30 states plus the District of Columbia.

The national plan offers a bit more flexibility than state plans, and you don’t need to choose a school to start saving. That decision can wait until your student is actually enrolling, in fact. As long as it’s one of the private institutions that are part of the plan, you can use your funds there.

Recommended: How to Start Saving for Your Child’s College Tuition

States With Prepaid College Plans

Only nine states still have prepaid college plan options, and each state will offer something a little bit different. You can compare all of the options below to see if any of these state plans work for you.

Are Prepaid College Plans Tax Deductible?

It depends on the state and plan, but in many cases, yes! There may be stipulations, though. For example, you’ll probably have to use the funds for higher education only. However, withdrawals for educational purposes may be tax-free. Moreover, your contributions to the plan could earn you deductions.

Are Prepaid College Plans Worth It?

That depends on where you live and what your student’s goals are. If the future is pretty certain, or you live in a state with a very flexible plan, a prepaid college plan can be a safe, stable way to save up money for college.

Because of the limitations and lack of flexibility, though, it may not be right for everyone. If, for example, you want to be more aggressive about your college planning, a 529 savings plan might suit your goals better. Plus, you can spend that money on things beyond just tuition and fees.

Recommended: Parent PLUS Loans vs Private Parent Student Loans for College

Alternative Methods for Prepaid College Plans

Beyond a prepaid tuition plan, you can also try a college savings plan to build up cash for college. This allows you to save up money and spend it on qualified education expenses. It doesn’t lock in a tuition rate, but because it’s a more aggressive type of savings plan, you could end up saving up more money in the long run.

There is also a national option. This plan applies even in many states that don’t have their own prepaid tuition plans. It also locks in rates, but you will have to choose one of the schools covered by the plan. Luckily, there are almost 300 to choose from.

Of course, if your child is headed to college in the next few years, you may not have time to save much money. Parent PLUS loans can help. When an undergraduate’s financial aid doesn’t meet the cost of attendance at a college or career school, parents may take out a Direct PLUS Loan in their name to bridge the gap.

The Takeaway

The thought of large student debt scares off many who would otherwise attend a college or university. But with some strategic and long-term planning, college can fit in the budget. You can mix and match approaches to find what works for you. For example, you could combine a prepaid tuition plan with a private student loan to pay for college. No matter what you ultimately choose, it will help to start planning well in advance.

Photo credit: iStock/dangrytsku

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.

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.

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.

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